Every day, cryptocurrency trading attracts an increasing number of newcomers who want to try their hand at this kind of speculation. Cryptocurrency trading is characterized by unpredictability, high volatility, and complexity of forecasting. This is an interesting occupation, and with the proper experience and skills, it is highly profitable. 7b invites you to review the 5 most popular crypto trading strategies that even a beginner can master with ease.
The essence of the scalping strategy is to make a lot of trades during the day and profit from seemingly small price fluctuations. As a result, the profit from all trades is summed up and a fairly decent profit comes out. Scalpers are traders who prefer high-speed and high-frequency trading. The first type refers to manual trading, when the trader is responsible for placing orders. The second one is used when we talk about automated systems, when a special algorithm can conclude several orders per second.
One trade within the scalping strategy usually takes from 1 to 15 minutes. To make profit within a day, a high volatility of the asset is required, and the cryptocurrency market meets this criterion.
The strategy works best in the flat market — when the price of an asset fluctuates between two levels. Scalp traders should have technical analysis skills, be able to analyze candlestick chart patterns, correctly identify support and resistance levels, monitor price action and trading volume. The profitability of one trade is relatively small. On average, we are talking about a minimum profit of about $1, but much depends on the initial capital of the trader. In addition, the profit depends on the degree of volatility of the selected asset. For example, the price of some altcoins can fluctuate between 10-20% per day. But keep in mind that such assets carry great risks.
However, scalping allows you to earn the same $100 profit much faster than long-term trading strategies. Therefore, this strategy is actively used to increase a small start capital. Before you start scalp trading, you should carefully study the amount of exchange’s fees, they must be taken into account for the development of a profitable trading strategy.
The chart clearly shows that now is a good time to purchase BTC, as the quotes have turned around and the price has started to fall. After about 5-10 minutes, a reversal will occur in the opposite direction. The moments for profitable entry into trades are circled in red — these are signals of a likely increase in value. If several descending candles appear on the chart in a row, then you can safely buy an asset.
2. Range trading
Range trading is one of the most suitable trading strategies for novice traders. In order to start trading, you need to have a deep understanding of the following points: candlestick chart, support and resistance levels. The essence is to buy when the price reaches the support level and sell when the price reaches the resistance level. It works the other way too if you short an asset.
To begin with, you need to determine the support and resistance levels on the price chart. They are indicated by horizontal lines in areas with two or more price edges. When placing levels, keep in mind three key rules:
- Place the lines on the body of the candle, it is more important than the wick.
- The latest price rebounds from the levels are more important than the earlier ones. Be guided by the last bounce.
- You need at least two edges to set the support or resistance level on them.
- The lines should be horizontal. In the case of diagonal lines, this is already trend trading.
In the above example on the chart, we can see that the price stopped at 1.3070 twice (highlighted in green). And then three more times (yellow highlights). When the price falls to the level of 1.3070, buy orders placed in this zone are triggered. This leads to a reversal of the price in the opposite direction.
HFT or high-frequency trading is based on algorithms. The algorithms are executed by powerful computers and special equipment. In simple words, it’s a kind of scalping on steroids. Machines can place millions of orders every day and gain a millisecond advantage. Traders place large orders and earn on volumes, although the price fluctuation itself is not so significant.
HFT bots are able to analyze minimal fluctuations in the price of an asset, as well as the divergence of asset prices on various exchanges. HFT bots open and close many positions in milliseconds. Such a speed is simply beyond human control and such price fluctuations go unnoticed.
With proper programming, high-frequency trading provides an obvious advantage. Powerful computers can detect new trends on the market and act automatically before the rest participants of the market try to determine the direction.
High-frequency trading requires large investments, since not only an algorithmic bot must be created, but also a trading strategy and hourly software-level support. For this reason, professionals and large financial companies are engaged in effective high-frequency trading.
Novice traders should be wary of platforms offering “profitable HFT bots”. After all, these are often fraudulent services. Who will sell a profitable trading bot instead of using it to make money? And if they do, it will be for a lot of money.
4. Trend trading
Trend trading is another profitable and easy-to-master trading strategy. The strategy involves holding positions in cryptocurrency trading for a longer period, often weeks or months. In this trading strategy, traders use the uptrend or downtrend of a digital asset.
There are various trend indicators, but one of the simplest and most effective ways to analyze trends is to use trend lines.
A trend line is a diagonal line on a chart that connects several edges on the chart. The main function of a trend line is to act as support or resistance for price movement.
In an uptrend, the price moves sort of up the ladder in a narrow channel. Basically, each local minimum is higher than the previous one. The same rule applies for local maxima.
Having determined that the trend is heading up, it is necessary to identify the main resistance and support levels. It is from them that it is necessary to build on. Thus, the support zone is suitable for opening long positions. As for the resistance zone, it is designed to close them. If the trend is downward, the signal for the beginning of resistance will be a breakdown of the resistance level. It is important to remember that in some cases a false breakdown occurs.
Among the most popular indicators are RSI, MA, and MACD.
5. Day trading
Day trading is just intraday trading. In particular, it relies on faster and more active trading activity, when traders make several trades a day, instead of waiting for longer-term trading opportunities.
When choosing trading instruments for day trading, be sure to take into account liquidity, volatility, and fees. First of all, traders need to have a good understanding of technical analysis and risk management.
Using these tools, traders can find areas where support or resistance levels may be located, as well as draw trend lines. As soon as a trader learns to read the signals provided by charts, it is possible to form a day trading strategy. Day trading strategies include: scalping, range trading, and HFT, which were described above.
The best strategies focus on making a quick profit and opening several positions a day. Take profits early and often. The markets may be turning in the opposite direction, so be sure to keep in mind the take-profit levels before each entry. However, do not rush, otherwise you risk losing potential profit.
Intraday trading is an energy-consuming process that requires a lot of stress, especially at the beginning of the journey. The psycho-emotional load is also very high here. To make it easier to cope with emotions, it makes sense to use stop-loss and take-profit tools and determine the percentage of the deposit that is being worked with.
Choosing a trading strategy is extremely important, because a well-chosen strategy is half the way to success. Strategy, coupled with effective risk and money management, discipline and nerves of steel will increase the chances of earning money on cryptocurrency trading. There is another good rule: “Don’t put all your eggs in one basket” – this means that you have to competently diversify your crypto portfolio.