Strategy for trading cryptocurrency: The best crypto trading strategies

Strategy for trading cryptocurrency

Strategy for trading cryptocurrency

Some day traders buy signals from self-proclaimed expert crypto traders on social media platforms like Facebook, Telegram channels, Twitter, and even WhatsApp groups. The application of technical analysis in crypto is best used in conjunction with other strategies. The best aspect of technical analysis is the emphasis on determining a complete strategy for when to enter and exit positions.

Therefore, trading with the market rather than against it is generally advised. Moreover, gauging the overall market sentiment with the crypto fear and greed index and Bitcoin Rainbow chart can be useful indicators to determine trend reversals at the extremities. Determining an asset’s current price and whether it’s under or overvalued is a core part of technical analysis. To achieve this, traders will typically analyze chart patterns and use a variety of indicators. EToro is slightly different from the other crypto exchanges we’ve mentioned above.

Then backtest this strategy on the assets and timeframes where you plan to apply it, taking into account the current market trend. If the backtest is positive, try trading using this strategy in a demo environment. If the strategy performs well, you can move on to using it in real trading. Range trading is a fairly simple strategy used during sideways price movements. When the price moves sideways, it sets identical or nearly identical local highs and lows, creating a resistance level and a support level. While lower volatility decreases the potential for profit, the relative predictability of these highs and lows can mean less risk.

Strategy for trading cryptocurrency

Crypto is not exempt from short-term capital gains tax, for example. For day traders, the sale of any crypto held for less than a year is taxed as marginal income. Make sure to include your crypto gains when reporting earnings online or with your accounting professional. Although crypto is a new and exciting industry, it has its risks for those who are interested in investing in it. Too much trading and changing ideas quickly are likely to cause unnecessary losses. Crypto day traders can avoid overtrading by separating rational trading from emotional trading.

Things to Avoid while Day Trading

It is up to you to understand the market and decide when it is appropriate to apply a given strategy. Crypto day trading can be a great way to grow your crypto portfolio and it’s a very lucrative alternative to the holding mentality that it’s crippling the crypto community. The obvious place to hide your protective stop loss is below the low of the day. A break below it will signal a shift in the market sentiment, and it’s best to get out of the trade. As previously discussed, the number one choice you need to make is to pick coins that have high volatility and high liquidity. If you’re not day trading Bitcoin, which is the most liquid coin out there, and you like the altcoins, try to pick those coins that have good liquidity and volatility.

As soon as the trade becomes profitable, you’d exit the trade. A strong media presence of a specific coin or crypto exchange can impact cryptocurrency markets. This cryptocurrency trading strategy focuses solely on taking advantage of these ‘events’. To avoid these schemes, consider trading volume when you select coins or tokens to trade. FOMO can lead you into a lot of bad decisions if you’re not careful.

Several techniques are available for day traders to utilize for making profits on short-term price movements in the market. Crypto day traders need to create a winning strategy supported by research and well-laid plans for initiating and exiting their positions. The idea behind crypto day trading is to look for trading opportunities that offer you the potential to make a quick profit.

Strategy for trading cryptocurrency

You can look for market correlations by comparing price charts for different coins. This fractal dynamic allows the discerning trader to spot cycles at different time frames and then take advantage at the right moment by timing entry and exit positions accordingly. Below, we outline some important considerations as you learn how to trade cryptocurrencies and how to day trade crypto. Coins go up and down in value based on market perceptions about their value.

Range trading is based on the assumption that crypto prices will normally —over a given period— only fluctuate within a certain range. Price movement outside of that range is assumed to indicate that a price is about to undergo abnormal change. For example, if the price dips below the lower bound of the range, that could suggest it is time to sell—under the assumption that it is the beginning of a significant downward swing. Scalping is a strategy for making a small profit from a large number of trades, which adds up to a larger profit. Scalping uses large amounts of liquidity to take advantage of small price changes over a short period.

As such, while most people utilize different trading systems, some factors are implemented into almost every technique. Consider the ease of use, fees, charting features, and security while completing this process. Holding leveraged cryptocurrency trades for months or years can be costly.

How to use crypto trading strategies

Trading involves a great deal of trial and error, so utilizing a crypto demo account can save substantial amounts of money. Finding patterns in a price chart is an essential aspect of technical analysis. There are many patterns out there, with a few common examples being the rising wedge, hammer, hanging man, and pin-bar. Each pattern indicates either bullish, bearish, or natural bias. Most people actively trading cryptos will spend a good deal of time creating and backtesting a strategy.

Trading Crypto Doesn’t Have to be Cryptic

Fundamental analysis can encompass almost every aspect of a business. However, we’ve shared a few of the most common ways cryptocurrency investors determine intrinsic value. ByBit has been serving customers since 2018 and has grown to become a top ten crypto exchange and number two derivatives and margin trading platform for crypto. Quickly becoming one of the most feature-rich exchanges, ByBit has something for everyone and is worth checking out if Binance lacks any desired features. Choose the type of trade (e.g. limit or market), enter the number of funds, and confirm the order. Monitor the active position and adjust the stop-loss level once the trade moves into profit.

Step 4 – Find a trading setup and determine entry and exit levels

Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. Instead of investing all your money into a specific asset at once, you divide your investments into smaller amounts. These amounts are then spread out over a predetermined timeline and are regularly invested on a particular time and day of the week – and only on that day and time. The RSI can be used for trading both short and long signals when the price is rangebound in nature as well.

Unlike fiat money, Bitcoins and other cryptocurrencies have no central bank that controls them. This means that cryptocurrencies can be sent directly from user to user without any credit cards or banks acting as the intermediary. The major advantage of cryptocurrencies is that you can’t print them like central banks do to create fiat money. GDAX –United States-based exchange that allows users to trade Bitcoin, Ether, Litecoin, and other cryptocurrencies. The first thing you need to get started trading our best bitcoin strategy is to open a bitcoin wallet. If you do not have a bitcoin wallet, then you can open one at the biggest wallet called Coinbase.

You can follow OKX Insights on Twitter, our crypto markets channel on Telegram, or bookmark our section with daily crypto market updates. Once you’ve selected a market and a cryptocurrency to trade, whether it is Bitcoin or an altcoin, you can click on the Trade button next to that crypto on the list. The exchange will then direct you to the trading dashboard for that cryptocurrency, where you will be able to place buy and sell orders and view the particulars of each trade. The cryptocurrency market has matured in recent years to become increasingly sophisticated with the introduction of highly liquid derivatives (i.e., futures, swaps and options).

Crypto day trading can be extremely difficult and EndoTech does it all for you. It takes the emotion out of trading and instead it trades using strong artificial intelligence to perform fact-based technical analysis. When developing a trading strategy, the amount of time you plan to devote to trading is a very important consideration to take into account. Scalpers seek profits from only a few pip increments on each trade. They trade in high volumes each day, repeatedly entering and exiting the market. On the other hand, swing traders will leave their trades open for a period that can range from a few days to several weeks or even months.

What is This Free Bitcoin Trading Strategy?

Bear in mind that scalping can be risky if you’re placing multiple trades on a very short-term basis. The psychological game is about developing the right patience, discipline, and trading methods to reduce risk. Stay up to date with our latest exchange reviews, promotions, how-to guides and educational articles on Bitcoin, cryptocurrency & more. Before it’s possible to enter a trade, the user must deposit using either crypto or fiat. First, click Wallet, then Deposit, select a payment method and complete the transaction. Binance supports most cryptocurrencies in addition to bank transfers and credit/debit cards.

Add to this the fact that we now have access to more data and market research than ever before, and it makes sense why crypto trading is growing in popularity. Now that we’ve covered the basics of trading crypto, we will provide a detailed step-by-step guide covering how to spot trade crypto. One of the most common mistakes that inexperienced traders make is not adhering to a strategy.