Best Crypto Trading Strategies For Beginners: 101 Guide
There are numerous ways on how to increase your profits when trading cryptocurrency. Although it is a high-risk investment, using special techniques and tactics can help you invest in the safest and the most reliable way. How to monitor and optimize your trading strategy? Which ones are the most winning ones? In this post, you will find the answers to the most common questions asked by beginner crypto traders. Moreover, the article will shed a light on how your trading strategies can be automated with help of cryptocurrency trading bots.
Crypto Trading Strategy: Basic Concepts
The first thing it is necessary to understand before diving into the world of trading digital coins is that you will need to use a particular strategy of buying and selling crypto money. It is an advanced plan on how and when you are going to perform your trading activities. In other words, it is a guide or special schema on what you should do to succeed in trading.
Choosing an effective strategy can help you minimize the trading risks and increase your profits. Although using a particular trading tactic is not a must for all players on the crypto market, most traders use and modify it on a regular basis. It is also worth mentioning that if you follow your own unique buying and selling plan, you’ll eliminate the emotional impact when making the decisions. Furthermore, it allows you to prepare for different unforeseen circumstances and trade wisely even during tough times. After all, a trading strategy can help avoid facing huge losses and come up with impulsive decisions.
The Components Of Your Trading Strategy
- The list of assets you can use for trading
- The indicators you use for making decisions
- Your stop loss indicators
- The way you measure your trading performance
- Your trading schedule
Generally, there are no strict rules for setting up a trading strategy. For example, you might not want to trade on Fridays or check the trends of the coins on weekends. You can use a flexible and complex approach to choosing the best tactic for your needs.
Top Trading Strategies Any Beginner Should Know
The trading strategies can be divided into two big blocks. The first block is active strategies that require regular monitoring and updating your cryptocurrency portfolio. The second block is passive tactics that are not so demanding and usually require less time and effort. The main idea here is a long-term investment. Now, let’s learn more about various types of strategies you can use for productive trading.
Block 1: Active Strategies
The number of active strategies is really impressive. You can try various alternatives before picking up the best one for your needs. Here is a list of options you can choose from.
Day Trading
This option remains one of the most popular ones among beginner and professional traders. The most important thing for this type of trading strategy is that the traders enter and exit particular positions within 24 hours. The term “day trading” comes from trading on the markets that were opened only during particular hours and were closed at night.
However, the modern cryptocurrency markets are accessible and fully operational round the clock. Therefore, day trading of digital coins means trading in a short-term style (as a rule, it is held within 24 hours).
It is important that day trading requires checking and analyzing dozens of different parameters. This tactic is usually very stressful and demanding. Therefore, this way of buying and selling cryptocurrencies might appear to be too challenging for beginners since you are expected to make the right decisions fast.
Swing
This alternative is something between traditional day and trend trading. It is a type of short-term trading, where buying and selling cryptocurrency assets are performed in a particular time frame (mostly, no longer than one month.)
Swing traders also use various charts and crypto trends to create their strategies. However, the significant changes on the market might take a longer time to come into effect. This allows traders to have more time to analyze the market tendencies and perspectives. These benefits make swing trading become more common among beginner traders.
Trend
This type of buying and selling strategy is a long-term tactic that supposes holding the positions for up to several months. The traders who stick to this strategy take an advantage of using specific market trends for making operations with cryptocurrency.
The basis for making decisions, in this case, is fundamental analysis. The main prognosis is that the chosen asset will keep moving according to the rules of a particular trend. For example, you can make a smart prediction that Bitcoin value will continue to grow in the nearest months. However, it is necessary to keep in mind that the trend reversal might also occur. Trend trading is also good for newbies on the cryptocurrency market if they analyze and manage risks wisely.
Scalping
This strategy is known to be the fastest trading tactic. The reason is that the trading professionals are not trying to benefit from trends or significant shifts in the markets. They are focused on taking advantage of small moves. You will be amazed to know that some positions might be opened and closed in a matter of a couple of seconds. This tactic is good to implement in markets that have high liquidity.
Scalping is considered to be not the best strategy for beginners. The fact is that traders should make winning decisions in a blink of an eye, have a deep understanding of the market trends, as well as know all the details regarding a chosen position. It is complex trading that is more common for individuals and companies that trade in large volumes.
Block 2: Passive Strategies
Passive strategies are also very popular in the global markets. Moreover, these trading tactics are usually good for individuals with little to no trading experience.
Buy And Hold
This is a type of long-term investment where you buy cryptocurrency to hold it for a long time. You don’t need to learn tons of information about the trends in the crypto market. It is possible to make a simple analysis of the previous price fluctuations to choose the most promising active. You won’t also need to keep in touch with the global trends and the performance of your portfolio too often.
When choosing this strategy, it is vital to pick up a proper cryptocurrency since not all digital coins might appear to be promising.
Index Investing
The core concept of index investing is creating a special basket of digital coins along with a token that will track its performance. Although this strategy might look incredibly complicated, it is likely to become one of the most popular ones in the nearest future.
How Can Crypto Bots Help
But what if you don’t want to spend hours manually analyzing the dynamics of the cryptomarkets? Is it possible to automate some of the operations? Sure! This is exactly where algorithmic trading is ready to help. Using crypto bots offers countless benefits:
- Fast and easy decision making
- More effective trading
- Top-notch accuracy
- Reduced trading effort because of the automatization
- Save costs on trading
- Minimum human intervention for making deals
The software solutions currently available for wide usage allow even beginner traders to automate the trades, so you don’t need to be a skilled trading expert or coder to start trading on cryptocurrency markets on auto pilot. Just set up your bot via a user friendly interface, delegate the most complicated and time-consuming functions to it, and enjoy the results. However, if you have a bit of coding knowledge and are willing to challenge your skills, here is a guide on how to code a crypto trading bot in Python.
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