Cryptocurrencies and their underlying technologies are currently at the forefront of technological innovation, proving their potential and worth in multiple spheres, not just the financial one. As a potential crypto investor, there are a lot of things one needs to be accustomed to, not mentioning the fact that this novel marketplace is riddled with uncertainty and volatility.
Without a doubt, the current crypto market, as bearish as it may be, is ripe with a plethora of opportunities. Hence, having a good trading strategy can mean the difference between losing everything and actually being able to make a profit. That is why we created a list with a variety of different crypto trading strategies to help you in your future endeavors as a crypto trader/investor.
Arbitrage trading is a fairly straightforward trading technique that involves the simultaneous buying and selling of assets in order to ensure a profit from the discrepancies in its price. In the context of crypto trading, arbitrage involves buying a cryptocurrency from a crypto exchange and then selling it at a higher price in another market (or another crypto exchange).
This method usually involves the trader to constantly pay attention to these price discrepancies (something that is fairly common in the crypto market thanks to the astonishing volatility of cryptos). The success of crypto arbitrage trading is also heavily reliant on speed one can perform it.
If done correctly, this method can be very profitable. That is why traders interested in this method should consider employing the services of crypto trading bots. These bots automate the process and increase the execution speeds. Another advantage brought by these bots is the fact that they can monitor the market over greater periods of time since they don’t have to sleep or take breaks, hence, the human factor is excluded.
Swing trading is another method that aims to take advantage of the crypto market’s volatility. This is by no means an easy trading method since it’s very much dependent on the trader’s ability to “read” the market. In short, swing trading involves a trader holding onto a cryptocurrency over a set period (a few days or even weeks). In this time, the trader attempts to determine the trend of their cryptocurrency holding based on the overall upward or downward trend.
Trading base on the fundamental value of a digital asset is one of the most advanced trading methods out there. Not only that, but this method usually involves investing in an asset and holding onto it for a period of a couple of years. Since the crypto market is not that old itself, this method comes with its own risks.
The method involves traders having to look at various indicators and try to determine if an asset is currently overvalued or undervalued. The method, conceived by Benjamin Graham and popularized by the famous value investor Warren Buffet, is a methodology mainly used on companies. However, with a bit of work, it can be applied to almost any digital asset.
Fundamental analysis involves the evaluation of a company’s following metrics: its price to earnings ratio, its earnings per share ration, and the return of equity. In the case of crypto assets, the fundamentals are tweaked, and it involves factors such as the network value to transaction ration, the asset’s value proposition, and the quality of the team.
The crypto market can seem like the “Wild West” for any newbie trader. That is why copy trading is probably one of the best trading methods for anyone looking to get into crypto trading. It’s a trading method that allows new traders to follow the examples of more seasoned traders from various platforms. On platforms such as eToro.com and 1Broker.com, users can copy trades from veteran traders and rely on their knowledge and inspiration to make a profit.
Scalping is a trading method intended for traders who are looking to take advantage of smaller gains but on a larger scale. The strategy involves exploiting various price gaps caused by bid-ask spreads and order flows. To be more precise, this trading method involves a trader making a spread or buying an asset at the bid price and then selling it at the asking price to receive the difference between the two price points.
There are various other strategies one can employ to “beat the market.” The most important aspect to take into consideration regarding any of the trading methods listed above is that there are risks that come with all of them. Especially in a market like the crypto market where volatility is always on the central stage.