A Quick Guide to Crypto Trading Strategies

Cryptocurrency trading has become a popular activity, particularly in the last year or so, because there is a lot of money to be made in this volatile market. Bitcoin was the first crypto to be launched in 2009 and within a decade, the market has expanded beyond imagination. There are a number of people who have made their fortunes in this space and many others are looking to do the same. The good news is that it is not that difficult for you to get started, but you should remember that you have to have a good strategy in order to succeed.

This essentially refers to an extensive plan that entails all your trading activities. It is a framework that every crypto trader has to create for guiding them in all their trading endeavors. These strategies are aimed at helping you make the most profit while minimizing your risks because they can eliminate unnecessary decisions. Even though it is not mandatory for you to have a trading strategy, it can and does prove to be lifesaving a lot of times. This is because it can help you in reacting to what happens in the market, rather than letting your emotions take the lead.

There are different crypto trading strategies that can be used by traders and some of the most notable ones are:

Day Trading

Perhaps, the most well-known trading strategy is called day trading, which involves opening and exiting positions on the same day. This means that day traders attempt to capitalize on intraday price movements i.e. the movements in price that happen within a day. This term has come from the traditional markets, where trading only happens during specific hours. But, it is a bit different in the crypto market because these are operational 24/7. Here, day trading refers to a short-term trading style, where traders open and close positions within 24 hours or so.

Typically, such trading involves using technical analysis and price action for formulating trading ideas. Likewise, a number of other techniques may be implemented for finding inefficiencies in the market. Crypto day trading can be quite profitable for some people, but it is also demanding and highly stressful, as it involves a lot of risks. Therefore, this kind of strategy is more appropriate for advanced traders.

Swing Trading

A longer-term strategy, swing trading involves holding positions for longer than a day, but this doesn’t go beyond a couple of weeks or a month. In some ways, swing trading is the halfway point between day and trend trading. Generally, swing traders attempt to take advantage of the volatility that takes several days or a couple of weeks to play out. A combination of fundamental and technical factors is used by swing traders for formulating their own ideas.

Of course, fundamental changes may take longer to become evident and this is where fundamental analysis can be helpful. Even so, technical indicators and chart patterns can also have a prominent role in a swing trading strategy. This is an excellent strategy for beginners to consider because they are short enough to make it easier to keep track of the trade.

Trend Trading

Also known as position trading, this particular strategy involves holding positions for a longer duration, which is around a few months. As the name indicates, trend traders try to tap into the potential of directional trends. These traders may enter into a short position when there is a downtrend and a long position in case of an uptrend.

Fundamental analysis will typically be used by trend traders, but this may not always be the case. Even so, as fundamental analysis takes into account events that take longer to play out, traders can take advantage of them. A trend trading strategy is based on the assumption that the underlying asset will continue moving in the direction of the trend. But, the possibility of a trend reversal is something that these traders need to take into account. Therefore, they may incorporate trend lines, moving averages, and other technical indicators for boosting their success rate and mitigating financial risks.

This particular strategy can prove to be quite effective for beginner traders, as long as they manage their risks and do their due diligence properly.