Cryptocurrency is a constantly stirring beast. Whilst we are currently in the second crypto winter – beginning in early 2022 with the crash of stablecoins TerraUSD and Luna – there are still enough signs that the market will reawaken in the near future.
But that doesn’t mean that trading can carry on in the same way. In fact, a number of investors have had to totally upheave their crypto trading strategies.
This means that, instead of long-term strategies that are based on market predictions, investors are choosing to formulate solid portfolios that can see out the winter blues and give them a strong presence in the market when things start to brighten up again.
Finding the right crypto trading strategies for a beginner, however, is not so easy. Even in the best of times, cryptocurrency is a difficult nut to crack. Looking back to 2017, Bitcoin had a sudden price jump almost out of nowhere, rising from $974 to $20,000 – a staggering 1,950% increase. It is important, therefore, that novices start with lesser known coins to build their portfolio and get a feel for trading within the market.
Right now, for instance, the price of Bitcoin is reaching nearly $30,000, whilst altcoins are distinctively lower. The Klaytn Price – an altcoin which has proven to be strong and investable in the current climate – is sitting below $1, for instance. With no-one knowing when the winter is going to end and a price like Klaytn’s is going to rise, a token like this makes for a far safer and more intelligent investment.
But the question of trading strategies must still be contemplated. As mentioned previously, many investors are opting for more short-term tactics in the market, choosing to prioritise short-term gain and stability rather than gambling on a future they cannot be certain of. With this in mind, here’s a look at five of the most popular trading strategies and why they are so beneficial:
Day trading has long been a popular trading strategy, but never more so than in the current market. This is mostly due to the fact that it gives the investor far less exposure to the volatility of the market. Instead of holding onto a token, traders only hold something for a few hours, or sometimes only a few minutes, before trading it for a slightly higher – or lower – price.
This also gives the potential for high trading volumes and an increase of liquidity, but it must be noted that as many as 95% of day traders eventually fail, so it is not a guaranteed success. However, as with any trading strategy, practice makes perfect, and traders must be ready for the occasional failure.
Scalping is another trading style that focuses on quick reactions and fast sales. In this case, investors scan the market during the day and make a profit off the smallest of price changes. In this case, however, an exit strategy is a must.
Whilst scalping is beneficial for small, consistent gains, one large loss can eliminate the gains that a trader has made, meaning they can start all the way back down at the bottom if they are not careful.
Range trading essentially refers to the difference between prices during a specific trading period. For instance, when the market reaches a point where a coin will not make any higher highs – or lower lows – then the trader sells the coin and capitalises.
These points are known as “resistance” – when a price is highest – and “support” – when the price is lowest. When the token is between the resistance and support point, traders will purchase at the support level and sell at the resistance level.
High-frequency trading is becoming more and more popular, not least because of its accuracy in reading the market. Whilst many traders have to constantly examine and determine when to sell, high-frequency trading leaves the analysis to an algorithm, using trading bots to enter and exit a crypto asset over a short period of time.
It must be noted, however, that this strategy is best suited to experienced traders that know how to distinguish mathematics in computer science – as well as complex market concepts.
One last strategy that is being utilised by a number of traders in 2023 is known as arbitrage. This involves buying a coin on a specific exchange and then selling it on another exchange for a higher price. The difference, here, is known as a “spread” – when the price of a crypto pair varies and traders profit on price disparity.
This is not for traders who only keep one eye on the market, however. It Is important to have accounts on multiple exchanges and constant vigilance to ensure a price disparity is capitalised on.
The Trading Strategy For You
It is important, if you are considering trading in the cryptocurrency market, that you choose the crypto trading strategy – as well as the altcoin – that is right for you. Think about how often you can examine the markets and whether a more intense trading tactic is going to be beneficial for you in the long run.
Cryptocurrency is an incredibly open market, and it can work for anyone if they have taken the time to research it. Make sure you are not complacent and you do everything you can to build your know-how before the spring of crypto starts to bloom once again.