What Is a Crypto Trading Strategy? 5 Crypto Trading Strategies Explained

If you have some experience trading cryptocurrencies, you might consider swing trading. It takes patience and a level of skill, but if you wait for the right moment, crypto swing trading can produce excellent returns. Crypto prices can change rapidly, so scalpers have to watch for an increase in trading volume and be prepared, knowing exact exit points before entering the trade. Crypto asset investing is highly volatile and unregulated in some EU countries.

• Scalping entails purchasing a cryptocurrency, monitoring it throughout the day, and then selling it when the price rises above the initial buying price.
• When scalping, all you’ve got to do is take out a crypto position and then sell that position back onto the exchange based on small price movements.
• On the contrary, arbitrage trading takes advantage of small price differences across exchanges.
• By tracking your portfolio and measuring your performance, you can easily improve upon it and make better trades.

Please consider, among other important factors, your investment objectives, risk tolerance and EarlyBird’s pricing before investing. Diversification and asset allocation do not guarantee a profit, nor do they eliminate the risk of loss of principal. Passive trading strategies are used by crypto investors who are in it for the long haul.

Differentiating Between Long-Term and Short-Term Strategies

Both crypto traders and investors should know and check if they need to pay taxes on crypto. For example, in the US, taxpayers must report their crypto trades by law to the IRS. Our thorough and all-encompassing crypto tax guide will break down everything you need to know from how crypto is taxed, what exactly is taxed, when, and how to pay them. It’s hard to talk about crypto trading without talking about risk management in cryptocurrency trading.

• EarlyBird helps parents, family, and friends collectively invest in a child’s financial future.
• We call them active because they involve constant monitoring and frequent portfolio management.
• The RSI divergence strategy is a more technical strategy but can be used to great effect for timing trend reversals before they happen.
• It can be challenging to swing trade crypto because you may take one or two trades a week.
• You can invest in Bitcoin or another cryptocurrency without spending much money.
• Passive trading strategies are used by crypto investors who are in it for the long haul.

Just like with crypto exchange fees, if tax is not accounted for, it can lower your profits. As you learn how to buy and trade cryptocurrencies, you must differentiate between crypto trading and investing. And, how do you take advantage of this distinction to effectively make your trades?

Arbitrage

Furthermore, when you go long your risk is limited, as any asset can only ever drop to $0, destroying your capital but that’s it. Shorting has theoretically infinite risk, as prices can always continue to rise and you will still be obligated to pay back the exchange. Be aware there are usually very specific time parameters for short trades, so you can’t just wait indefinitely to return the asset in the hopes it will finally drop. A breakout trading cryptocurrency strategy is based around the ideas of support, resistance, and channels. There is no “best” trading strategy that can be generalized to work for everyone because this is something that relies heavily on the individual trader.

• To correctly spot this, first, identify if your trend is to the upside or downside.
• Armed with these powerful crypto analysis tools, you’ll have the necessary insights and information to make informed trading decisions.
• If you want to practice, some exchanges offer “dummy” accounts where you can trade fake cryptocurrency against real-world market data, so that you can learn the ropes with literally no risk.
• Both look for the existence of stationarity, allowing for traders to determine if mean-reversion is present.

It’s a framework you create to guide you in all your trading endeavors. Crypto-exposed stocks gapped up in Tuesday morning trading as bitcoin (BTC-USD) rebounded from a correction to the lowest level since mid-June. To reiterate, we will generate our signals by adding a new ‘Signal’ series to our dataframe, where 1 implies a long signal and -1 a short. In this guide, we’ll be using CoinGecko’s Public API to fetch historical crypto price data via Python. Mostly, a token/coin tends to move for a longer period inside a certain range. For example, the range of Bitcoin remained $8,602.40 to $10,211 for a whole month-long period.

Cryptocurrency Trading: Easy Strategies for Beginners

To learn more about Ezekiel’s method of trading backed by mathematical probability, you can check out his one core program. In line with the Trust Project guidelines, the educational content on this website is offered in good faith and for general information purposes only. BeInCrypto prioritizes providing high-quality information, taking the time to research and create informative content for readers.

But, consider your risk management because if you risk 1% on each trade, that’s $2, which doesn’t give you much scope for growing your cryptocurrency account. It’s a difficult question to answer because it depends on how much trading capital you have to trade cryptos, and it’s reliant on your skills as a crypto trader. So focus less on the money and more on improving your crypto trading skills. If you have a background in trading other financial instruments, don’t assume that trading cryptocurrency is the same. Spend a few weeks or more watching the crypto markets and practising in a demo account or with micro-lots on a live crypto account. Day trading cryptos takes focus and discipline, and a flexible approach.

Index investing

That means all crypto transactions are verified through a computing process known as “mining” and then recorded on the currency’s ledger. Most of these ledgers are supported by something called “blockchain” technology — so you’ll often hear investors refer to blockchain and crypto ledgers synonymously. That means they can’t be regulated by politicians, and they aren’t affected by common monetary issues like inflation.

• And then, the prices consolidate, typically pulling back to the previous high or low and moving in a range.
• It’s also worth noting most shops and websites aren’t yet equipped to process crypto payments (although this is slowly changing).
• On the other hand, technical analysis involves studying price charts, patterns, and indicators to predict future price movements based on historical data.
• This is because you can always move to passive crypto trading instead, which is much easier and less demanding.

Nonetheless, whether a novice or an advanced trader, one must conduct their due diligence before committing funds. Despite the risk, a savvy trader pays attention to the margin requirement and other crucial rules to avoid having a terrible trading experience. Scalp traders prefer highly liquid markets as it is pretty predictable when one should enter or exit the market.

Securely store your crypto

Divergences arise when large numbers of traders decide to exit the market and sell their assets. With this strategy you will be able to avoid the volatility of the market and survive the short-term price movements in crypto trading. Defining a strategy_result function amalgamates all previously discussed data to generate a signal output of consolidated figures. Then we can determine our profit, number of trades, and number of wins based on the discrepancy between the generated entry and exit prices.

• But it’s worth noting that you don’t have to follow the same strategies forever.
• Usually, the exchanges with margin trading options offer a leverage up to 100x, which is a hazardous ‘game’ and not recommended for beginners.
• It enables a more hands-off approach to investing in the blockchain industry and cryptocurrency markets.
• The amount will depend on your personal situation, i.e., your financial capability.

By investing in promising projects and reputable cryptocurrencies with a strong track record, there is a chance to capitalise on their long-term growth potential. Another tool worth considering is Glassnode, which focuses on on-chain analytics. It goes beyond mere price and trading data by tracking various on-chain metrics – like active addresses, transaction volumes, and network hash rates. This type of information can give you insights into market sentiment and potential price movements based on user behaviour within the blockchain itself. Moreover, setting realistic expectations and sticking to a trading plan can help manage risks.

Swing trading

Therefore, traders should conduct thorough research before purchasing any cryptocurrency and avoid spending what they cannot afford to lose. Cryptocurrency trading bots have revolutionized the way traders interact with digital assets. These computer programs automate trading functions across multiple exchanges or platforms, offering a range of benefits to both beginners and experienced traders. For instance, imagine Alex, a seasoned trader, who spends his days analyzing market trends and executing trades based on minute-by-minute price movements. He may take advantage of small price discrepancies and profit from the volatility by repeatedly buying low and selling high within a single day. For example, let’s say you believe in the transformative potential of blockchain technology and decide to invest in a leading cryptocurrency like Bitcoin or Ethereum.

• It takes the emotion out of trading and instead it trades using strong artificial intelligence to perform fact-based technical analysis.
• You can also earn money by sharing your day trading Strategy with other users, potentially building a name for yourself within the community.
• Looking at the chart below, we can see that there were three key RSI divergences on the recent bitcoin/U.S.
• The rates for exchange between crypto assets, even buying and selling rates, can vary greatly.
• If you want to learn how to trade cryptocurrency, you’re at the right place.
• All the investment strategies are suitable and profitable for you as they come with several pros and cons.

The difference between those prices is slippage, and in the crypto markets, a few minutes can mean the difference between a big profit or a big loss. Although crypto is a new and exciting industry, it has its risks for those who are interested in investing in it. Quant traders utilize HFT, which is an algorithmic trading approach to benefit from bid-ask price discrepancy to sell/buy assets in microseconds using latency. However, short-term price differences are spotted by trading following momentum strategies to act on anticipated reactions to the volatile crypto market. Demo trading is a great way to learn cryptocurrency trading with zero risk. The use of virtual money (not real crypto) removes the stress of losing funds, allowing traders to hone their skills and test various scenarios.

New to crypto trading but don’t know how to get started? Here are 3 simple long-term strategies worth considering.

Looking at HTX through the combination of HT and X, HT represents the native token of the platform while X symbolizes the exchange. On the other hand, X is the Roman numeral for 10, which pays tributes to HTX’s 10th anniversary. It is a new era for the platform with synergy between HTX, TRON, and Poloniex. As shown above, this 20-day SMA crossover strategy ultimately yielded negative returns over the course of a year. As demonstrated in our subsequent output below, our SMA crossover strategy for Ethereum over the past year generated negative results.

The prices of cryptocurrencies in the future could also be affected by regulatory changes, with the worst-case possibility that cryptocurrency becomes illegal and therefore worthless. As a trader, you might employ different trading strategies simultaneously, meaning you are actively trading the immediate edge while at the same time swing trading and/or position trading. When trading crypto, it is crucial to remember that you also have to pay fees to crypto exchanges. But, on top of the crypto exchange fees, it is essential to know that crypto tax comes on top of the trading platform fees.

What is the best way to trade crypto?

EndoTech is a leading automated crypto trading platform that has been fine-tuning its trading algorithms since it launched in 2012. This may seem a bit scary for some but EndoTech never gets permission from your exchange account to withdraw or transfer funds so you don’t have to worry. There are plenty of trading strategies out there and several platforms that – some of the most popular day trading strategies are range trading, scalping, and arbitrage. If you want to save time, you can instantly copy professional traders plays with eToro, and learn as you go. The Relative Strength Index (RSI) is a technical indicator used in financial markets to assess the momentum and strength of price movements of an asset.

Day trading crypto doesn’t require a subscription to a brokerage or margin account, making the ability to indulge in short-term trades more accessible than the stock markets. The strategy of crypto day trading entails entering and exiting a position in the market on the same day within crypto trading hours. It’s also known as intraday trading because trades are typically started and concluded within a single day. Yes, day trading BTC is like playing with Bitcoin volatility throughout the day. An investor-formulated trading strategy in cryptocurrency trading is an algorithm that defines a set of established rules for buying and selling digital assets on cryptocurrency marketplaces.