A beginner’s ultimate guide to cryptocurrency trading strategies

Nowadays, cryptocurrency is proving to be one of the most lucrative and volatile assets which is why more people are becoming interested in trading and investing in it. However, if you are new to crypto trading, you should know that venturing into it without a plan can lead to potential loss of your invested capital. The good news is that there are various crypto trading strategies suited for beginners that can help minimise your risks! 

BTC Post has curated some of the most popular and tested crypto trading strategies for beginners. Take a look at them below:

Cryptocurrency trading strategies for beginners

In a volatile crypto world, you need a winning game plan to earn your well-deserved profits. Take a look at some of the most common crypto trading strategies beginners can easily grasp below:

Range trading

In range trading, you will look for crypto whose price has been bouncing up and down. The idea is to buy low and sell high just like how most investors trade in forex and stocks. You can rely on the crypto stock chart to help you analyze when to buy and sell.

Scalping

Scalping is a short term trading strategy where investors sell before there is a fluctuation in the market. Scalpers focus more on exploiting small moves which is why they often open and close their positions within a short period.

Arbitrage

Arbitrage is the tactic of buying crypto on one market and selling it on another at a higher price. Since crypto can be exchanged openly between two parties, anyone can create a market for trading. This means that there are multiple markets for every trading pair and its price differs for each one. Because of the variations in asset liquidity and trading volume in these markets, the values of the coins may vary substantially. As a result, you can buy assets cheaper in one market, sell them for a higher price on another and profit more compared to trading within the same market.

To arbitrage, create accounts on various exchanges where you believe the same coin will trade at widely different prices.

A great example of an arbitrage opportunity is when Bitcoin was once 40% more expensive in South Korea than in the United States. This was dubbed the “kimchi premium,” and it occurred on several occasions. Traders benefited by buying Bitcoin on US exchanges and selling it on South Korean exchanges right away.

Dollar-Cost Averaging (DCA)

Dollar-cost averaging is a simple and widely-tested strategy where you split your money into small amounts and buy at specific times and days of the week instead of investing all of your funds at once. Buying at regular periods like this helps to mitigate the impact of market volatility so you will likely get more profit on average.

Buy and hold

Buy and hold is a passive crypto trading strategy where you buy a large sum of assets and hold it for a long time regardless of the market fluctuations. Buy and hold does not entirely rely on technical indications. You won’t even have to examine the performance of your portfolio regularly. However, keep in mind that cryptocurrency is a high-risk asset, so this approach should only be used with more stable coins with large capitalizations like Bitcoin and Ethereum.

Day trading

Day traders aim to profit from price changes that occur within one trading day. They enter and exit multiple trading positions every day to take advantage of small price changes and accumulate minimal profits. It came from the idea of traditional markets, which are only open during the day. This is why day traders no longer stay in positions overnight. 

To do day trading, utilising technical analysis and closely monitoring price movements are necessary which is why this is typically the best option for expert traders. However, beginners can still do this strategy simply by predicting the price movements within the day and entering positions based on them.

Swing trading

Swing trading involves holding positions for more than a day but no more than a few weeks or months. If you opt to do this, you have to aim to profit from waves of volatility that last for several days or weeks. Swing traders may use technical factors such as chart patterns to create trade ideas.

This is ideally the most practical active trading strategy for new traders since it can give them more time to think about their moves. In other words, swing trading allows you to make better decisions with less haste.

Trend trading

Holding your positions over a longer period which can last a few months is referred to as trend trending. Here, you will assume that your asset will continue to move in the trend’s direction and hold your position until the trend ends. Often, trend traders take a long position in an uptrend and a short one in a downtrend.

While trend trading may be a good strategy for new traders, you must consider the potential of a trend reversal where the chart moves in the opposite direction of your prediction. However, you can still make a successful trade provided you study various technical indicators such as trend lines and moving averages.

Learn more about cryptocurrency trading

It is not simple to choose or come up with a crypto trading plan that fits your financial goals. The good news is, there are plenty of strategies you can choose from such as those listed above. 

However, you don’t have to stick to those strategies all throughout your whole crypto journey. As you get more trading experience, your skills should improve as well so you can develop your own strategy. Check out more articles here at BTC Post to learn more tips and tricks about crypto trading!