Cryptocurrency prices aren’t random – they’re heavily influenced by a variety of different factors. So, if you’re thinking about trading cryptocurrencies, it’s important to use a proven strategy rather than relying on your gut feeling. If you’re new to cryptocurrency and searching for the best platform, go to This URL.
Before you start trading cryptocurrencies, it’s a good idea to develop a strategy that matches your risk profile and investment objectives. Although you might get lucky occasionally with a gut-feeling trade, using a proper crypto trading strategy will help you make consistent profits in the crypto investment market.
Concepts That Will Make You Better At Bitcoin Trading
When crypto traders are looking for a long-term trading strategy that will help them ignore day-to-day price fluctuations, a simple moving average (SMA) trading strategy can be a good option. This type of strategy can help traders track the price movements of the cryptocurrencies they are holding or want to trade.
Simple moving averages can help you identify trends and patterns in price movements, and compare them in the short, medium, or long term. Moving averages can be calculated for a wide range of periods, from as short as 10 days up to 200 days or even weeks. For instance, when Bitcoin was in a bear market, traders considered 200-week moving averages to be a crucial level for Bitcoin trading. A short-term strategy can be planned using a 50-day moving average.
- The moving averages strategy is used to trade multiple different market patterns, such as a death cross signalling a bear market, or a golden cross signalling a bull market. An SMA trading strategy can be used to complement both fundamental and technical analysis, providing traders with another tool to help make decisions.
- In range trading, a trader identifies a price range to buy and sell over some time. This type of trading can be profitable in markets that are known to be volatile, like the cryptocurrency markets. So if you’re looking to cash in on market volatility, range trading could be a good strategy for you. For example, if a cryptocurrency is trading at $40 and a trader thinks it will jump to $50, $40-$50 is the trading range for the trader over the next few days or weeks. A trader may try and buy the crypto at $40 and sell it when it reaches $50 to earn a profit. However, range trading requires traders to have precise knowledge about when the cryptocurrency would trade between a particular range. Otherwise, if the trader misjudges, his strategy might backfire and they might suffer losses.
- Scalping: Scalping is a popular short-term trading strategy that many cryptocurrency traders use to make a quick profit. Scalping involves making small, frequent trades to make a good profit by the end of the day.
Cryptocurrency scalp trading is a popular day trading strategy that takes advantage of double-digit market movements. Scalp traders look to make small profits over a short period by using leverage and tight stop-losses. This strategy helps to temper uncertainties or unfavourable price movements.
Scalp traders need to have a good knowledge of technical analysis and charting tools to make quick, profitable decisions. By stacking profits and compounding gains, scalp traders can make a significant amount of money over a short period. Cryptocurrencies with good liquidity and high trading volumes are often the preferred choice for scalp traders.
- Event-driven trading is a strategy in that trade attempts to take advantage of the price changes of a cryptocurrency before or after a development or event takes place. A recent and good example of this is the traders who bought Ethereum before the Merge upgrade.
- The ‘Buy the rumor, Sell the news’ strategy is a popular way to trade based on significant events that may impact cryptocurrency prices in the short-term. As a trader, you should be able to identify which events are likely to cause price movements so you can make assumptions about where the price will go after the event occurs. Then, you can attempt to trade based on your predictions.
There is a tonne of bitcoin noise in the media nowadays, and it can be very difficult to filter out the good from the bad. In that light, we’ve outlined five very important trading concepts to know when investing in bitcoin and cryptocurrency. Hopefully, this will help you avoid some of the pitfalls of investing in digital assets.