Although people have been trading stocks for centuries, cryptocurrency is still a relatively new form of investment. As a result, there are few tried-and-true strategies for predicting the future price of crypto assets. However, that doesn’t mean you shouldn’t try. In this article we’ll look at some of the most popular crypto trading strategies and discuss why they work (or don’t).
1. The Day Trading Strategy
The day trading strategy is the most popular and easiest to understand when it comes to cryptocurrency trading. It involves buying and selling at the same time, but with different amounts. You could open a position for $1000 in Bitcoin, for example, and then sell that same amount when you want to exit your position (this is called “closing”).
You can use this strategy to make money (if you buy low and sell high), but it also means that you could lose money if you sell too soon or buy too late. Why? Because day traders usually only hold their positions for a few hours at most—sometimes as little as 15 minutes! This means they have no time to wait around until their trade hits its sweet spot; instead they need to exit quickly before prices change again.
Short selling is popular with day traders because it gives them more flexibility in how they manage their risk exposure over short time periods. Check out this article which explains what is shorting crypto and how it works.
2. The Scalping Strategy
Scalping is a trading strategy that involves making many trades, each for a very short duration. The goal of scalping is to make small profits on each trade, with the idea being to make many small profits instead of fewer, larger ones.
Scalping can be done using both technical analysis and fundamental analysis. Some traders believe that it’s best suited for markets that have high volatility (such as cryptocurrencies), while others feel that this approach is more suited to calmer markets (like stocks).
3. The HODLing Strategy
HODLing is a long-term strategy. It’s used when you have a lot of patience and don’t want to take any risks by investing in anything else. If you’re new to crypto trading, this isn’t the best strategy for you because it can be difficult to understand at first. The HODLing strategy works well with Bitcoin because it has a low volatility and doesn’t move too much in price, so there aren’t many ups and downs while you wait to make your profit.
4. The Margin Trading Strategy
Margin trading is a strategy that allows you to borrow money from your broker in order to trade with. For example, if you place a $5,000 order and the margin requirement is 50%, then you will have to deposit $2,500 in cash or marginable securities. Your broker will lend the remaining $2,500 for your trade.
When using this strategy, it’s important that you understand the risks involved before making any trades. If the price of your trade decreases significantly and your equity drops below the margin requirement (or maintenance requirement), then the broker may force liquidate some or all of your positions. This can result in losses greater than those incurred by simply holding onto positions until expiration day arrives (namely because there are fees associated with liquidation).
Additionally, even if everything goes according to plan and there are no unexpected events between now and expiration day (assuming one has been selected), any profits made on each position must be paid back over time through dividend payments. Things might not go as planned during this period either, because they lose value faster than expected or suddenly increase due to unforeseen circumstances such as changes in interest rates or market conditions around them.
When that happens, these large amounts could come at an inconvenient time when funds may not be readily available without additional effort being made beforehand by investors themselves. That could lead some inexperienced traders into trouble down further downline from where their original investment came from originally.
5. The Market-Making Strategy
Market-making is a strategy that can be used by traders to make money from the spread, which is the difference between the bid and ask prices. Market makers are essentially middlemen who take both sides of a trade. For example, if you want to buy 1 BTC, your order will go through a market-maker first—they’ll put it up for sale at $11,000 and then simultaneously purchase 1 BTC at $11,100 when someone sells their coins. This way, they always make a profit on every transaction as long as there’s enough volume to support them (i.e., enough people willing to buy/sell).
6. The Position Trading Strategy
The Position Trading Strategy is a long-term trading strategy. It’s used by investors who want to hold their assets for a longer period of time. This strategy involves the holding of assets for a long period of time, usually 6 months or more. The goal is that once you’ve purchased an asset and held onto it for this period of time, it will increase in value enough to offset any losses you might incur during your waiting period (aka: “the correction”).
This type of position trading can be risky because there are no guarantees that your chosen investment will do well over time. However, if done correctly and wisely, then this strategy could prove extremely profitable.
Conclusion
We hope that by now you have a better understanding of how to trade cryptocurrencies. With so many different trading strategies available, it can be difficult to decide which one is right for you. We believe that the best strategy is the one that fits your personal trading style, but we also think that HODLing might be a good option for most people who want to invest in crypto.
Any financial information or opinions contained in this article are the author’s own and do not represent endorsement or support of any products or services by SmallBizClub.com.
2634 Views
