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Different Crypto Trading Strategies You Should be Aware Of
According to a recent news article, more than a hundred million Indians possess cryptocurrency. The figure is likely to rise considerably higher throughout the holiday season.
However, crypto trading, like trading in stocks and commodities, is riddled with dangers and drawbacks. To reap long-term rewards from crypto trading, market participants must devise tactics that make trading both enjoyable and risk-free. Let us begin by discussing tactics that might assist you in obtaining favorable results.
Day trading
This trading method entails entering and quitting positions on the same day. A trader’s goal in engaging in such a transaction is to benefit from intraday price swings in a cryptocurrency of his choosing. For a successful transaction, investors often depend on technical indicators to determine entry and exit locations for certain coins.
Range trading
Market participants also depend on skilled analysts, who provide support and resistance levels daily. The term resistance refers to the price level over which the price may climb. Therefore a resistance level is higher than the current price. On the other hand, ‘Support’ is a level below which a crypto price will not fall; hence, a support level is always lower than the current price.
Scalping
This trading method entails increasing trade volumes to earn. A wise trader observes the margin requirement and other crucial guidelines to prevent negative trading experiences despite the danger. Scalpers examine the crypto asset, previous patterns, and volumes before deciding on an entrance and exit position within a day.
High-Frequency Trading (HFT)
HFT is a quant trading method that employs an algorithmic trading approach. HFT entails using algorithms and trading bots to aid in a crypto asset’s speedy entry and exit. Creating such bots requires an awareness of sophisticated market ideas and a solid understanding of mathematics and computer science. As a result, it is better suited to experienced traders rather than newbies.
Dollar-Cost Averaging
When it comes to identifying the optimum entry and exit moment in a cryptocurrency market, it is advisable to believe that market timing is almost impossible. So, ‘Dollar Cost Averaging’ is a relatively reasonable method of investing in cryptos (DCA). DCA is the term used to describe investing a certain amount at regular intervals. This method assists investors in avoiding the time-consuming task of market timing and accumulating riches over time.
Exit strategies are more difficult under the DCA method. It necessitates a study of industry trends as well as a grasp of the market cycle. Reading technical charts may also assist you in determining when to depart. Before making a decision, cryptocurrency investors should keep an eye on oversold and overbought areas. For a better understanding of technical charts of different cryptos, you may refer to WazirX live charts.
Build balanced portfolio
Crypto trading is still in its early stages. While certain nations encourage cryptocurrency trade, others remain suspicious. Because central banks worldwide are working on new methods to govern digital currencies, trading in cryptos is frequently a dangerous business. However, some tactics might assist investors in avoiding severe volatility. Creating a well-balanced portfolio that incorporates several cryptocurrencies such as Bitcoin, Dogecoin, and Ethereum might go a long way toward mitigating volatility.
Furthermore, investors may keep a predetermined amount of recurring deposits in various cryptos. A balanced portfolio will enhance your risk appetite systematically, allowing your portfolio to provide favourable long-term returns.
Avoid making trading calls based on hype
Using social media to get cryptocurrency news is a standard error made by beginning investors. Social media hype should never influence investment choices. Because digital money is a trendy issue, misinformation spreads rapidly.
Primary Research
Primary research is an essential trading strategy. You don’t need to be a trading specialist to do basic market research. Primary research includes keeping up with any crypto-related news. To help you get started, WazirX compiles all the news articles you need to read. And before investing in a risky asset like crypto, you must assess your resources and define an investment objective. WazirX allows you to investigate Bitcoin, Ethereum, Tron, Ripple, Litecoin, etc.
Arbitrage
Arbitrage is the tactic of buying crypto in one market and selling it in another. The spread is the price difference between purchase and sell. Due to the disparity in liquidity and trading volume, traders might benefit. The only way to take advantage of this opportunity is to create exchanges with substantial price differentials.
Betting on Bitcoin Volatility
Cryptocurrency is one of the most volatile asset types being traded. Bitcoin prices recently changed roughly 30% in a single session. Trading Bitcoin futures allows wager on volatility. Buying both a call and a put option is the way to go. They must also be identical. To exit when crypto values fall or climb, you must sell both the call and put options.
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Different Crypto Trading Strategies You Should be Aware Of was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.