In early 2017, an investment of $1,000 on the cryptocurrency market could have easily made you a millionaire. However, fast forward 12 months later and purchasing Bitcoin cost some investors over 90 percent of their investment. As such, how do you prepare yourself against the massive volatility associated with the cryptocurrency market? How do you establish a winning trading strategy as professional traders do?
Inherently, humans tend to undergo intense emotional swings when making investment decisions. Woefully, these emotions could very easily lead you to make an awful choice that you might lament later. For this reason alone, it is crucial to have a predefined plan of action for every cryptocurrency investment from the start. The three most essential crypto trading strategies for maximum returns are:
The trader makes several purchases and sales every day in day trading. The trader aims to benefit from even the slightest price swings through these intraday trades. The trader hopes to maximize their earnings in contrast to long term trading strategies. Seasoned traders can extend their anticipated profits using this strategy. Regardless, this strategy is associated with a lot of pressure and time sensitivity. On top of that, the high number of traders on various exchanges hikes the trading fees.
Day trading provides traders who sacrifice their time and effort to understand market patterns and trends with an opportunity. In recent decades traders have concentrated on a small number of with elevated liquidity and trading opportunities. Day traders such as scalpers exploit the high trading volumes to earn profits. Indeed, scalpers may exit a trade just seconds after opening the position. These traders are always looking to close a position before any negative news or fluctuation, altering the crypto market sentiment.
It is vital to have a vast amount of funds to exploit this short-term day trading strategy. Even though the return on capital after each trade is small, staking a big amount of money means significant earnings after the end of each trade. Most scalpers take advantage of automated trading platforms with the high-frequency trading capability to enter many positions on their behalf. Bitcoin Profit is a popular cryptocurrency trading website that we highly recommend to day traders.
Swing trading extends the time horizon. In contrast to the aforementioned day-trading strategy, intraday trades are not often opened. Swing traders normally trade several crypto assets at once. They remain keen on the charts, always ready to modify their positions to establish them to become more profitable. After identifying a local high, a swing trader adjusts his position to what is alleged as shorts. The trader stakes against the price and disposes of his crypto holdings.
If the swing trader tends to think the same token oversells the crypto asset, they go long and re-acquires Bitcoin again. Swing crypto trading is ideal for those traders who do not have the time to sit behind their screens, monitoring their trades as required in other trading strategies such as day trading and scalping.
The least requirement to begin swing trading is a basic grasp of technical and fundamental analysis. These trades can run for a couple of hours, days, or even weeks; hence it is important to know what you are buying. You do not want to acquire a low-priced crypto asset without properly investigating it. The low price might result from a strong rivalry in the market, regulatory concerns, lawsuits, or other question marks that might impede the project from taking off towards your selling targets.
After thoroughly inspecting some outstanding crypto projects’ progress, you should scrutinize their price chart on a higher timeframe, such as 4h-1d candles. Typically, you want to identify a trend that has dropped to some considerable measure and has been trading sideways or on a slight uptrend for a substantial period. Notably, the longer the period, the better.
One important factor to bear in mind is understanding the influence of Bitcoin price movements on altcoins’ price. When the Bitcoin market is on a bull run, as witnessed over the last few months, the rest of the altcoins tend to fall. Besides, when BTC plummets, the other altcoins tend to follow the trend. Excellent opportunities occur when Bitcoin is less volatile.
The final strategy we will be looking at is traditional investing. In the beginning, you have to put in a shift into researching different crypto assets. At the end of the day, every investor wants to venture into solid projects spearheaded by well-versed teams and a bright future. However, once you have settled on your 5-6 different tokens, you can sit back, relax, and watch them grow in value.
It is evident that cryptocurrencies have a similar effect as the internet had back then. For this reason, it is a question of when and not if the big banks, institutional investors, and hedge fund managers across the world will join the cryptocurrency bandwagon. Why should you risk your hard-earned capital by placing more than a hundred positions a day while you can choose to hold some cryptocurrencies and make huge returns?
This crypto investment strategy presents itself as a very attractive opportunity for those individuals who do not consider themselves full-time traders. The crypto industry has developed its vocabulary for cryptocurrency holding. The term ‘HODL’ which stands for ‘Hold on for Dear Life,” was first used in 2013 in the BitcoinTalk Forum.
These investors are willing and ready to hold crypto assets for an undefined time regardless of the market price or price fluctuations. The acquiring and holding strategy are not as complicated, and it is exactly what you think it is. Following this strategy, investors focus on long-term returns, and they are not interested in short-term or medium-term market movements.
There are several reasons why you should trade cryptocurrencies in 2021. Overall, the future of cryptocurrencies appears to be brighter every day. That alone is a standout idea of why you should venture into digital currencies over the upcoming months. Crypto assets are much safer and even more promising alternative investment options even though they are highly volatile from time to time. Always be sure to choose the best exchange with lowest fees like Coinbase or Robinhood.