The world of cryptocurrency is among the hottest topics of the 21st century.
Cryptocurrencies have introduced a number of amazing innovative technologies which are able to change the world as we know it.
Those innovations have revealed a brand new economic and financial model, of which number one priority is to be more fair compared to the existing one.
And the best part is that cryptocurrencies are just in the beginning.
Which means that people who will get involved now are most likely to profit the most!
Therefore, the best way to get rewarded by the crypto rising is of course trading.
The purpose of this post is to illustrate the most popular trading styles and give the chance to the ambitious trader to choose the best option for him.
The main strategies that discussed are:
- Scalping
- Day trading
- Swing trading
- Buy and hold
- Arbitrage
The first 4 strategies are categorized by the amount of time that the trader intends to keep his crypto assets while the last one is an amazing style that promises to minimize the risk as much as possible.
So, let’s waste no more time and give a more thorough look to the best cryptocurrency trading strategies.
Scalping
Time frame: Small (transactions completed as quick as possible)
Proposed experience level: Ideal for experienced traders
Scalping is the strategy that is completed in the smallest time frames.
The scalper concentrates his attention on small price shifts and tries to get profit from them.
His main goal is to complete a trade as fast as possible.
Traders often buy and sell a crypto asset within one minute or even less.
As you can imagine the percentage of profit is usually under 1%.
As a result a scalper completes a lot of trades per day in order to make a decent profit.
The whole nature of scalping trading requires from the trader a lot of experience and knowledge in order to be successful.
Last but not least the small time frames demand nerves of steel and the ability to make a plan and stick to it no matter what.
If you want to take a more thorough look in scalping trading click here.
Day trading
Time frame: 24 hours
Proposed experience level: Ideal for experienced traders
This strategy is probably the most popular strategy in the world of stock exchange markets. What happens is that traders are not expected to keep their assets by the end of the day, which is usually considered to be 7 hours.
Subsequently, the exact same thing happens with the crypto assets but in this case the time frame is considered to be 24 hours.
Once again, success in day trading style requires a lot of things.
So, you should not attempt it unless:
- You have an in-depth knowledge in how cryptocurrencies work and how their market works
- You are an adept user of technical analysis, which is the kind of analysis that you are going to use
- You are confident on yourself that you can control your emotions because if you don’t, sadly you are going to lose your money
If you are curious to learn more about day trading and the opportunities that it offers, click here.
Swing trading
Time frame: From a couple of days to a couple of months
Proposed experience level: Suitable for beginners
In this trading style, traders are expected to hold their crypto assets at least for one day but no more than 2-3 months.
In this kind of strategy is useful for someone to apply both technical and fundamental analysis.
Meaning that the trader, before get any buying decision, should take into consideration the following:
- Historical data about price fluctuations of the cryptocurrency of interest (which is called technical analysis)
- The reputation of the cryptocurrency, how useful it is the cryptocurrency, the market capitalization of the crypto and many more factors (the analysis of this kind of factors belong to the fundamental analysis)
The time frame of the swing trading makes it suitable for beginners, since it doesn’t come with the stressing the above 2 strategies have.
Of course this doesn’t mean that swing trading is risk free.
It simply means that there are fewer problems to worry about.
For more details about swing crypto click here.
Buy and hold (HODL)
Time frame: Long-term (it could be a year to many years)
Proposed experience level: Suitable for everyone
Buy and hold is a strategy that actually belongs in the investment category and not trading.
The reason for that is the time frame since investors are expected to buy cryptocurrencies now and keep them for many years.
The main idea that motivates the buy and hold strategy is the anticipation that cryptocurrencies are going to replace the government-issued fiat currencies.
Should this happen, the crypto holders are expected to have an amazing return on their investments.
Below are some interesting facts about buy and hold strategy:
- The strategy is also known as HODL which is a misspeling from hold and stands for “Hold On for Dear Life” among the crypto community
- The prices of all cryptos are extremely volatile which evokes to traders a constant emotion of stress and sometimes even fear. But HODLers are not affected by those fluctuations since all they got to do is to HODL
- In order to make money out of this strategy, you don’t even have to be a good trader. You don’t worry about the highs and lows or spot the duration of a market trend. As a result is suitable for everyone
Arbitrage
Time frame: Buy and sell at the same moment
Proposed experience level: Suitable for beginners
Arbitrage is the strategy that involves from extremely low to no risk at all!
If you have never heard of this strategy, I am sure that at this point I caught your full attention!
Arbitrage is the strategy that focuses on finding really small differences on the price of a cryptocurrency, between two different exchange platforms and buying it at the first platform and selling at the second at the same time.
This becomes possible due to the absence of a central bank regulator which can lead the crypto prices to be different from one exchange platform to another.
As you can understand, the margin for profit might be very small but is risk free.
The actual challenge over here is how to spot those differences and conduct the transaction almost at the same time.
The solution is hidden in the use of crypto arbitrage softwares which can automate the whole process for you.
You can explore more about the arbitrage strategy by clicking here.
Closing Thoughts
Whether you like a more risky style or a safe one, trading never stops to be a fascinating and arguably a profitable procedure.
Although you should not get confused and consider it to be free and easy money!
Trading can be very tricky and if you don’t pay enough attention you might end up losing a lot of money.
The bottom line is that it is worth trying and that’s why we are here to help you achieve your goals.
Thumbnail image source: Bitcoin thrading chart
