A Comprehensive Guide to Cryptocurrency Trading Strategies -

Published Nov 02, 21
4 min read

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In this section, we will discuss some of the most common crypto trading strategies. Although keep in mind that you can always create your personal strategy that works for you. It could be based on these broad strategies or something completely new. Why you need a trading plan Here’s why a crypto trading strategy is crucial to your success: Having and maintaining a trading strategy is akin to having a map.

One of the biggest challenges facing traders is the interference of feelings and emotions. These become an impediment when an asset’s price starts trending in the opposite direction to a bet. In cryptocurrency, this happens so frequently that it easily leads to an emotional roller coaster. Successful traders have learned to keep trades free of emotions by sticking to their trading plans.

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A day trader will make multiple trades within a day, buying low and selling high within little gains that compound to large sums by the end of the day. Typically, sometimes it gets hard to perform this manually. To succeed in thisstrategy, you will need to consider automating your trades using trading applications or crypto trading bots like Coinrule.

Score more wins to consider your strategy a success. Swing trading When it comes to swing trading, the time period varies. Whilst in day trading and scalping, traders typically open and close positions multiple times within a day. In swing trading, this happens within a much longer period. This could be anything from a few days to a few months.

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The only difference is the long time periods between opening and closing a position. Trades set up through this strategy could take months and sometimes years. It is an ideal strategy for investors favoring a more hands-off approach. This strategy is sometimes called ‘HODL’ (or Hold On for Dear Fife) in cryptocurrency.

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A crypto trader would invest in a coin or token and hold it even when the prices are plummeting. Such a trader would thus be called a ‘Hodler.’ Margin trading (trading with leverage) Margin trading is not a trading strategy but rather a trading method. Adopted from the traditional stock market, it involves a trader using borrowed capital to open positions on a trading platform.

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If you score a win, the reward is much larger, and the reverse is also true. If the trade goes sideways, you also lose a lot more. ℹ️ When trading cryptocurrencies with margin, you will come across the following common terms – margin, leverage, and liquidation. is the amount of capital you stake in a position.

is the price at which a trade is automatically closed when the price moves against your position. The larger the leverage, the closer the liquidation price to the entry price. To better understand leverage, assume you enter a trade with 5x leverage. This means that your trade’s position size is 5 times the capital you staked from your own pocket (i.

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What differs is the level of risk. There are different kinds of risks, and in this section, we will discuss those related to cryptocurrency trading. Perhaps the most widespread of all is the risk that a given asset’s market price or the overall crypto market will swing unexpectedly and negatively affect your market position..

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It could be caused by the failure of a trading platform or malfunction of a trading application etc.. Refers to a loss incurred due to a failure in the entire trading system. Closely related to the market risk, but this one is much direr given that it is caused not just by the market downturn but also the collapse of crucial systems within the marketplace.

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That was a systemic failure that led to a market meltdown. Now that you understand the kind of risks you are most likely going to encounter, you should factor them every time you are about to make a trading decision. Portfolio management Professional traders rarely have just one asset within their portfolio.

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And that’s where portfolio trackers come in. They are software applications for desktop, tablet, and mobile devices that help track every kind of investment you make in the crypto market. By tracking your portfolio and measuring your performance, you can easily improve upon it and make better trades. As the saying goes, you can’t improve what you can’t measure.

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You also want to know how much you are gaining or losing from a particular trade or investment. Keep in mind that you could have to maintain multiple portfolios. As a trader, you might employ different trading strategies simultaneously, meaning you are actively trading while at the same time swing trading and/or position trading.