You’ll need iron nerves, an effective plan, and an intuitive trading platform if you want to succeed in the dangerous world of cryptocurrency. You’ll learn about the steely nerves and the user-friendly trading platform through careful research and more research.
Table of contents:
• Cryptocurrency Trading strategies
• 10 best Cryptocurrency Strategies
Cryptocurrency Trading strategies
Did you know that day trading on the cryptocurrency market is one of the easiest and most lucrative ways to make money?
But if you want to succeed in the cutthroat world of cryptocurrencies, you’ll need an educated trading plan and a winning technique because day trading in cryptocurrencies demands a solid understanding of blockchain technology and cryptocurrencies to avoid needless losses.
Cryptocurrency day trading
The cryptocurrency markets’ distinct liquidity and volatility make it possible for crypto day trading, a short-term trading strategy that involves buying and selling during the same trading day. Many day investors are already learning how to profit from the volatility of coin prices and take advantage of minute market movements.
10 best Cryptocurrency Strategies
What separates business from gambling? The answer is an effective action plan. Day traders build their profitable strategy on research and planning. Depending on your abilities and the market’s peculiarities, you can employ a range of day trading strategies for cryptocurrencies.
1. Scalping
Cryptocurrency scalping is popular among day traders because of its potential profitability, ease of bot automation, and low risk. Scalping strategies are used by day traders to build up a big number of smaller victories rather than a few significant ones.
Because scalpers use a lot of liquidity to profit from small price movements for longer than a short time, scalping is the trading strategy with the quickest turnaround.
The time frame could occasionally be anywhere from a few seconds to several hours. Traders can benefit from the increase in trading activity by keeping up with the news and future events that are anticipated to have an impact on price fluctuations.
Scalping is one of the best cryptocurrency trading strategies since traders may set up a bot for frequent, high-intensity transactions based on technical indicators or signals.
2. Range Trading
By spotting regular high and low prices, which are displayed as resistance or support levels on candlestick charts, range trading makes the most of non-trending markets.
Prices above and below the present price are referred to as support and resistance, respectively. When the price moves back and forth between those two levels, traders can buy at the support line and only sell at the resistance level.
By buying a bitcoin asset when it is oversold and selling it when it is overbought, day traders may profit from this strategy.
Volume is crucial to range trading since it may be used to validate patterns and determine whether it is appropriate to apply a range trading technique.
Since volume is believed to lead price if you want to confirm any trend, keep in mind that volume should rise upward in the direction of the trend.
3. High-Frequency Trading (HFT)
HFT, a form of algorithmic daily trading technique, is used by quantitative traders to quickly enter and exit a bitcoin asset over a short period of time.
High-frequency traders use computers that are built to execute sophisticated algorithms to capitalize on price changes that occur in only a few seconds or even milliseconds.
The computers continuously track and examine cryptocurrency prices across a number of exchanges, looking for patterns and other trade-triggering events.
This strategy is best suited for seasoned traders because building such bots requires a strong background in computer science, mathematics, and an understanding of sophisticated market principles.
However, by using specific trading logic, you can combine HFT with a number of beginner-friendly crypto day trading strategies.
4. Technical Analysis
An analysis is a strategy that forecasts future market movements of a securities currency using market data. Technical analysts can estimate future cryptocurrency earnings or losses using previous trade data to apply their statistical trade approach to any financial market.
Using technical analysis, day traders may spot short-term trading trends and patterns, which enables them to find trading opportunities and make money.
To improve your chances of success, use specific technical analysis indicators. The Convergence of the Running Average The strongest indication for day trading cryptocurrency right now is divergence.
5. Fundamental Analysis
This approach is similar to technical analysis in that it also involves generating predictions, but it differs greatly from it in that it is based on human behavior patterns rather than price changes.
By studying a variety of information sources to determine the social consensus on a certain currency and predict people’s behavior, day traders use this strategy to try to predict whether demand for particular cryptocurrencies will rise or fall.
The sources of this information are social media posts, trade magazines, and mainstream media outlets.
Some websites try to track sentiment on the most popular cryptocurrencies by looking at Twitter chatter because more positive Twitter posts about cryptocurrencies are likely to indicate the market is moving upward, while more negative tweets about cryptocurrencies are likely to indicate the market is moving downward.
6. Arbitrage
Arbitrage is one of the best day trading strategies for cryptocurrencies. It comprises buying a coin exclusively on one exchange and making money by selling it on the other at a higher price.
When the price of only a crypto pair, such as Bitcoin and a lesser-known alt currency, swings across exchanges, day traders can profit from price differences between the two marketplaces.
The price difference between what customers pay for it and what you charge to sell it is known as the spread.
To use this technique, you must have accounts on marketplaces that show a significant price difference. Arbitrage is a sophisticated financial strategy, but it can keep prices stable for digital assets between exchanges if it is automated by cryptocurrency tax software.
Arbitrage is particularly inspiring for day-trading cryptocurrencies because there are constant visible price variations because the market is not deregulated and there are numerous exchanges.
7. MACD Strategy
The MACD is a favorite among cryptocurrency traders since it frequently gives a heads-up when a reversal might be approaching when the lines start to turn, verifying the signal when a crossing occurs.
Trading the MACD, taking a long or short trade depending on the crossover, may have been profitable for each important peak and trough in the daily Bitcoin price chart below.
As just two regions experienced market chop that caused the indicator to produce subpar or incorrect indications, waiting until the two lines start to diverge can help you avoid being cut out of the market during times of market turbulence.
One of the most often used technical analysis indicators is the MACD, which is sometimes referred to as a lagging indicator. The method can help traders foresee upcoming trend changes.
The Moving Average Convergence Divergence indicator is a technical analysis indicator that was created in the late 1960s by the trader and author Gerald Appel.
The tool provides incredibly simple-to-read signals and has a histogram to help traders further by giving a visual picture of the strength of a trend and making any crosses obvious.
Because the MACD is a lagging indicator, it can occasionally give false indications that could lead traders to open positions before they should.
8. Moving Averages
Choosing a simple moving averages (SMA) trading technique can be the best course of action for cryptocurrency traders who choose to disregard daily price changes and pursue a long-term trading approach.
An SMA trading approach can be used to monitor the price movements of the cryptocurrencies that traders own or plan to trade. Simple moving averages can be used to compare short-, medium-, and long-term price movement trends and patterns.
It is possible to calculate moving averages for time frames of 10, 200, or even more weeks. For instance, traders used 200-week moving averages as a crucial trading benchmark while Bitcoin was in a bear market. Planning a short-term strategy can be done using a 50-day moving average.
The moving averages strategy is used in a number of trading patterns, including a death cross that denotes a bear market and a golden cross that denotes a bull market.
When the 50-day moving average drops below the 200-day moving average, it is referred to as a death cross, and when it climbs above the 200-day moving average, it is referred to as a golden cross.
Both fundamental and technical analysis can be employed in conjunction with an SMA trading strategy.
9. RSI Trading
RSI, or relative strength index, is a very beneficial tool for crypto traders to analyze the trends for a particular cryptocurrency. RSI is an indicator that depicts whether a cryptocurrency is overvalued or undervalued, overbought or oversold, or whether a trend reversal is going to happen.
RSI above 70 indicates overbought conditions and below 30 means oversold conditions. However, RSI is more suitable for markets that are trading in a range and not trending.
RSI can be used in combination with other tools for technical analysis of a cryptocurrency and to identify highs and lows to decide the entry/exit prices. When the RSI shows overbought conditions, traders should wait for it to fall below 50 before going long.
It is important to understand that RSI cannot predict whether a trend will reverse or continue. It is just a measurement. As a result, the cryptocurrency trader should combine many tools to develop a winning approach.
Traders have a wide variety of alternatives while navigating the cryptocurrency waters. While picking an acceptable trading strategy is wise, it is also prudent to align it with the stronger macro tailwinds, such as regulatory changes, stock market changes, dollar index changes, etc.
10. Bollinger Bands Strategy
Using the midline simple moving average of the Bollinger Bands to initiate long or short signals can be a trustworthy, successful strategy for cryptocurrency traders.
According to the daily Bitcoin price charts below, if the price verified a candle near through the middle of the Bollinger Bands, it was either a short or long indication.
John Bollinger, a well-known financial analyst, developed Bollinger Bands in the early 1980s, which are still hugely popular today. When combined with candlesticks, price chart patterns, and other technical indicators, it can be a part of a profitable and successful cryptocurrency trading strategy.
The technical analysis indicator consists of two standard deviation lines combined with a simple moving average. Depending on how severe the volatility in the relevant price movement is, the deviation lines either widen or narrow.
Conclusion
Traders have a wide variety of alternatives while navigating the cryptocurrency waters. A good trading strategy should be chosen, but it is also wise to match it up with the stronger macro tailwinds, such as changes in regulations, the stock market, the dollar index, etc.
