Best Crypto Trading Strategies
09 Jun, 2022
Crypto Trading Strategies
Are you wondering which is the best cryptocurrency to trade? This question comes up all the time among online investment communities, and the answer isn’t always simple to determine.
Since there are so many different cryptocurrencies available on the market today, not to mention numerous exchanges through which you can purchase them, finding the right one for your portfolio can be a challenge.
Here’s an overview of some popular cryptocurrencies you might want to consider investing in, along with some helpful tips on how to pick them based on your personal needs and goals.
How to Trade Cryptocurrency for Beginners
To learn how to trade cryptocurrency, we need first to understand how it’s exchanged and what cryptocurrency is. Cryptocurrency is not just a regular currency like dollars, euros, or pounds.
It’s a digital currency that can be used in different kinds of trading operations with other currencies, products, or services.
If you’re an absolute beginner, it may be smart to start with a fiat-based exchange. Many fiat exchanges allow you to buy and sell Bitcoin, Ethereum, and other cryptocurrencies directly with USD.
These exchanges offer more convenient fee structures than trading crypto pairs directly (although they charge higher fees). For example, Coinbase offers a 1.49% fee on credit card purchases and 2.99% on bank account purchases.
You can also use these exchanges to trade between different cryptocurrencies. This is another way of avoiding fees—if you want to diversify your portfolio but don’t want to use multiple wallets or accounts.
How to Select the Best Cryptocurrency to Trade
Consider the following questions before you select which crypto to invest in:
- How much you’re willing to spend
- How frequently do you plan to trade
- Whether you want to trade in large amounts of crypto (more than $500) or small amounts ($20) The good news is that it doesn’t take long to set up an account on most crypto trading platforms—and once your digital wallet is established, it will only take minutes before you can start trading.
Once you’ve opened an account, connect it to your bank account via wire transfer or credit card payments. Once that’s done, use the platform’s app or website to buy crypto using one of the given exchange options.
Learn to Trade Cryptocurrency
The best way to trade cryptocurrency is via a platform that allows you to do so. There are several benefits to trading cryptocurrency as well as drawbacks such as volatility, so keep in mind that you may not make a profit on a smaller investment.
Crypto trading can be risky; there are no guarantees, and it takes time to master. Thus, it is important to learn how to trade cryptocurrency for profit. Check out how below:
Get yourself a good exchange It doesn’t matter where you get your cryptocurrencies from, but at some point, they need to end up in an exchange platform. Some exchanges will let you use fiat currency (such as USD) to buy cryptocurrencies or vice versa, while others only deal in crypto-to-crypto transactions. There are plenty of exchanges out there, and new ones are popping up all the time; find one that suits your needs and has low transaction fees.
Use online resources Once you have money on an exchange, buying and selling cryptocurrencies is easy enough. But how do you know when to buy it? How much should you invest? And when should you sell? Day trading isn’t easy; fortunately, there are resources available online that can help guide your decisions. For example, Investopedia has a great introductory guide to day trading.
Learn technical analysis Technical analysis involves studying charts of price movements over time to predict future price trends based on historical data. Most trading apps provide charts to help you make investment decisions, but you will need knowledge of the abovementioned online resources to help you decipher these charts.
When traders are looking to make short-term trades (less than a few days), they should look at using their favorite exchange or broker.
You’ll want to put your money in an exchange or with a broker that has low fees and low spreads, so you can keep as much of your profit as possible. Check out the best ways to trade crypto in the short run:
Scalping is a trading method that focuses on benefitting from small price movements and reselling for a quick profit. Scalping necessitates a tight exit plan because a single major loss might wipe out the many little gains the trader has worked so hard to achieve.
As an inexperienced trader, you should keep things simple. You can try out a simple momentum trading strategy with only two indicators: RSI and MACD. These indicators show you when to buy or sell cryptocurrency.
The rules for both are straightforward: When RSI goes above 50, it’s time to buy, and when it goes below 50, it’s time to sell. Similarly, when MACD crosses 0 (zero), it means it’s time to buy, and when it crosses -0 (negative zero), that means it’s time to sell.
This strategy involves buying coins and holding onto them for at least a week, but usually much longer. Traders who employ medium-term trading usually aim to buy low and sell high, taking advantage of price volatility in an attempt to generate quick profits.
Popular medium-term trades include:
- Day trading: Day traders hold positions for anywhere between six hours and a few days before closing out their positions or switching strategies
- Swing Trading: Swing traders hold positions for several days to several weeks, sometimes even months
Many cryptocurrency exchanges don’t charge a transaction fee for buying and selling. In some cases, you may have to pay a deposit or withdrawal fee when you transfer fiat into or out of your account.
However, if you set up an account at Binance and then buy some cryptocurrency on another exchange, you can use that other exchange to trade your cryptocurrency for free as long as Binance doesn’t charge a withdrawal fee.
Thus, reverse trading is the best way to trade cryptocurrency without fees.
One of the most efficient and profitable ways to trade cryptocurrency is range trading, which consists of buying coins once they’ve risen in value to a set amount and selling them when they fall back down. In other words, you go long on coins that are rising in value, then short-sell them once they’ve fallen again by at least a certain percentage. This strategy allows you to profit both from short-term financial market movements (when you buy low and sell high) as well as longer-term gains.
If you’re wondering how to trade cryptocurrency and make a profit, simply buy, hold, and HODL. The only strategy required for a long-term investment in crypto is to sit back and watch your holdings climb.
Long-term traders can also play it safe by dollar-cost averaging: purchasing small amounts of cryptocurrency at regular intervals with a fixed budget. This can help protect against random price swings that could hamper profits or lead to major losses if left unchecked.
Here are a few strategies to help you maximize profits if you’re investing in crypto for long term gains:
Follow the Trend
The easiest way to make money with crypto is to follow the current trend. There are a few different strategies, but it all comes down to following another trader—and if they turn out to be a good one, you benefit from their knowledge and work.
The best way to do that is by signing up for an account on one of several crypto-only exchanges, such as Binance or Bitfinex. You can also use technical analysis to see how many traders are buying and selling each cryptocurrency.
For example, if there is high demand for a cryptocurrency, the price will automatically go up and vice versa. Thus, it is important to follow the trend to understand when to buy and sell.
Buy the Dips and Hold
One of the best ways to trade cryptocurrency is to buy coins on dips (or during a downturn). A dip in prices happens when there is bad news that causes investors to sell their holdings.
This means that you can often buy coins at discounted prices, which translates into better profits if you hold onto them for a longer period.
In fad trading, you are predicting that a coin will go up in value because of some news event or other fad, and you buy it at its current price.
If it goes up by more than you initially thought, you make money on your original investment, but if it does not go up by enough (or just goes down), then you lose money.
However, this strategy can be very risky and is best suited for experienced traders who have market know-how.
There are a lot of options when it comes to trading cryptocurrency, so you need to decide which one is best for you. Before trading, make sure you do your research and know what your end goal is.
If you are looking to trade Bitcoin but don’t have a lot of money, the best way to trade crypto in the US is to start with an exchange that doesn’t charge transaction fees.