What is a crypto trading strategy and why do you need one?
Every experienced trader acts according to a certain strategy or method, because it makes trading more convenient and profitable at the same time. Cryptocurrency trading strategy is a specific sequence of rules, which set out specifications for mostly considered types of coins, level of acceptable risk and a special pattern of financial processes. In this article, you will find out more about common techniques for different types of traders and their main distinctive features.
Popular crypto trading strategies
There are not that many widespread techniques in the industry, but all of them are not alike. If you want to form an exact approach to trading crypto, it’s worth trying one of the following strategies:
Day trading. This method is suitable for those, who are able to spend a lot of time studying crypto news, analysing charts and changes in prices. The main principle of the described strategy is to take and exit positions within the same day. Day trading may be not the best strategy for rookies, as it requires them to quickly make rational and objective decisions. This skill, however, comes only with experience.
- Arbitrage trading. This scheme of making money on crypto trading platforms is very different from any other, as it is based on monitoring sale and purchase rates on a lot of exchanges and trading coins at a profit. All you need to do is create accounts in several exchange services and search for large differences between crypto prices.
- Automated trading. If you want to receive passive income using cryptocurrency, we would recommend purchasing computer programs which automatically enter and exit a lot of positions by using special algorithms. Of course, this strategy requires extra investment and may sometimes bring losses instead of profits, but if you use services of efficient trading robots, then the likelihood of enriching becomes really high.
- Scalping. The described strategy is based on getting little profit from each of short term trades. If you devote much time examining past trends and general directions of prices, it becomes possible to close a lot of deals successfully and get a large income in total.
- Range trading. Traders who use this strategy can be called professional analysts because they determine the range of the price of cryptocurrency, purchase it and then sell with a certain markup. If your predictions of surges and declines often turn out to be true, then you should probably give this method a try.
- Dollar-cost averaging (DCA). This strategy can be used by both novices and experienced traders, as it has quite a low risk factor. DCA requires investing a fixed amount of money after the same period of time. If the value of a crypto that you invest in plummets, you won’t lose as much savings as if you’ve spent your budget at once.
All of these strategies are time-tested and profitable. If you want to find your perfect trading attitude, you should try each of these techniques in order to make a thoughtful choice. Actually, some traders even combine several strategies and use them from time to time so as not to miss out on gains and grow their monthly profit as high as possible.