What exactly is cryptocurrency trading?

Cryptocurrency trading is the trading of cryptocurrencies on an exchange. You can trade cryptocurrencies by wondering about their price movements through CFDs (contracts for difference).

CFDs are leveraged derivatives, meaning that you can trade cryptocurrency price trends without owning any underlying coins. When trading derivatives, you can either go long (buy) if you believe a cryptocurrency will rise in value or go short (sell) if you believe it will plunge.

Strategies for trading cryptocurrency

A crypto trading strategy is an established procedure for planning and making trades that you follow. Trading strategies usually lay out which trades to make, when to make them, when to exit them, and how much capital you should risk on each position. Here are a few cryptocurrency trading strategies:

Day trading

This trading strategy calls for taking positions and exiting them on the same day. The objective of a trader is to book profits among the intraday price trends in a cryptocurrency of their choice while accepting such a trade. For a successful trade, investors often depend on technical indicators to figure out entry and exit points for specific cryptocurrencies.

Range trading

Market players also count on experienced analysts, who provide support and resistance levels each day. “Resistance” indicates the point up to which the price may rise; hence, a resistance level is a price above the current price. Support, on the other hand, is a level below which a crypto price is not expected to fall; thus, a support level is always lower than the current price.

Scalping

This cryptocurrency trading strategy involves using rising trading volumes to book profits. A smart trader supervises the margin requirement and other important rules to avert bad trading experiences, although there is risk involved. Scalpers examine the crypto asset, past trends, and volumes and pick an entry and exit point within a day.

High-Frequency Trading (HFT)

HFT is a form of the algorithmic trading strategy used by quant traders. This includes developing algorithms and trading bots that assist in quickly entering and exiting a crypto asset. Developing such bots needs knowledge of complex market concepts and a strong understanding of mathematics and computer science. Therefore, it is more apt for advanced traders than beginners.

Dollar-Cost Averaging

When it comes to seeking the perfect entry and exit points in a crypto market, it is best to presume that timing the market is impossible. So, ‘Dollar Cost Averaging” (DCA) is a rather logical way to invest in cryptos. Investing a fixed amount at a regular interval is known as DCA. This strategy helps investors discard the menial job of timing the markets and building wealth in the long term.

However, an exit strategy could also be problematic in the DCA style. It necessitates the study of the market trend and a grasp of the market cycle. Reading technical charts can also assist you exit at the appropriate time. Crypto investors should supervise oversold and overbought regions before taking a call.

Arbitrage

A strategy in which a trader buys crypto in one market and sells it in another is known as arbitrage. The distinction between the buy and sell prices is referred to as the “spread.” Because of the difference in liquidity and trading volume, traders may be able to book profits.  To take advantage of this situation, you must open accounts on trades where the prices for the cryptos you are trading differs greatly.

The Takeaway

Crypto day trading traces short-term profits by plotting high-risk strategies that plan recurring purchases and sales of crypto. Remember that many traders lose money. Allocate specific time to your trades, estimate gains and losses, and stick to a full-fledged strategy. You can begin with paper trading to try your hand and practice without using your actual money to trade. Understanding cryptocurrency trading for a beginner can be pretty formidable, but researching is key. Your hard work is guaranteed to pay.

About Us:

Blockchain Tradein is one of the most renowned wealth managers globally, currently catering to over 112 million users, 90 million active management, 80 million investments, and 15 million monthly withdrawals. We are featured on all the top financial websites and magazines across the world. We pledge to commit ourselves to believe that every person on this planet has the right to make a successful investment and have their portfolio managed. As a result, we offer our clients constant support and a dedicated guidance team 24 hours a day, seven days a week.