What Is a Crypto Trading Strategy? 5 Crypto Trading Strategies Explained 

What Is a Crypto Trading Strategy? 5 Crypto Trading Strategies Explained

Cryptocurrency technical analysis can work for any trading timeline, from scalping and day trading to long-term investments. This content is for informational purposes only and should not be construed as investment advice. Nothing mentioned in this article constitutes any type of solicitation, recommendation, offer or endorsement to buy and sell any crypto asset. Trading in any financial market involves risk and can result in loss of funds. Before investing any money, one should always conduct thorough research and seek professional advice. While this system alone can be used as a simple crypto trading strategy, it can sometimes give false results.

• According to Greenberg, a technical understanding of the technology and team behind an altcoin project gives traders a competitive edge.
• As a trader, you might employ different trading strategies simultaneously, meaning you are actively trading while at the same time swing trading and/or position trading.
• When these false signals happen, it often solidifies the previous trend, which can cause acceleration.
• If you are willing to assume greater risk as an investor, then investing in one or more cryptocurrencies may be right for you.

Similarly, you should set multiple take-profit orders to book small profits after small intervals. Passive investment is particularly smart if you’re trying to build a nest egg for loved ones over a long period of time. Once you’re ready, you can use your exchange account to buy crypto and start trading. Alternatively, if you’re planning on investing in crypto as a way to support your child, consider giving them their own digital wallet with EarlyBird Crypto.

What Is Crypto Staking? A Guide to Earning Passive Income

To backtest trading strategies, one will require historical crypto price data. Fortunately, the process of acquiring and implementing aggregated crypto price data for trading strategies is simplified by the public CoinGecko API. This derivative is popular because it allows traders to utilize leverage, as some exchanges offer perps with extremely high leverage possibilities. They can be extremely risky, given their lack of regulation and potential for high significant fees.

• Leverage allows traders to control a larger position with a smaller amount of their own capital, increasing their market exposure.
• For any requested stock, this module produces a visually appealing plot with long/short green and red colored markers respectively as signals.
• Additionally, you might use technical analysis to identify short-term trading opportunities in altcoins that exhibit promising chart patterns.

So, before making a purchase, you should check the available trading pairs on the exchange to identify the pair that contains the digital currency of your choice. After identity verification, deposit fiat to your account or connect your bank account (if that’s an option) to purchase the cryptocurrency you want to trade. Alternatively, you can transfer crypto to the exchange if you already own – some. Think of long-term holding as planting a seed and waiting for it to grow into a strong tree. It requires patience and the ability to withstand short-term volatility while focusing on the long-term vision. If you’re interested in decentralised finance (DeFi), DefiLlama is a specialised tool that offers comprehensive data and analytics on multiple blockchain networks and DeFi protocols.

Get Historical Crypto Prices with CoinGecko API

RSI is calculated based on the ratio of the average gains to average losses over a specified period, typically 14 days. Your crypto trading strategy is a fixed plan that you design to achieve profitable returns when buying or selling in the crypto markets. This plan employs various analytical tools to identify predefined market conditions and price levels, including important resistance and support areas. Also called trend trading or following the trend, this strategy involves long-term investing in assets. A trader/investor will typically buy or invest in an asset when the price is low and sell when the price is high, not unlike the other strategies.

• One major advantage of long-term holding is its potential to generate substantial profits over time.
• By winning big and losing small, a single win can potentially cover 3 or more losses.
• Installing CoinGecko’s API with python can be done by typing “pip install pycoingecko” into your computer’s terminal or command line.
• You need a proven strategy to consistently make money in the cryptocurrency market.

Given that cryptocurrencies seem to have more negatives against the stock market but not enough positives, why would you want to trade digital assets? They are only similar to the extent that the end goal is the same – gaining profit from your activities. They are different in that results from trading activities are generally expected within a short to medium-term period.

What is cryptocurrency trading?

Usually, the exchanges with margin trading options offer a leverage up to 100x, which is a hazardous ‘game’ and not recommended for beginners. Fundamental analysis for cryptocurrency involves evaluating two important factors short term trading crypto – on-chain and off-chain metrics. On-chain metrics include network hash rate, wallet addresses (active and dormant), network applications, token/coin issuance rate (inflation/deflation), network fees, and transactions.

• As a result, the overall value of your investment portfolio will go up alongside those asset values.
• That means you could make money if the price goes in either direction, as long as your prediction is accurate.
• This can yield powerful results, but the market structure – as any tool – can provide false signals as well.
• It’s a strategy that focuses on exploiting small moves over and over again.

It’s worth noting that this crypto trading method is most effective in a highly volatile market (when prices are rising or falling sharply). When the market moves sideways, however, it can trigger multiple buy and sell signals as the two moving average lines converge and diverge more frequently. This usually happens when there is a lot of uncertainty in the market and there’s an equal number of bearish and bullish traders. This is the only problem with the trading strategy, but the average gains tend to outweigh any losses incurred from periods of low volatility. Again, this is a long-term strategy and works best over a period of at least 18 months and can be combined with other indicators to deliver better results.

How to Invest in Cryptocurrency

To find out what is really working and what is not, you should follow and track each trading strategy – without breaking the rules you set. It’s also helpful to create a trading journal or sheet so you can analyze each strategy’s performance. As the world’s leading virtual assets exchange, Huobi launches a refreshed branding strategy on September 13, 2023, where “Huobi” will be rebranded as “HTX”, our new global brand. The FTX bankruptcy estate holds large amounts of cryptocurrencies, which may get sold in the near future. With EarlyBird Crypto, you can build a nest egg for your child by investing in Bitcoin or Ethereum alongside a balanced UGMA portfolio using an EarlyBird account. As a result, cryptos tend to be treated more like commodities than regular currencies.

• The best time frames to look for divergences are usually within a four-hour or daily window.
• Leverage trading is a method in which traders borrow funds from a broker or exchange to magnify their trading position’s size, aiming to amplify potential profits (or losses).
• One example of this is the correlation between the price of bitcoin and every other altcoin.
• When the price of bitcoin dips due to downward pressure, the altcoin market tends to fall with it.
• Leading indicators are measurable signals that help forecast future price action activity, giving traders more insight in the present.
• However, the traders need to pay a deposit, withdrawal and trading fee twice, reducing your take-home profits.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor’s financial circumstances. Become familiar with a handful of cryptos with good liquidity and map out zones on the charts where the price may reverse or take off with momentum.

Arbitrage

The emergence of cryptocurrencies has created a thriving crypto asset market. Both professional as well as novice traders are looking to benefit from the market’s volatility. – And how do you make sure you are trading carefully, safely, and securely? Learn how to trade cryptocurrency in this how-to guide for new crypto traders.

• Some crypto-focused funds invest in cryptocurrency directly, while others invest in crypto-focused companies or derivative securities such as futures contracts.
• So, for example, investing the money meant for your mortgage payment is a bad idea because you could lose it all.
• One of the best things about HOLD is that allyou need to do is simply buy digital currencies without setting the take profit or stop-loss.
• A random statement from a significant investor, such as Elon Musk, can plummet prices by 10% overnight.
• A crypto day trader should devise a winning strategy backed by research, with well-laid plans for when to enter and exit their positions.

The RSI divergence strategy is more advanced than this and can be used to identify when the price trend will change direction before it happens. It works by looking for discrepancies between the price and the RSI indicator. Normally, both the price and the RSI move in roughly the same direction. However, there are times when the price is falling but the RSI is rising, and vice versa. This only happens when there’s a subtle shift in buying or selling volume and is a tell-tale sign that momentum is in the early stages of reversing. RSI stands for “Relative Strength Index,” which is a chart indicator that measures momentum by calculating the average number of gains and losses over a 14-day period.

Best Crypto Day Trading Strategies

For the best results, you should research and understand all the potential strategies and tactfully choose the most suitable one. If you rely on your preferences, allocate your funds using at least three of the above-listed strategies. Choosing the lowest risk strategy will be more favorable for you to adapt. Notably, a smart trading strategy offers two types of trading options, i.e. short and long. It is highly advised to keep on booking small profits instead of waiting for a huge chunk to build up. Download EarlyBird today to add cryptocurrency to your child’s investment strategy.

• In terms of value and the best cryptocurrencies to invest in, it’s worth noting that a lot of crypto assets tend to fluctuate in value.
• Crypto assets are a high-risk investment, and trading them without a plan in place can often lead to a loss of invested capital.
• If something unexpected happens in the market (and it will), your trading plan should define how you react – and not your emotions.
• In this same vein, a crypto with high liquidity is often accompanied by a higher price.
• So, you could secure your position by setting it up every time you create an order.

The Fisher Transformation highlights when prices have moved to an extreme, based on recent data. It converts prices into a Gaussian Normal Distribution, highlighting peak swings and making price reversals easier to identify. This tool is an example of a leading indicator because it identifies potential price reversals before they occur.

How To Trade Cryptocurrency: A Step-by-Step Beginners Guide

Many investors are nonetheless attracted to the potential upside of investing in crypto. If you decide to invest, it’s important to carefully research any digital coin before buying it. Pay attention to transaction fees when making crypto purchases because these fees can vary widely among currencies. Coinbase is a suitable cryptocurrency exchange for beginners who want to prioritize security and convenience.

• Naturally, fundamental changes may take a longer time to play out, and this is where fundamental analysis comes into play.
• This means all you need to do is deposit funds, tell the trading bot what you want to trade and when to trade it, and let it do all the hard work for you.
• HODLing lets investors take profits from long-term value appreciation when they invest for an extended period.

Usually, the most accurate crypto signal providers will charge a fee before allowing you to join their channel. Of course, given their expertise and the profitability of their trades, it’s natural that they’ll charge for VIP access to their strategies. When you exit the trade you must of course give back that $900, but any profits you get to keep. So if Bitcoin went up 10% for example, your $100 worth of Bitcoin would only be worth $110, but a 10x leveraged position with $1000 worth would now be worth $1100. This can be a bit riskier, but many exchanges allow for it and it is the way people can actually make impressive profits even when an asset tanks.

What Is Trading Strategy And Why Is It Important?

Recognized as the trading strategy with the fastest turnaround, scalpers leverage large amounts of liquidity to seize on small price movements. The entire point of day trading cryptocurrency is to profit from tiny market movements. Because cryptocurrencies are volatile, day trading in the crypto market may be pretty rewarding.

Moving averages, projected trend lines, and technical indicators can be additional indexes that can assist on this front. The best crypto trading strategy spread is actually a combination of effective trading methods. A lot of these strategies are derived from methods used in forex and stock exchange, with a few tweaks to make them suitable for use in crypto markets. There are active strategies, which involve aggressive buying and selling patterns, and passive strategies, which require less time and effort from the trader’s end.