Top 5 Crypto Trading Strategies - Every Trader Must Know

Interest in trading cryptocurrencies is as high as ever, and innovations are continuously coming onto the market. Explore our selection of crypto trading strategies below to find the one that works best for you.

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Crypto Trading: You need to know

Since cryptocurrencies are issued and supported by a network of computers rather than a single central authority like a government, they are exchanged on decentralized exchanges (called a blockchain). Cryptocurrencies are immune from many of the political and economic issues affecting traditional currencies because of their decentralized character.

This does not imply, however, that cryptocurrencies are immune to outside influences. Contrarily, cryptocurrencies fluctuate wildly and are influenced by a variety of variables, including supply and demand, media coverage, the incorporation of e-commerce payment systems, and significant events.

Due to these variables, it is crucial that your bitcoin trading techniques emphasize portfolio diversity as well as ways to manage volatility. You can diversify your portfolio by trading a range of asset classes, including cryptocurrency.

You can protect yourself from the risk of a market move going against you and reap the rewards of positive movements by diversifying the types of trades you make.

The Trader’s Maze: Crypto Trading Stratagies

Before attempting to trade the market, it is crucial to establish a cryptocurrency trading strategy due to the volatile and unpredictable nature of cryptocurrencies.

When we talk about trading in cryptocurrencies, we mean to speculate on changes in the price of cryptocurrencies using a CFD trading account. These leveraged derivatives let you make predictions about price changes without needing to own the underlying asset.

As an alternative, you can purchase cryptocurrencies through an exchange, which requires that you do the coin-purchasing yourself. You must open an exchange account, deposit the full position value, and keep the cryptocurrency tokens in your personal wallet until you’re ready to sell them. Direct cryptocurrency purchases can be complicated, so novice traders shouldn’t attempt them.

Moving Average Crossovers

Understanding moving averages (MAs) and crossover trading strategies is necessary for trading MA crossovers. Let’s start at the beginning: a moving average is a lagging technical indicator that creates a single trend line by dividing the number of data points by the sum of a financial instrument’s price points over a given timeline.

While reducing the impact of sporadic price spikes, this single trend line enables you to identify the current trend’s direction. Analyzing historical price movements, also helps you to look at the levels of support and resistance.

Another useful technique is to plot a chart with two moving averages—one short-term and one long-term. A golden cross, which is seen as a buy signal, occurs when the shorter MA crosses over the longer MA, showing that the trend is turning upward. A death cross, which occurs when the shorter MA crosses below the longer MA to suggest that the trend is changing to one of decline, is made.

Relative Strength Index (RSI)

A technical indicator called the relative strength index (RSI) is used to spot market momentum as well as overbought and oversold positions. Additionally, it can be utilized to draw attention to overt and covert divergence in the financial markets. Trend trading is another name for this form of trading.

The RSI calculates the ratio of profitable price closes to unprofitable price closes and displays the results as a percentage.

The formula is used to compute it:

RSI = 100 – (100 / [1+RS])

A smaller percentage often indicates an oversold situation, while a higher percentage typically reflects an overbought position. The indicator is represented as a percentage out of 100.

So, what is the greatest cryptocurrency trading strategy for RSI? Well, that depends on your trading strategy and risk tolerance. When the price is rangebound, the RSI can be used to trade both short and long signals.

However, as markets frequently follow trends, employing an RSI indicator to identify entry and exit trends will help you decide whether to trade.

Event-driven trading

Markets for cryptocurrencies may be impacted by a particular coin’s or exchange’s significant media exposure. The main goal of this cryptocurrency trading method is to profit from these “events.” It’s a well-liked trading tactic among beginners.

Not just cryptocurrencies but also stock indices, commodities, and FX pairings can all have their prices affected by news coverage of current events. Many seasoned traders will profit from this effect; it goes beyond mere speculation.

Before an anticipated news release, such as an earnings report, you would typically watch the market for a consolidation pattern and then take action as soon as the market broke out. However, given the erratic and volatile nature of cryptocurrencies, you might have to hold off on making a deal until after such a press release has been released.

Simply put, you would buy your preferred cryptocurrency when good news is reported and sell it short when bad news is reported.

Scalping

Opening positions in line with a trend and often entering and quitting the market several times in a short period of time as it develops is known as scalping. One of the shortest-term strategies, individual trades are held for only a few seconds or minutes at most.

For active day traders, this trading method performs exceptionally well. Scalping concentrates on minute-to-minute price variations that are influenced by volume. You would close the deal as soon as it started to make money.

There is no such thing as “waiting for the market to represent trends” since you must act quickly and exit failing trades. Scalping works best when the market is highly volatile.

When scalping, you might want to use tear-off tickets. With them, you can establish an opposite-direction position so that you’re prepared to exit, either capturing your winnings or limiting your losses.

Remember that scalping might be risky if you make many trades in a short period of time. It’s crucial to carefully manage your risk.

DCA (Dollar Cost Averaging)

Dollar-cost averaging (DCA) may be of interest to you if you’re seeking for an indicator-free crypto trading approach. The DCA technique is well-liked by both novice and experienced traders.

You divide your investments into smaller sums as opposed to putting all of your money into one asset at once. These funds are then allocated over a predetermined period of time and consistently invested on a specific day and time each week, and only on those specific days and times.

How does this actually appear when done? Say you make the decision to put money into bitcoin. You decide a DCA plan will be the most effective course of action and have set aside $15,000 for this purpose. Thus, multiply your original investment by the number of weeks you want the approach to last.

We’ll assume for the sake of this example that you want to invest your $15,000 over the course of six months. The result of multiplying the starting sum by 24 (the number of weeks in a six-month period) is $625 each week. You invest your $625 in bitcoin for the following six months on Tuesdays at 2 PM, up until your initial investment is gone.

Why make such investments? Regularly purchasing an asset reduces the effects of market volatility, so you usually get more money back from your final investment than if you had put all of your money into it at once.

It’s important to keep in mind that you must trade the specific coin through an exchange in order to fully utilize this strategy, and with us, you can only trade derivatives through CFDs.

How to apply strategies in crypto trading

Now you know the basics of cryptocurrency trading strategies, how do you get started? Well, you can follow our easy guide to placing your first cryptocurrency trade:

Create a new account with us or sign in to an existing one. From there, you can enter the cryptocurrency market.
Select a coin to concentrate on after learning how the bitcoin market functions. With so many choices, keep in mind the value of diversifying your cryptocurrency holdings.
Create a trading strategy using the following tactics. Pick one that fits your personality and level of risk-taking.
Choose a platform for trading cryptocurrencies.
Open, watch, and close the first position you take. Open a practice account to test your cryptocurrency trading strategies using fictitious money instead.

I hope you understand each and every step from this article. If you don’t understand anything from this you can freely contact us through comments or contact us page. Thanks for reading!

Happy Trading!!!