When it comes to the digital assets class, cryptocurrency is one of the fastest emerging businesses. It is a business that could make you a lot of money, but it also requires a strategy. If you have no experience in crypto trading, you will need to carry out some research before you commit your money. An excellent strategy will come in handy. Identify what digital currencies you’d like to trade in, these could be Ripple, Ethereum, Litecoin, Bitcoin, and so on.
The best part is that all of these currencies can be traded in financial technology markets on various professional platforms. Since the cryptocurrency market is tremendously volatile, the profit margins are quite exciting. In this section, we will look at some of the best bitcoin trading strategies.
Understanding a cryptocurrency trading strategy
If you’ve done any business before, then you know it all starts with having a plan and executing it. Cryptocurrency is just like the money you use to purchase items in your daily undertakings. The only difference is that this is a digital currency. Digital currencies also don’t have a central bank. What makes these currencies more profitable is the fact that they are more volatile. You can buy a certain currency, hold it for some time, and then sell it at a profit.
That said, a crypto trading strategy is a well-laid plan that guides trading activities. The ultimate objective of the strategy is to ensure that you earning a profit. It guides you from the point of investment to the point of profitability. Should anything happen in between, your strategy has a response plan.
Day trading is one of the most prominent trading strategies. So, what does it entail? Day trading entails entering various trading positions at a certain time and exiting them at the same time. If you are going to focus on this strategy, your focus should be the intraday price fluctuations. These are price moves that take place within your chosen day. The bottom line is that you will enter the market when it opens and exit when it closes. You are not going to trade throughout the night.
You need to understand that most cryptocurrency platforms are active throughout the year, 24 hours a day. Monitoring the markets day and night can be a daunting task and you are likely to make some losses. This doesn’t mean that you cannot be successful if you prefer a longer-term trading session, but it is always to work with what makes you comfortable. For beginners, short-term trading will minimize your risks as you test the markets.
Swing trading is another one of the crypto trading strategies that you could use. It is more of a long-term plan that allows you to earn profits in the long run. As a trader, you will need to hold on to a particular trading position for a longer time. Although it is more than a day, it is certainly not longer than a month. The objective is to cash in on the volatile waves. Sell when the currency you are trading hits a record high in terms of value. Fundamental analysis of the market is particularly critical in this crypto trading strategy. Moreover, it sometimes takes a long time for any significant changes in the market to manifest themselves.
Swing trading works incredibly for beginners, you get a longer time to analyze the markets and learn the trade before you make your move. You can keep an eye on the movement of the market without any pressure, and only act when it is necessary.
Trend trading is also popularly known as position trading. The trader takes a particular position and holds it for a while. This could be for two months or more. Since this is more of a directional trend strategy, you take a short position where a downtrend is involved, and a long term position on an uptrend position. Trend traders also use fundamental analysis to make decisions. When you take your position, you assume that the variables will keep moving in a certain direction. If that doesn’t happen, then you are likely to make losses.
In the crypto markets, you can expect small moves or big moves. Scalping is a strategy that doesn’t rely on significant movements. It is considered one of the quickest and best trading moves in the market. It mainly works on exploiting small moves. Most traders who use this method do not maintain their trading positions for a long time. They work by closing and opening positions over time. This can even be in a matter of seconds. Scalping as a method of trading can be an efficient trading method when a trader comes across a marketing inefficiency.
The right cryptocurrency plan can earn you high profit margins while the wrong strategy can lead to huge losses. Choosing the right trading strategy is key. You need to choose the strategy that works best for you and leverage it for profit. Not all traders can be master scalpters and not all traders can be good at trend trading, you therefore have to find a strategy that works best for you.