Crypto Trading Strategies: A Brief Glimpse

Cryptocurrency, also known as Crypto, is a digitally existing form of currency, the
transaction of which is facilitated via cryptography. As no single regulatory authority exists
over crypto transactions, a decentralized network called blockchain is mainly used for its
transactions. As it is associated with benefits like limited availability, safer transactions,
quick and easy transactions, resistance against inflation, etc., cryptocurrencies are gaining
astonishing popularity over recent years.

What is crypto trading?

Crypto trading, as the name indicates, is the use of cryptocurrencies in various forms of
online and offline trading. It mainly involves speculating on the possible price shifting of
multiple cryptocurrencies through a CFD account. Being derivative accounts, the users need
not own any underlying asset to be involved in the educated speculating.
The users can also make transactions of cryptocurrencies through exchange accounts. In
such instances, the user will have to open an exchange account, purchase the number of
cryptos, and store them as tokens in their account wallet for future transactions.
Due to possible rapid leverages, crypto trading may appear as a risky affair for many. But if
handled with utmost care and accuracy, crypto trading can provide the user with great
fortunes. Numerous trading strategies are present in the crypto trading section. The users,
especially beginners, are expected to pick one of such strategies and follow it accurately to
make the best out of crypto trading.

Crypto trading strategies

As cryptocurrencies are similar to equities in their uncertain nature, they are bound to be
accompanied by risks. If a crypto trading enthusiast is into making long-term benefits out of
cryptocurrencies, the crypto experts suggest following any particular trading strategy to
avoid pitfalls and potential risks. Numerous crypto trading strategies already prevail, and
some of the most popular and favorable ones are discussed below.

Dollar-Cost Averaging:

One of the complex issues crypto traders face is deciding the ideal time to enter the market,
as a wrong market entry may even cost a fortune. Such concerns can be canceled by
adopting the Dollar Cost Averaging (DCA) strategy. It suggests that the users invest at fixed
intervals. Although it may sound simple, it enables the user to treat crypto trading as a long-
term investment opportunity rather than a one-time benefit. The trader need not worry
about finding the right time for trading and can take off to trading at regular intervals,
increasing the chances of making profits. This strategy demands the user to put more
research into the market trends. As constant transactions happen, the trader needs to refer
to the live charts to find the best deals.

Day Trading:

Day trading is considered one of the ideal strategies for beginners due to the lower risk
factor. In day trading, the user is expected to enter and exit the market within a day. The
user must pick a single cryptocurrency to deal with, speculate its possible price shifts
throughout the day, and carry out trades. The advantage of this strategy is that within a day,
the price shifts are less likely to be drastic, and thus the user holds a higher chance to
successfully speculate the movement of the currency, which is sure to bring favors their
way.

Scalping:

Scalping is another trading strategy involved with closing the trade within a day. But it
involves a bulk sum of cryptocurrencies and is comparatively riskier than day trading. This
strategy aims to fetch maximum profit by investing cryptocurrencies in bulk quantity. Due to
the high-risk factor, beginners and less-experienced traders are not advised to get involved
in scalping. The traders are expected to study the market trends, previous performance of
the chosen cryptocurrency, ideal entry and exit points, etc., before following the scalping
strategy.

Building a balanced portfolio:

Building a balanced portfolio is said to be one of the best and safe strategies in crypto
trading. It requires the trader to build a portfolio of various high-performing
cryptocurrencies rather than focusing on a single one. This approach provides the trader
with the opportunity to widen the trade prospects and also considerably reduces risks. It is
advisable to make regular investments in various cryptos at fixed intervals to maximize the
possibility of gaining high returns.

High-Frequency Trading:

High-frequency trading is an advanced trading strategy that expert traders use, involving
algorithms and bots. In this strategy, traders usually develop good algorithms and bots that
let them quickly enter and exit a crypto trade. As it takes a great deal of experience in crypto
trading and market analysis to develop such advanced algorithms with high accuracy,
expertise in computer science and mathematics is inevitable and is suggested for advanced
traders.

Range Trading:

Range trading is a strategy that uses market analysts expertise to understand a
cryptocurrency is possible movement. The trading analysts provide a cryptocurrency range
of support and resistance levels daily. In simple words, the support level is the minimum
level to which a cryptocurrency could fall, and the resistance level is the maximum level up
to which the cryptocurrency can shoot. Once the trader gets hold of these minimum and top
levels, they can carry out trades accordingly and exit without losing much money.

Arbitrage:

Arbitrage is another advanced trading strategy used by crypto traders in which the trader
purchases cryptocurrencies from one market and sells them off at another need for a better
price. The difference of money in the prices of the same crypto at different markets is called
a spread, and with efficient dealings, the trader can convert this spread into their profit. To
carry out this strategy, the trader is expected to have multiple accounts at various
exchanges which offer a significant difference between the prices of cryptocurrencies. The
possible profit depends on the trading volume and the exchange's liquidity rate.

Event-driven trading:

The cryptocurrency markets do get influenced by current events, including political turmoil,
natural disasters, etc. In event-driven trading, the trader expects and prepares for an
important event to happen and enters the market as soon as the event happens to gain
maximum profit. Acting on such positive market breakouts often pays off well for the trader.
But as the nature of cryptocurrencies is highly uncertain and unpredictable, the traders are
expected to wait until the news is officially released and give a quick analysis of the market
breakout and then act upon it to avoid any possible loss.