The Crypto market is moving towards taking center stage in global trade each day. The unique decentralized structure and high return potential in crypto are taking the world of investors by storm. Many investors are making money by leaps and bounds following some great crypto trading strategies for their investments. At the same time, it can be daunting for beginner investors to understand these strategies and make profits.
But not anymore because we are here to help you educate yourself about these crypto trading strategies so that you can decide which of these fits your goals perfectly.
Let's start by understanding Crypto trading first.
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What is Crypto Trading?
In general terms, trading is an economic activity that involves buying and selling any asset, good, or service.
For example, 'A' sells tea to 'B' and gets something in return from 'B'. It's a simple trade. Now, multiple possibilities are associated with 'A' to make a profit from this trade. 'A' might have searched for a suitable buyer for his tea or waited for the right time when tea demand rose to a high price. It is also possible that 'A' was reselling the tea at a higher price after buying it at a lower price from 'C'. All these possibilities are strategies to make a profit from trading.
Similarly, Crypto trading is one where the cryptocurrency becomes the trading asset, and the trader makes a profit by using different strategies according to his knowledge and will.
To put it another way, Crypto trading is the buying and selling of crypto assets by analyzing the price movement of these currencies to obtain profit.
Crypto trading is performed through various crypto exchange platforms. Users on these platforms follow different trading styles to plan and execute their crypto trade.
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Here we have jotted down the most popular trading types followed by crypto investors:
Day trading
This trading strategy involves buying and selling the cryptocurrency on the same day. This trading strategy aims to reap the benefit of price movement(s) that have happened on the day before the market closes. One of the main benefits of day trading is eliminating overnight risk. It doesn't demand users to be tech-savvy like other trading types, and one can easily make a profit without spending long hours on a crypto trading app.
However, the profit obtained in day trading can be not very good compared to other trading methods.
Scalping is a strategy in day trading where the trader makes a profit from numerous buying and selling to make high volumes of small gains.
Range trading
This crypto trading involves selecting a price range for a crypto asset. This range will have a definite high (resistance price) and low price value (support price) set against a specific timeframe. The user can profit through this trading style by setting the right price range of a cryptocurrency for a definite period.
Almost all crypto exchanges provide the facility of range trading to their users. They use crypto trading bots to perform such trading automatically. These bots are programmed to buy for you as the price crosses the support band and sell if it crosses the resistance band.
Generally, range trading chases small profits as users restrict the trading to a specific range. This type of trading requires experience and good knowledge of the crypto market to make ample profit.
Position trading
If Day trading is the ODI of the Crypto market, then position trading is the test match. This is because it is long-term trading. A trading position is held for a long time (around a week or month) to obtain the required profit value. Investors who follow this trading pattern do not exit their position due to small gyrations in the price. They analyze the long-term trend behaviour of their virtual digital assets and then hold it till the right time comes.
This crypto trading requires less continuous investor involvement and can deliver tremendous profits.
Swing trading
Swing trading is one of the preferable trading strategies used by crypto investors. Those using swing trading hold positions longer than day traders but shorter than positional traders. Swing traders prefer medium or high time frame charts on crypto exchanges to analyze the price behaviour of their crypto investments. Moving average crossovers, cup-and-handle patterns, head and shoulders patterns, flags, and triangles are some of the most frequently used chart patterns. The traders have to be efficient to read these patterns for planning their upcoming movie.
The "swing" in this type of trading can be defined as the entry and exit points of their particular investment done in a crypto trading app.
Fundamental Trading
This type of trading style focuses on the fundamentals of a cryptocurrency to decide where and when to invest. The external events and updates associated with a cryptocurrency are the primary basis of its fundamental analysis. A fundamental trader is more concerned with the objective value regardless of the market price.
Technical Trading
When trading on the crypto exchange is done based on statistical trends gathered from the historical performance of a cryptocurrency, it is called technical trading. Technical investors use an objective approach to decide their investment moves and strategies. A leaning towards price change and past trading activity is seen in technical trading. Most investors see it as a contrasted trading type of Fundamental trading.
Arbitrage Trading
Arbitrage trading is a bit advanced and risky trading style. It allows the trader to profit from the difference in the price of the same commodity in two different markets.
Let's understand it with an example.
Consider yourself a wheat trader. You go from village to village to sell and buy wheat for villagers. Now, you found out that wheat price has been low in village 1, say 50/kg, and high in village 2, say 55/kg. To take advantage of this price difference, you bought 10 kg wheat from village 1 and sold it to village 2, resulting in 50rs profit on this trade. This is precisely what arbitrage trade is. The only difference is that crypto becomes the commodity, and crypto exchange becomes the market for this trading.
Arbitrage traders take advantage of minute differences in the price of a cryptocurrency on two different exchanges. They buy the crypto assets from one exchange at a lower price and then sell them to another exchange at a higher price. Though this difference is minimal most of the time, it can still benefit the trader in some cases.
Also Read: 5 Reasons to Invest in Cryptocurrencies
Conclusion
Crypto popularity is skyrocketing, and the right crypto trading strategy can give remarkably high returns. There is no right or wrong crypto trading strategy for making a profit or loss. Investors need to choose the trading style that fits their goals, convenience, and risk-taking capacity.
