The Beginners Guide to Cryptocurrency Trading Strategies
For those just getting into crypto trading it can be a little overwhelming. However, with the right trading strategies, it’s not as daunting as you may think. In this article we’ll dive into some of the more common trading strategies that you can use to start your trading adventure.
Crypto Price Influences
You can trade crypto using other crypto coins or using fiat currency. The most common traded pair is the crypto-fiat pair. For each pair, there is a certain rate at which it’s sold, and this price will change based on several factors:
- Bitcoin: the crypto market is heavily influenced by the price of Bitcoin with all altcoins following bitcoins trend. If Bitcoin rises, then altcoins follow suit.
- Mining costs: with blockchain technology, users can mine new digital coins. This requires expensive machinery and power. If the cost of mining goes up, then crypto coins also increase.
- Government: government decisions and regulation can also influence price. If government endorses a certain coin, it’s likely to increase in price
- Forking: if a coin faces issues and disputes, it can lead to the breaking or “forking” of a new coin from that currency. When this happens the price of the original coin will drop e.g. Bitcoin and Bitcoin Cash.
Crypto Trading Strategies
There are different approaches one can take when it comes to crypto trading. Here are some of the facts you should use to determine your trading strategy:
- Crypto is volatile: crypto prices can change dramatically by the hour with small market changes having large impacts.
- Research heavily: there are over 1600 cryptocurrencies available worldwide. As a result, you need to do your research before choosing which coins to buy and trade.
- Short-term trading: with crypto prices changing by the hour, short-term trading is a way to make profit. Don’t hesitate if you see a price movement, make your move before the price fluctuates again.
- Using a stop: using a stop loss is crucial when undertaking long-term trading. A stop loss will set a price that determines the value you will sell your coin if the price falls. A stop loss will help avoid heavy losses when the market takes a turn for the worse.
Analysis of Crypto Price Action
Analysing the market is crucial in making a healthy profit. There are two types of analysis; technical and fundamental. Technical analysis is the study of crypto coin price charts, whereas fundamental analysis focuses on explaining reasons behind a market shift. Here are some of the common charts used under the technical analysis strategy:
- Candlestick charts: candlestick charts form patters which inform traders if the price of a coin is likely to go up or down.
- Indicators: indicators help traders more effectively analyse the market. There are several mathematical indicators such as Relative Strength index (RSI), Moving Average (MA), Moving Average Convergence Divergence (MACD) and Parabolic SAR.
- Date and time: maps out crypto prices over a time period. Day traders prefer one-hour charts to analyse price movements and make quick profit.
Day Trading Tips
Day trading can be a profitable strategy for those who prepare accordingly. Here are some tips to follow to help maximise your profit:
- Work to a plan: have a clear vision of the profit you aim to make before you start trading. This will ensure you don’t sell to soon or hold on for too long.
- Entering and exiting at the right time: when you enter and exit the market will determine the profit you make. Analyse the market accordingly and do your due diligence before trading.
- Bitcoin trends: the performance of Bitcoin will impact all other coins so always keep an eye on how it’s trending.
These trading tips and strategies should put you in good stead to implement your first trading strategy. As mentioned above, do your research, analyse the market and always keep an eye on the price of Bitcoin.
The information contained within this website and resource section is not intended to be a substitute for financial advice or promotional offer on the investment or purchase of Cryptocurrencies, digital tokens or related assets. Although care has been taken in preparing the information provided to you on this site and in the resource section, we are not held responsible for any errors or omissions and accept no liability whatsoever for any damage or loss you may incur through the result of your own actions and decisions when deciding to purchase or invest in Cryptocurrencies or related digital assets. You should never engage in trading unless you fully understand the nature of the transactions you are entering into and the extent of your exposure to loss. We recommend you always seek financial/or legal advice counsel relating to your investment and purchase circumstances. This material has been prepared for informational use only.