A Beginner’s Guide to the Different Types of Crypto Trading Strategies
64% of day traders fail to turn a profit despite the bottomless well of trading resources available to them. The only explanation is that most traders aren’t using the information at their disposal to trade profitably. Don’t be like most traders.
Join the prestigious 36% of victorious traders by embracing the crypto trading strategies shared below. Your portfolio will thank you.
Scalping
Scalping involves taking small, quick profits. This strategy is best suited for traders who have lots of time on their hands. It takes a considerable number of trades to become profitable.
Scalpers don’t hold their positions for long. Trades are executed in a few minutes or hours at most.
Because they’re moving so quickly, scalpers need to react as soon as opportunities arise. This strategy is more appropriate for experienced traders than novices.
Arbitrage Trading
In arbitrage trading, you buy and sell currencies in different markets to take advantage of price differences. Let’s say you’re buying Bitcoin on Coinbase for $8500. You can immediately sell that same coin for $9000 on Binance if you have an account there.
This is a simple example of arbitrage trading. It’s much more complex in practice. Many arbitrage traders use bots to automate the process.
High-Frequency Trading (HFT)
HFT uses computers and cunning algorithms to execute trades faster than a human ever could. While traditional traders prefer a slow and steady approach to crypto investing, high-frequency traders strike quickly to take advantage of fleeting market fluctuations.
Swing Trading
Swing trading (also known as day trading) is another short-term trading strategy. It’s similar to scalping, except that swing traders hold their positions for several days to weeks. Swing traders are usually less active in the market since they often hold positions for a while.
Support and Resistance
A support level is a price point at which there are a lot of people who are willing to buy or sell cryptocurrency. Resistance levels are where traders don’t want to interact as much with the token.
When the price of a cryptocurrency reaches a support level, it’s likely to return to its trend soon. At resistance levels, prices are unlikely to fall any lower or higher.
Support and resistance levels are constantly fluctuating. The trick is to know where these levels are before the market reaches them.
Technical analysis can be helpful here. Traders can use past market behavior to predict future trends.
Markets tend to repeat themselves, which means patterns will appear again later. If you can spot a pattern, use it to your advantage.
Test These Crypto Trading Strategies in a Real Market
Now that you have the most popular crypto trading strategies under your belt, it’s time to put them into action. Start with a meme coin so you don’t risk too much money. Then you can move into the big leagues with Bitcoin and Ethereum traders.
When you’re ready to fund your trading account, use the tips in our finance section to ensure your budget can handle this new investment.