Crypto Trading Strategies You Need to Know

crypto trading strategies you need to know

According to a recent news report, more than 10 billion Indians own cryptocurrencies. This number is likely to get even higher during the holiday season.

However, just like trading stocks and commodities, cryptocurrency trading is full of risks and pitfalls. To profit from cryptocurrency trading in the long run, market enthusiasts need to develop strategies that make trading fun and safe. Let’s start by discussing the strategies that can help you achieve favorable returns.

Trading day

This trading strategy involves entering and exiting positions on the same day. The trader’s objective associated with such a trade is to make a profit between intraday price movements of the cryptocurrency of his choice. For successful trading, investors often rely on technical indicators to determine entry and exit points for a given cryptocurrency.

Regional shop

The market parties also rely on expert analysts who offer support and resistance on a daily basis. “Resistance” refers to where the price can go up, and therefore the resistance level is the price above the current price. “Support”, on the other hand, is the level below which the price of the cryptocurrency should not fall, so the support level is always below the current price.

Scalping

This trading strategy involves using larger trading volumes to earn profits. While there are risks involved, an experienced trader will take care of the margin requirement and other important rules to avoid bad trading experiences. Scalpers analyze crypto assets, past trends, volumes and choose an entry and exit point within a day.

High Frequency Trading (HFT)

HFT is a type of algorithmic trading strategy used by quant traders. This includes developing algorithms and trading bots to get in and out of cryptocurrencies quickly. Developing such robots requires an understanding of complex market concepts and a solid understanding of mathematics and computer science. Therefore, it is more suitable for experienced traders than beginners.

The dollar costs average

To find the perfect entry and exit point in the cryptocurrency market, it is best to assume that market timing is next to impossible. So a quite sensible way to invest in cryptocurrencies is “Dollar Cost Averaging” (DCA). DCA means investing a fixed amount periodically. This strategy helps investors get away from market timing and build long-term wealth.

However, the exit strategy can also be complicated DCA-style. It requires studying market trends and understanding the market cycle. Reading technical charts can also help you close at the right time. Cryptocurrency investors should pay attention to oversold and overbought areas before taking the call. You can watch WazirX live charts to better understand the technical charts of various cryptocurrencies.

Build a balanced portfolio

Cryptocurrency trading is still in development. While several countries accept cryptocurrency trading, some are still skeptical. Central banks around the world are looking for better ways to regulate digital currencies, which is why trading cryptocurrencies is often risky. However, there are strategies that can help investors avoid extreme volatility.

Building a balanced portfolio of different cryptocurrencies like Bitcoin, Dogecoin and Ethereum could go a long way in beating volatility.

Additionally, investors can also hold a fixed amount of regular investments in various cryptocurrencies. This systematically increases risk appetite and helps your portfolio generate favorable returns over the long term.

Avoid trading conversations based on hype

Relying on social media for cryptocurrency news is one of the mistakes new investors often make. Investment decisions should never be based on the hype created on social media. Since digital currency is a hot topic, misinformation on this topic is spreading very quickly.

Primary research

One of the most important trading strategies is to do primary research. You don’t have to be a trading expert to do your primary research into the value of the property you’re buying. This requires that you stay up to date with all the news in the cryptocurrency industry. WazirX helps you do that quickly by compiling all the news you need to read before the day starts.

Also, you should evaluate your finances and set an investment goal well before betting on a volatile asset class like cryptocurrencies. You can explore Bitcoin, Ethereum, Tron, Ripple, Litecoin, etc. and start investing with WazirX.

Arbitration

Arbitrage refers to a strategy where a trader buys cryptocurrencies in one market and sells them in another. The difference between the purchase price and the selling price is known as the “spread”. Due to the difference in liquidity and trading volumes, traders can find an opportunity to make profits. To take advantage of this opportunity, you need to open accounts on exchanges where there is a big difference in the prices of the cryptocurrencies you are trading.

Betting on the volatility of Bitcoin

It is no news that cryptocurrencies are currently among the tradable asset classes. Recently, Bitcoin prices have fluctuated by almost 30% in a single session. You can bet on volatility by trading Bitcoin futures. The way to do this is to buy a call option and a put option at the same time. The redemption price and expiry date must also match. When cryptocurrency prices fall or rise sharply, you have to sell a call option and a put option to get out.