Crypto trading keeps attracting millions of new investors from all over the world every year. Some invest small amounts of money, hoping to get a return at some point. Others daily trade currencies for a fast profit. The truth is that there are many ways you can approach crypto trading, but the most important thing is to understand the game’s rules and risks.
Crypto markets are incredibly volatile, and one wrong move can result in massive price fluctuations. That was proved recently when the markets lost hundreds of billions of dollars. Therefore, to become successful at crypto trading, you must choose a strategy that fits your budget and goals.
Types of Crypto Trading Strategies
Some strategies can make you money in the short term, while some work better as long-term investments. Whatever you choose, you should never forget to pay close attention to price fluctuations. Many prevalent cryptocurrencies have significant price drops and spikes daily, so it’s always a good idea to track the latest market developments as closely as possible.
1. Day Trading
Day trading is one of the most popular strategies because it allows you to cash out daily. Most day traders pick one digital asset and closely monitor its behavior. Successful traders follow the price movements and book their profits to pinpoint current trends and make better assumptions about the future.
This type of trading is usually done on special platforms that provide all of the technical details and indications needed to make accurate predictions. If traders read the data correctly, they can predict the best time to buy or sell a cryptocurrency. The trading platform must have real-time updates and many other features for it to work. B2C reviewed popular trading platforms to help you find the best option for your needs.
2. High-Frequency Trading or HFT
HFT is a popular method among quant traders. However, it’s one of the most complicated types of crypto trading because it requires an excellent understanding of complex market concepts and advanced programming skills. HFT traders are known to develop their own algorithms and bots to be able to make trades as quickly as possible.
As you can imagine, only a few people have all the skills to be successful at high-frequency trading, so it’s a strategy reserved for experienced traders. However, it’s also one of the most lucrative crypto trading strategies when done right.
3. Range Trading
Range trading is based on information attained from experienced market analysts. Traders join online communities and marketplaces to find experts who make educated guesses on future crypto prices. The so-called resistance is the exact point where a digital asset is expected to increase in price. High resistance levels mean that the asset will likely increase in value in the future.
On the other hand, if the “support” level is below the price of the crypto, it tells you the lowest expected price for the asset. In other words, it means you know the price’s bottom.
4. Dollar-Cost Averaging
Timing is everything in crypto trading. If you pick the right moment to get in and exit the markets, you can make a lot of money very quickly. However, as you may already know, that’s much easier said than done. Dollar-Cost Averaging or DCA is a type of crypto trading that should make things easier. Instead of choosing the right moment for making trades, DCA involves investing the same amount of money in regular periods. That way, investors don’t have to time every move, but they still make money in the long run.
It’s not getting in that’s the problem with DCA; it’s getting out. Finding the best existing strategy requires a lot of hard work. Investors have to study market trends to identify repeating cycles. There’s a lot of research, chart reviews, and other processes involved if you want to pick the right time to get out.
Scalping is a type of crypto trading where investors use increased trading volumes to make profits. It’s a risky venture, so you must stay true to the best practices to succeed. Successful traders ensure that the margins are met and that each trade follows the rules. One wrong step can and usually does lead to unwanted outcomes.
Traders, or scalpers, as they are also known, have to stay on top of the latest market news. They must track and analyze digital assets and compare historical trends and trade volumes. Once the calculations are done, the only thing left to do is to pick the best entry and exit points on the same day.
6. Build a Balanced Portfolio
One of the reasons why crypto trading is so volatile is the many different laws and regulations in various countries. Some countries are more than open to crypto trading, while others forbid it. The cryptocurrency market is still largely unregulated, which is why most available digital assets are risky investments. Extreme volatility is the primary suspect for destroying crypto traders.
If you don’t want to share the same fate, the best approach is to diversify your investment across multiple cryptocurrencies. For example, hundreds of thousands of LUNA token holders lost their entire investments just a few weeks ago. Imagine putting your entire life savings into a cryptocurrency only to wake up one day with an empty digital wallet.
You can minimize your losses by purchasing multiple cryptocurrencies at the same time. Having a collection of, let’s say, Bitcoin, Dogecoin, Ethereum, Solana, and other digital assets can help you reduce risks. If one crypto starts losing value, the rest of your investment could be making you money. Having a balanced portfolio can help you get higher returns in the long term.
Things To Avoid When Trading Cryptos
We could mention the following tips as strategies, but they focus more on the don’ts than the dos. So instead, think of them as essential tips that should help you avoid the pitfalls of cryptocurrency trading.
1. Investing Without Doing The Research
This one should go without saying, but before spending a single dollar on a cryptocurrency, you should make time for primary research. You must dig for as much information as possible, even if you’re not an expert. Research the value of the asset you plan to purchase, follow the latest industry news, and try to stay on top of the game. Reading the latest news while having your morning coffee can make a huge difference in your career.
It’s also essential that you set clear goals and a budget before betting on a cryptocurrency. B2C reviewed popular trading platforms, and most of them include reading materials, tutorials, tips, and other helpful material that can help you make better investments in the future.
2. Don’t Give Into The Hype
The hype around some crypto projects has spread throughout social media networks like wildfire. And since people like to get money for nothing, millions of users spend their hard-earned cash on flashy cryptos. However, that’s exactly what you want to avoid. Everyone is talking about digital currencies, so there’s plenty of fake information everywhere. That’s why you should always do your research before buying any digital asset.
3. Don’t Go All In
It doesn’t matter which strategy you use, you should always remind yourself that cryptocurrency markets are as volatile as they get. So while investing your savings to earn higher returns might seem tempting, betting all your money is never a good idea.
The best approach is to start investing small. You should spend only the amount you can lose. Let’s say that 5% of your total investing capital is a good starting point. Also, if you’re planning on trading cryptos, you should set up a savings account first.
The world of crypto trading is entering a new era as more and more countries plan to introduce government-regulated digital currencies. The recent market crash has outlined many problems that should be fixed in the future. With that said, crypto markets are still highly volatile, so you should always tread lightly until new regulations are implemented. We wish you the best of luck in your future crypto-trading ventures!