A Guide To Crypto Trading Strategies: The Basics

A Guide To Crypto Trading Strategies: The Basics

Over the years, cryptocurrencies have slowly made their way into the financial sector. Many businesses have started integrating them within their own portfolios — be it as a means of conducting business or as a business in and of itself. Traded on a decentralized market, cryptocurrencies operate on a blockchain, meaning they are somewhat less sensitive to political and economic factors that normally affect traditional currencies. Cryptos are, however, affected by supply & demand, media exposure, among other things.

Buying and selling cryptocurrency has become commonplace in recent years. Referred to as cryptocurrency trading, there are many different elements that individuals must take into consideration when buying or selling cryptocurrencies. There are also many different trading strategies that individuals opt for to optimize the financial rewards that come with such investments.

Below we will list some of these strategies to help you familiarize yourself with the available options out there.

1. Day Trading

This crypto strategy involves trades that are initiated and concluded on the same day within crypto trading hours. Though time-consuming, this strategy allows you to make money from even the smallest fluctuations in the market.

2. HODL (Buy & Hold)

This crypto trading strategy is all about putting in your investment and forgetting about it for an extended period of time in hopes that the price of the asset will eventually go up. This strategy focuses on not letting the day-to-day spikes and dips in value drive your decisions to either buy or sell your cryptos. Over time, investors can profit from an increase in the asset’s value.

3. High-Frequency Trading

This crypto strategy focuses on the creation of algorithms and trading bots that allow you to automate the buying or selling of a crypto asset. It is highly complex and requires a thorough understanding of the market and algorithms, meaning it is not a great strategy for newcomers in the crypto industry.

4. Dollar Cost Averaging

This crypto strategy is all about investing an amount of money in increments over intervals. It allows traders to profit from market changes without taking major risks. You just have to decide on a fixed amount to invest and specify the period of time you’d like for these investments to occur. The changes in the market or value of the crypto should not get in the way of your investments.

5. Scalping

This crypto strategy focuses on entering and exiting based on trends occurring in the market. It is a short-term strategy that allows you to benefit from spikes and dips in the price of the crypto as individual trades are often held for a few minutes at most. If you have time and are an active day trader, then scalping might be a good strategy for you.

6. Event-Driven Trading

This crypto trading strategy involves taking decisions based on certain events (announcement of partnerships and collaborations, product launches, network upgrades, listings and delistings on exchanges, etc.) taking place regarding a particular cryptocurrency. Prior to any crypto-related event, traders using this strategy rush to trade based on market predictions regarding how the event will affect the asset’s value.

What’s the best strategy?

There is no one answer that fits all. A strategy that works for someone may not work for you as it all depends on the goals you set. You must know what you want to get out of your investment and implement a strategy accordingly.

If you need help with this, Tradepedia is here for you. We offer learning, coaching, and mentoring programs of different kinds. Through a series of thoughtfully designed step-by-step learning modules, methodologies, and tools, we will help you take your crypto trading game to another level.