Crypto Trading Strategies
In this guide, we talk about crypto trading strategies, their types and how should traders use them. The main goal of this article is to present different strategies for Bitcoin trading, Ethereum trading and altcoin trading.
You can expect to learn about specifics of the crypto market, how to control your emotions, tools available, and crypto analysis. We show off different ways to trade cryptos, including arbitrage trading, buy & hold, wing, trend, and scalping strategies. Other relevant topics to supplement your crypto trading knowledge are advanced crypto trading and crypto fundamental analysis.
How Important are Strategies?
While investing, direction and end-objectives are clearly vital. However, the path towards a goal is what makes or breaks the deal. The “path” in this context is strategies on how to invest, when to do so and how to close the order. Tactics constitute an important part of your trading efforts, especially when cryptos are in question.
Different market trends require different approaches and understanding them can make a line between profit and loss. Altcoin trading strategy does not differ that much from bitcoin. However, bitcoin is known to move all alts in terms of price, so you should adjust your strategy accordingly.
There are many factors that impact the price of cryptocurrency, as the value changes on hourly bases and sometimes drastically. Thus, it is important to understand the best way to approach trading at that specific moment. Cryptos also do not depend on the solitary regulatory body but rely mostly on the market trends. Luckily, many of coin strategies come from Forex and commodity trade, both of which had time to mature.
Emotional Trading and Habits
Before we delve deeper into crypto tactics, it is important to set the basis for sound reasoning. As the name suggests, crypto strategies are about creating a good game plan on how to manage your portfolio. It also includes what type of orders to use and how to utilize your knowledge. Emotions can help investors choose the right moment through their “gut feeling.”
However, many a trader experienced panic or stress emotions that they could not control. In turn, it led toward wrong decisions, mostly through premature trade order closure or construction. Thus, controlling your emotions while investing in cryptos is crucial. Bull and bear trends (growth or decline of the market) can scare anyone. However, understanding the market, one can easily deduce that such fluctuations are old news.
Keeping a cool head at all times, even if your entire bank check is in jeopardy will definitely help. By deducing when to accept losses and when to get inside highly volatile period can save you from losing out everything you have in balance. It is important to understand that there is no perfect time to trade cryptos (or anything really). Analyze the market with a clear mind and cut your losses when needed.
The same can be said about habits, as many get into cryptos with beginner’s enthusiasm. However, the said hype can die out pretty quickly after first few failed tries. After all, trading coins is a continuous effort of employing knowledge and patience while making money. Thus, as with anything else in life, good habits come in quite handy. Here are few that you should practice every day in order to streamline your investment success:
- Clear your mind from all things not related to crypto when engaged in trading
- Keep analyzing charts on daily basis, not missing out longer periods to keep updated
- Continuously educate yourself about trading tools, strategies, and crypto market itself
- Regularly perform deep analysis, both technical and fundamental
- Have a positive outlook on your investments
Tools for strategy implementation and analysis
There are various tools that can help you in crypto strategy implementation. These often come as free functions though paid ones are more complex and thus, more helpful. Here are the most important ones that beginners should be aware of:
– Software: they come as a complete deal of all automated programs that help extract data, provide analysis, and transfer funds around. By downloading it, most of the time you get a flashy interface, pinpointing issues, and opportunities.
– Individual Bots: Although software solutions are awesome, we would recommend starting with individual packages. Bots come in different shapes, prices, and functionalities. For starters, bots that gather and analyze data are more than enough to kick-off their bitcoin day trading.
– API tools: APIs connect you with the trading platform by performing complex operations within seconds. Thus, instead of you manually gathering data in excel, use APIs to get that spreadsheet and alarm systems to do the job instead of you. Just faster and better.
– Charts: Although it is possible to work out the market without above-mentioned tools, charts are mandatory if you want to profit. Price and volume charts provide vitally important information for your cryptocurrency trading strategies.
Take Trading View snapshot below. At the top corner you have indicators that show price patterns while graph itself gives visual presentation of the market. You can even combine different exchanges and track out where fluctuations are larger.
You can read more about these in our separate article, .
Types of Crypto Trading Strategies
Day trading can rightly call itself as an umbrella tactic that all others base their philosophy on. Day trading is one of the oldest concepts in the trading industry. You make an order and close it within 24 hours, with hourly analysis the basis of your assumptions. Most people start with this particular strategy and is perfect for those that just started trading bitcoins for beginners.
The main advantage of this tactic is lower risk rate of your order releases. You have enough time to look at the data in front of you and decide when it is enough to call it a day. However, small price differences and large fluctuations can put a toll on investors that are prone to emotional trading.
Additionally, you can capitalize on small profits most of the time only a few times, since the goal of day trading is to do few trades on an entire day.
Crypto day trading is perfect for beginners, as it provides enough time for starters to get a hang of the industry. There are numerous cryptocurrency trading sites that provide charts containing hourly and daily data. Thus, using tools mentioned in this crypto trading 2018 guide, you can implement the strategy easily and with quite a low level of stress.
This strategy is quite common in the crypto world, due to large fluctuations on an hourly basis. Exchanges and trade centers are numerous, leaving space for investors to buy fast and sell even quicker. The idea is to make a small profit out of several transactions in one day or even within an hour. You buy cryptos cheaply at one exchange and sell it expensively on the other, making an easy profit.
This strategy has its merits, as it lowers don the risk of losses. On the other hand, even though cryptos can fluctuate, you still depend on exchange rates on different platforms. This can render your activities useless if unfavorable. Thus, we recommend this strategy only once you have everything set. You should also understand cryptos you are trading, thus a little bit of experience in the crypto markets is necessary.
Buy & Hold
Another popular method of trade, buy & hold even has a name in the crypto jargon – HODL. In this strategy, the trader looks to purchase the coin at the low price level and hold it until the market trends push the coin into the favorable zone. According to this strategy, the price would inflate upwards as time passes, earning you larger profits as you wait out.
This has several advantages and disadvantages. On the pro side, you can purchase the coin and lend it out to others, earning interest as a result. You also bypass complex analysis on daily basis and concentrate on long-term indicators. On the con side, bitcoin rose to $20.000 at one point in 2018, only to fall down to $4.000 at the end of the year. You stand to lose a lot if your long-term analyses misfire.
Swing trading tactic uses the graphical presentation of price fluctuations as a mean to locate trends within a certain period of time. The market moves in both directions, as price sometimes falls and rises. Swinging in the market means to locate repeating timeframes of price behavior, and then capitalize it by buying or selling.
This is reserved for experienced traders, especially those that understand charts and indicators. Mobile apps and chart platforms in this strategy are invaluable. You do need to understand peaks and drops in order to use this strategy properly.
The trend is very similar to Swing tactic, though with a little twist. Where swing is used for short-term trading purposes, trading with trends is long-term oriented. You pick up major events and reasons behind fluctuations but do not get into an hourly rate of change. You should be interested more in daily changes, as you wish to grab larger price differences.
Crypto scalping strategy has bigger potential in terms of profit than swing tactic but it requires a bit larger investments. However, you are also at a higher risk of losses if you misinterpret signs. Whereas swinging is better suited for experts, trend trading can accommodate starters as well as experts.
You should keep in mind that cryptocurrencies change value fairly quickly and drastically. Bitcoin scalping can land you quite a lot of money but you also stand to lose it just as fast.
Lastly, you can scalp while trading cryptos. The strategy revolves around the notion that smaller but numerous trades a day is the best profit gainer tactic. This might work on days when coin drastically changes in value and should thus be implemented sparingly.
You can also use the tactic if you are aiming for lots of trades but for a small amount of profit. This type of market approach might land you small profit per transaction but risks are very low.
It is also good for starters to try their hands on the trading, tough we advise small funds only to be invested. Scalping itself uses smaller volumes of coins and funds after all in order to catch as many changes as possible.
Crypto Trading Tips
We have several tips for you to consider while trading cryptocurrencies:
- Always look at the market data before you use a strategy. Sometimes the market might move against you, so it is best to be prepared.
- When using tools like charts and bots, open up several of them and compare data. This should give you clearer idea on how the industry moves.
- If you wish to buy and sell coins to own them, prepare wallet and trade platforms prior to your activities. It is also good to check the terms of trade as well.
Crypto Trading Signals
There are many API and apps out there that provide you signal services. These are alarms whose main aim is to guide your attention towards important trends happening momentarily in the market.
What is important to understand is the fact that you should either set them yourself or use someone else’s. Twitter and Facebook is a good source if you would rather wish to use the latter option. Check out our guide regarding top Twitter accounts for crypto trade signals to get a better idea.
Crypto Technical Analysis
Suffice to say, strategies are meaningless if you do not do research beforehand. Thus, everyone involved with crypto investment uses technical analysis. These investigations focus on statistics and numerical changes of the industry in terms of price and volume fluctuations. Charting is essential here and there are numerous platforms that provide combined findings from several crypto trading websites.
Read more about signals and how to set up your own investigations in our article about crypto technical analysis.
Crypto Fundamental Analysis
Apart from a technical aspect, crypto traders use fundamental analysis to dig deeper than simple statistics. Fundamental investigation works out psychological patterns in the crypto industry. This is an especially important tool to use, due to how blockchain world basis its value on market trends and human factor.
Mainstream markets have regulators and central banks controlling interest rates and thus, pricing. Cryptos, on the other hand, allow investors, miners, and users to set evaluation according to the demand and supply. We prepared a separate guide for fundamental analysis to complement your crypto leaning.
Conclusion Crypto Trading Strategies
In this crypto strategies 2018 guide, we went over several of them in terms of the advantages and disadvantages they have. Traders should use each of the crypto trading strategies with great care, as most involve serious funding.
Without an understanding of the market functions, and strategies themselves, it is easy to picture bankruptcy of your operations. Keep your emotions in check, practice good trading habits, and hang in there. You will reach your goals if you keep yourself disciplined and vigilant.