Formulating a crypto trading strategy that works in accordance with your personality style, financial goals, and risk appetite is not an easy task. Here, we’ll explain some of the most popular and common crypto trading strategies to make it easier for you to choose the one that may suit you best.
Despite the regulatory dark clouds still plaguing bitcoin and other cryptocurrencies in various jurisdictions around the globe, coupled with the super volatile nature of these digital assets, crypto trading has gained serious popularity over the years and has made countless regular individuals wealthy.
According to fresh research reports and statistics, more than 81 million people from various regions created unique crypto wallets on Blockchain.com as of March 2022, and financial experts have predicted that the global blockchain market will grow by $39.17 billion by 2025.
Per crypto markets data available on Google Finance, the price of bitcoin (BTC) has increased by a massive 3,806.85 percent in the past five years, while ether (ETH), the world’s second-largest crypto by market cap, has risen by 7,032.22 percent in that same period.
Unlike the forex and stock markets, the cryptocurrency markets never sleep, making it possible for traders to make huge amounts of profits day in and day out.
However, to become successful in the fast-paced world of crypto trading, one must choose a trading strategy that suits them best, as there are countless ways to make good profits from crypto trading.
For the uninitiated, a trading strategy simply refers to an extensive plan or framework carefully formulated to guide traders throughout their trading endeavors. To be a successful trader, it is important to create and follow through with your strategy.
Since expert traders often trade the markets with strict adherence to their trading strategies, it is safe to say that trading strategies have the ability to help crypto traders mitigate financial risks and losses, as it helps them to avoid making unnecessary trading decisions that are not in line with their strategies.
With that said, an ideal crypto trading strategy must clearly specify the asset classes to be traded, tools and indicators, entry and exit triggers (stop loss), position-sizing, and portfolio performance measurement.
Day Trading – this is a common active trading strategy that involves opening and closing a position on the same day. In essence, day traders try to take advantage of intraday crypto price movements.
Swing Trading – in this type of crypto trading strategy, traders often hold positions for longer periods. A typical swing trade can last from between a few weeks to one month.
Dollar-Cost Averaging – this involves investing a fixed amount of money in the cryptocurrency of your choice at regular intervals. This strategy is suitable for investors with a long-term focus.
Scalping – this strategy focuses on exploiting small price moves multiple times in a day. Day traders are expert traders who are often on the lookout for bid-ask-spreading gaps in liquidity or other inefficiencies in the market.
Other trading strategies include ‘Buy and Hold,’ index investing, and trend trading.