Traders need to adopt cryptocurrency trading strategies to leverage the volatility of these assets to their benefits. Sometimes, these are needed to cut the risk too. Explained here are the most used cryptocurrency trading strategies and the rationale behind their adoption.
- Day trading: It refers to buying and selling the cryptocurrency the same day. Trader uses this strategy to earn money from the price movements that happen during the day. One has to be confident of the entry and exit points to benefit from the day trading.
- Scalping: Traders use scalping strategy to book profit from increased trading volumes. By choosing intelligently the entry and exit points during the day, the traders can enhance benefits of scalping.
- High-frequency trading: Also known as HFT, it is a type of algorithmic trading strategy. In this strategy, traders develop algorithms and trading bots that help enter and exit the cryptocurrency market real quick. It is suitable for advanced traders who are comfortable with computers and mathematical models. Also, in-depth knowledge of how crypto-trading works can help.
- Range trading: In range trading strategy, the traders choose resistance and support level. The resistance level is the highest price point which the cryptocurrency is expected to touch and the reverse is true for the support level. The traders scoop out the profit by putting the selling price near the resistance level. They try to minimize the losses by selecting the support level and exit from the trade if the price shows downward trend.
- Arbitrage trading: In this strategy, the trader buys the cryptocurrency in one market and sells it in another. This approach allows the trader to benefit from the difference in volumes, liquidity, etc. of the two markets and book profits.
Apart from the above, the investors with a long term perspective resort to Dollar-cost averaging strategy. It involves investing at regular intervals to get the benefit of price fluctuations. Consider any strategy or a combination of these to make the best of earning opportunities available in the cryptocurrency trading market. These may help you add more to your earnings and reduce the risk involved as well.
