Dear crypto investor, do you want to start trading in crypto? In this case, a proper crypto trading strategy should not be missing. Which one you use depends on preference, knowledge, and experience. As long as it is executed consistently. Practice breeds art. But which crypto trading strategies are there?
In this article, you will find 4 crypto trading strategies that work. No crazy or new tactics, but just apply what works from the (day) trading world.
On to successful trades!
Crypto Trading Strategies That Work
Being a beginner in crypto trading, one must go through a vibrant learning environment. Knowing the fundamentals of cryptos, reading charts, candlesticks, market moments, and economic decisions are must-haves. Besides that, a newbie must have fundamental and technical analysis skills to predict the price moments.
Investing in crypto is by no means easy. Prepare yourself well!
Practicing on the demo account is the key to perfecting your favorite crypto trading strategies. Taking the best day trading course is also a smart investment. Especially since the risks are so high in crypto trading. One loses money easily.
Which crypto trading strategy do you apply? The crypto trading strategies which we name in this article will contribute to improving your skills.
Don’t you have a demo account yet? You can make one at eToro and practice crypto trading strategies.
Crypto Trading Strategy 1. Range Trading
Range trading is an active investment approach in which the trader determines a price range of a cryptocurrency that he has to buy and sell over a certain period. For example, if a currency is now priced at $15 and you anticipate it will increase to $40 in the next weeks, you should expect it to trade in a range between $15 and $40. You might try to range trade it by buying it at $15 and selling it if it jumps to $40. You would repeat this method until you believe the stock will no longer trade in this range.
Any asset, including currency, equities, and cryptocurrencies, may benefit from a range of trading methods. The volatility, and hence the range, is the most significant distinction between these assets. When range trading, more volatility products like Bitcoin carry a higher risk, but they may also generate higher gains.
Range trading is a crypto trading strategy that relies purely on technical analysis and does not look at fundamental analysis. Therefore, this strategy is not suitable for finding new crypto coins with potential. It is purely short-term trading within the fad of certain cryptocurrencies, regardless of its potential.
How to Use Range Trading in crypto?
- Crypto traders must first find a crypto market that is not trending. This may be done by utilizing a moving average indicator with a timeframe that is no greater than the period under consideration. The Average Directional Index (ADX) is a method of determining the strength of a trend without considering its direction. It is measured on a scale of 1 to 100, with an index below 20 indicating a sideways market.
- The next step is to determine the trading range. To guarantee that the price is not momentarily increasing or falling as part of a longer trend, the price must have recovered from the support band and declined from the resistance band at least twice.
- After defining the trading area, range trading can be carried out by simply buying and selling when the price reaches the support and resistance bands. Stop orders should be placed at or just outside the trading range. On the other hand, using indicators in parallel may provide additional insights
Range trading is one of the simple yet effective crypto trading strategies. Practice first on a demo account until you make profits more often than losses.
Crypto Trading Strategy 2. Scalping
Scalping is an intraday crypto trading strategy that seeks to earn profit from minor price fluctuations. The purpose is to make tiny but frequent gains that would result in a large return at the end of the day.
As opposed to day traders, scalpers place a greater emphasis on technical analysis than fundamental analysis. Crypto scalpers depend extensively on support and resistance levels, candlestick chart patterns, and other technical indicators like Fibonacci retracements and Bollinger Bands.
Scalping is more advanced among crypto trading strategies. Also, it is time-intensive. Also, transaction costs need to be taken into account for each trade, since scalping executes many trades. On the other hand, this strategy can lead to higher returns thanks to disciplined trading.
How to Use Scalping in crypto trading?
- Range trading is a popular scalping crypto method that includes tracking the price movement between highs and lows over a certain time period. This has been explained as the primary strategy under the first heading.
- Some scalpers also try to profit on the bid-ask spreads or the gap between the bid and ask prices. Firstly, a wide bid-ask spread occurs when the asking price is higher than the bid price. This usually occurs when there are more buyers than sellers, resulting in a price increase. As a result, cryptocurrency scalpers will be selling at this time. A narrow bid-ask spread, on the other hand, occurs when the asking price is less and the bid price is higher than usual. Buyers outweigh sellers in this situation.
Crypto Trading Strategy 3. Swing Trading
Swing crypto trading strategy is popular with traders of all skill levels. Because of the extended timescales and volatility of cryptocurrency, strategies are tempting. Swing trading is a trading strategy in which traders seek to profit from market fluctuations in a short to medium time frame. The idea is to profit from any market "swings" that may occur over the course of a few days, weeks, or months.
Swing trading strategies work well in trending markets like forex, stocks, and cryptocurrencies. Technical analysis is often used by successful crypto swing traders to watch short to medium timeframe charts in order to discover daily and weekly trends. Basic analysis is particularly important since economic events might take days or weeks to occur.
How to Use Swing Trading in crypto?
There are two ways to do swing trading.
- The first strategy follows a market range by using support and resistance levels. The market is sometimes described as being caught in a box between the two lines above and below. When the price falls below support, the trader waits for a strong price rejection (a candle that closes above support) before starting a long position on the next open candle. The idea is to exit the transaction before selling pressure builds up at the point of resistance. To be successful with this strategy, you must first understand your daily candlestick chart as well as the levels of support and resistance. Your stop-loss and take-profit levels will also be important in ensuring that you do not exceed these restrictions.
- The second strategy is to profit on a single move in a moving market by joining after the retreat has ended. Traders ride the wave by spotting a trend, say, using a 50-period moving average. When the crypto market gets close to the moving average, traders will wait for a good price rejection before starting long bets on the next candle. As a general rule, place your stop-loss below the candle low and your take-profit just before the market swings high.
Crypto Trading Strategy 4. Crypto Arbitrage
Crypto arbitrage is the last of the crypto trading strategies in this article. Arbitrage is purchasing cryptocurrencies in one market and selling them at a higher price in another market. The "spread" is the difference between an item's purchase and sell prices. Being a typically unregulated market, Crypto enables anybody to set up an exchange. Because of disparities in asset liquidity and trading volume, this might result in significant spread discrepancies.
Traders in the cryptocurrency market often maintain a portfolio on the exchange they trade. To begin an arbitrage opportunity, create exchanges where you think the same asset will have drastically different pricing.
Contemporary, this crypto trading strategy may not be as effective as in the past. However, it is still possible.