The cryptocurrency markets experience various trends and variables, rather than random events. As a result, traders try to trade cryptocurrencies solely on their instinct.
Before investing in cryptocurrencies, creating a plan that fits your risk tolerance and investment preferences is wise. While unplanned trades may occasionally result in profits for you, a sound crypto trading strategy is necessary to determine your course of action and guarantee earnings from your trades. Let’s talk about five of the most effective crypto trading techniques. Visit this site to have some knowledge about the guide on cryptocurrency.
Moveable Averages
- Choosing a simple moving averages (SMA) trading technique can be the best course for cryptocurrency traders who disregard daily price changes and pursue a long-term trading approach.
- The price changes of the cryptocurrencies that traders own or intend to trade can be tracked with the aid of an SMA trading method. 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 periods of 10, 200, or even more weeks. For instance, when Bitcoin was in a bear market, traders regarded 200-week moving averages as a key threshold for trading Bitcoin. For more details, you can use the automated trading bot and charts available on crypto exchanges.
- A 50-day moving average can be used to plan a short-term strategy. Several trading patterns, like a death cross that signals a bear market and a golden cross that signals a bull market, use the moving averages approach.
- 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.
Using a Range
- Range trading is an active trading method, in contrast to moving averages. The cryptocurrency markets are known for their turbulence, and traders profit from this turbulence while they range trade.
- A cryptocurrency trader chooses a range to purchase and sell over time in this type of trading. The trader’s entering point is the lower range, while their departure point is the upper range.
- For instance, if a cryptocurrency is now trading at $40 and a trader believes it will rise to $50, the trader’s trading range over the coming days or weeks will be $40 to $50.
- A trader might attempt to purchase the cryptocurrency for $40 and sell it for a profit of $50. Make sure, you must calculate your profit after deducting the transaction fees.
Range trading necessitates an exact understanding of the times that the cryptocurrency would trade inside a given range on the part of the trader. If the trader makes a mistake, his strategy could fail, and they could lose money.
Scalping
Another short-term trading approach that cryptocurrency traders can employ to coordinate their day trades is scaling.
- Scalping is a trading technique that entails making small, frequent trades to turn a tiny profit at the end of the day.
- In the cryptocurrency market, it is a common day trading strategy because there are days when the market may experience double-digit fluctuation in either direction.
- Leverage and strict stop-losses are used in scaling to reduce risk.
- Scalp traders require quick decision-making skills, a solid understanding of technical analysis, and mastery of charting software.
- Scalp traders accumulate earnings and compound gains over a brief period to a sizeable sum.
- Scalper traders typically favor cryptocurrencies with high trading volumes and good liquidity.
Trading inspired by events
- This type of trading strategy is making trades to profit from price changes before or after a development or event occurs about a specific cryptocurrency.
- The traders who rushed to purchase Ethereum before the Merge upgrade are the best and most recent examples of this type of strategy.
- The boring happenings from the important events that will cause the cryptocurrency values to fluctuate during the period of change should be distinguished by a trader’s keen eye.
- The trader then tries to make a profit based on their predictions of the price movement following the occurrence of the event.
Trading RSI
- Relative strength index, also known as RSI, is a highly useful tool for cryptocurrency traders to examine the trends for a specific coin.
- A cryptocurrency’s RSI value indicates whether it is overvalued, undervalued, overbought, oversold, or whether a trend reversal is likely to occur.
- Overbought situations are indicated by an RSI above 70, while oversold conditions are indicated by an RSI below 30.
- RSI is more suited for markets that are range-bound and not moving, though.
Conclusion
While navigating the waters of cryptocurrency, traders have a wide range of different options. 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.
