Crypto trading strategies markets are known for their extreme volatility, making them attractive, albeit challenging, to trade. Learn how to optimize your cryptocurrency trading with these strategies and tips.
How to Prepare to Trade Cryptocurrencies?
A strategy is a helpful decision-making tool, but by itself, it won’t get you very far. Many other factors combine to enhance your success as an investor, including your experience, discipline, and risk management tools.
Learn to Trade Cryptocurrencies
Learn about the Market
Allocate time to learn about cryptocurrencies, blockchain technology, and financial markets. The goal is to understand how the market as a whole and individual cryptocurrencies work. It is an ongoing process, as calls are constantly evolving and moving in response to new developments in technical development, hard forks, and regulation, among other factors.
Create a Trading Plan
A trading plan is a comprehensive plan for your trades. You can define the details of your risk attitude, goals, trading strategies, risk management rules, and much more. You can also list the markets you want to trade, for example, bitcoin, ether, and litecoin.
Practice your Trading
Investors who are not experience in cryptocurrency trading can start with a demo account to learn how it works in a risk-free environment. Then, you can use your simulator to test your trading plan thoroughly and review it as many times as necessary before moving on to a live account. You can also access free IG Academy resources to hone your trading skills.
Use Risk Management Strategies and Tools
Calculate the Risk-Reward Ratio
Before making any trade, decide if the risk associated with the potential profit, known as the risk-reward ratio, is worth the risk. For example, if your maximum possible loss on a trade is €100 and your total potential profit is €300, the risk-reward ratio is 1:3. Of course, your balance will depend on your risk appetite, personal circumstances, and strategy.
Use stops and limits
A stop automatically closes a position if the price moves against you from a certain amount.
- Primary Stops are accessible but could be closed at a worse price than requested if the market moves quickly or “gaps.”
- Guaranteed Stops will permanently close a trade at the exact level you have specified. You will pay a small premium if a guaranteed stop remains triggered.
- Trailing Stops, which follow positive price actions to lock in profits. Again, these stops are not guaranteed, so you could go short if the market moves quickly.
- You can also consider using a limit, which will close the trade automatically once you’ve made a certain amount of profit.
Work With Discipline
Try to maintain discipline when trading cryptocurrencies, only making trades that are in line with your trading plan. It will help you escape the common pitfalls that arise when emotions affect decision-making, such as delaying to cut losses (hoping for the market to recover) or being overconfident (“letting go”) of a winning trade.
Top 5 Cryptocurrency Trading Strategies
A cryptocurrency trading strategy is essential to making the most of the market possibilities as it helps identify opportunities and the correct times to enter and exit trades. In addition, cryptocurrency trading allows you to go long or short of taking advantage of price movements in either direction, offering a whole world of possibilities. Here are some popular strategies and critical tips for cryptocurrency trading.
1. Trading Intradia
Day trading involves opening and closing trades on a single day to make quick profits from intraday price movements. Because positions are not held open after the markets close, the costs and risks associated with holding them overnight are avoiding. However, this strategy requires special attention, so it is only suitable if you can reserve the necessary time for your operations.
2. Scalping
Scalping is a form of high-frequency intraday trading, where the goal is to make small profits from a large number of trades. It involves opening locations in line with a trend, often entering and exiting the market multiple times as the market evolves. Basically, Individual works take place over a few seconds – minutes at most – making it one of the more short-term strategies.
3. Trading With Trends
Like scalping, this exchange involves opening a position in line with a trend. But the goal for a trend trader is to maximize profits by keeping the part open for as much of the price movement as possible, rather than opening and closing manifold positions in quick succession. It can remain a short, medium, or long-term strategy because leanings can develop over time.
4. Swing Trading
Swing trading focuses on price swings within a trend. However, the goal is to income full advantage of market volatility by moving in both directions as a trend evolves. While this opens up more profit opportunities, you are unlikely to trade at the same highs and lows of the price movement. A partial trend reversal is often needed to identify that a new reverse or “swing” is underway.
5. Automated Trading
Automated trading involves using a computer program to execute trading orders automatically. These systems can be as straightforward or complex as the investor uses them. They are fully customizable and verify using historical data before going live.
Conclusion
This trading strategy involves taking positions and exiting on the same day. The aim of a trader while adopting such a trade is to book profits amid intraday price movements in a cryptocurrency of his choice.
Also Read: What is Ethereum Classic? – History, Advantages, and More
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