Crypto Trading Strategy: Best Options For Beginners

Published on:

One of the most popular ways to make capital on crypto is trading. It has a low entry threshold compared to investing and doesn’t require spending thousands of dollars on equipment. Even though trading may seem too complex at first, there are simple working strategies. Let’s dive into the top 6 options! 

Dollar-cost averaging 

The crypto market is highly volatile, which can be quite stressful for a newcomer. In case you’re not ready for those unexpected ups and downs on the chart, consider Dollar-Cost Averaging (DCA). This strategy involves purchasing a fixed amount of an asset regularly. Usually, modern exchanges offer such services — the system will automatically purchase the desired cryptocurrency at a chosen date and time. 

However, DCA only works with promising projects that are there for the long run. Do not use this strategy with speculative or overhyped assets, as they can hit the rock bottom at a rate of knots. 

Scalping 

One of the most often used crypto approaches is scalping, a day-trading strategy based on the frequent small profits from short-term price movement. One successful deal may translate into several dozen dollars, but twenty small trades like that add up to a significant profit. Unlike DCA, scalping doesn’t require a fundamental analysis of an asset. In fact, this strategy is most effective with highly volatile speculative cryptocurrencies. 

Range trading 

This technique is used for relatively stable markets with consistent support and resistance levels. In simple terms, an asset price moves in a certain range over a chosen timeframe. If the coin breaks through this range, it typically means a trend reversal. In case the asset surpassed the resistance level — it’s a good time to buy in and vice versa. Traders often use limit and stop orders to automate the process. 

Read more:  Crypto Wallets 2.0: Exploring Next-Generation Security Measures and Technologies

High-frequency trading

HFT is an algorithmic trading strategy that involves executing a large number of small deals over a short timeframe. This approach requires high-frequency financial data and complex electronic tools to analyze the market and execute many orders in a few seconds. Beginners can take advantage of various trading bots available online. However, do your research and test several options before making a decision. 

Arbitrage trading

Arbitrage refers to the practice of buying an asset on one platform and selling it on another to profit from price differences. Since there are hundreds of cryptocurrency exchanges, arbitrage opportunities are limitless. 

For instance, BTC price on Binance is $18 500, while Coinbase’s rate is $18 700. You buy Bitcoin on Binance, then transfer and sell it on Coinbase at a higher price. Arbitrage is one of the most beginner-friendly approaches as it doesn’t require technical or fundamental analysis. 

News and sentiment trading 

Last but not least — news and sentiment trading. It requires analysing various information sources to predict how market participants will react. For instance, when there is a major upgrade in the project, the coin price tends to rise. Or when Elon Musk decides to tweet about it. On the contrary, when the sentiment is negative, market players tend to panic-sell, lowering the coin rate. While certain players lose money due to fear and greed, experienced traders make money on the predictability of human emotions. 

So which trading strategy to choose? 

There is no unified response when it comes to crypto. Your trading strategy choice should be based on personal goals and possibilities. We recommend trying out several techniques to identify the best-working ones. And remember, flexibility is key. If your current strategy doesn’t bring the desired results, you should be able to adapt, improve or change it. 

Read more:  3 Steps for a Fun Meeting with a Startup Investor

Related