The most recent addition to the wide range of asset classes available today is cryptocurrency assets. Retail investors are the next to enter the market for digital assets after a number of institutional investors. In cryptocurrency trading, a trader will temporarily take a buy or sell position in the hope that the price will rise. When trading cryptos, the fundamentals of the asset class typically take a back seat. One can trade cryptocurrencies using a variety of strategies. The majority of trading strategies are fully covered in this article.
Trading vs Investing in Crypto
Although trading and investing are two very different ways to build wealth, they are frequently used interchangeably. Trading is the use of a trustworthy technical indicator to predict a short-term price movement. Traders typically buy and sell within a year or less. Some trades last only a single day.
Contrarily, investing in cryptocurrencies entails purchasing an asset and holding it for an extended period of time. ordinarily longer than a year. While the price at which an asset is purchased is crucial, valuation typically takes a back seat when making investment decisions. The reasoning behind this is that an asset with solid fundamentals appreciates over time and generates respectable returns. Cryptocurrencies like Bitcoin and Ethereum, for instance, have provided investors with handsome returns over a long period
Methods for Trading Crypto
Although there are countless trading strategies, we have provided a list of the most common ones. These methods ought to aid in determining the risk-reward dynamics of trading.
Day Trading in Cryptocurrency
Buying and selling an asset on the same day is known as intra-day trading. The price on that particular day is solely affected by the buy-sell market forces. By following institutional traders whose positions have an impact on the asset's price during intraday trading, retail investors profit. As an illustration, when a sizable institutional investor buys Bitcoin or Ether, the price of the asset soars. If retail traders are quick to respond in these circumstances, they can profit from these market movements.
Read more: How To Pick Crypto For Day Trading?
What Is Crypto Swing Trading?
Swing trading is the practise of purchasing an asset, holding it for a week or a month, and then selling it, depending on price movements. Swing trading necessitates longer-term price monitoring than intra-day trading. Swing trading also combines the technical and fundamental analysis of the asset. For instance, many traders used the swing trading strategy to enter and exit the market during the recent Ethereum Merge event. When using swing trading, historical analysis of the asset is also essential.
Read more: Ethereum Price Prediction
Cryptocurrency Arbitrage
Using the arbitrage strategy, traders can buy and sell assets on various exchanges. As an illustration, if Bitcoin is trading at $ 17,500 on one exchange and $ 17,700 on another, the trader would buy the asset on the first exchange, transfer it to the second exchange, and then sell it there to profit. The trader is required to pay commissions to each of these exchanges when engaging in arbitrage.
Trading Crypto Futures
In futures trading, a contract is made to buy an asset at a specified price in the future. The agreement is held to be a contract. A talent for making accurate price predictions is necessary for future trading.
Trading at a High Frequency
It entails trading using algorithms that scan the markets in accordance with pre-established criteria. When certain criteria are met, high-frequency trading enables bots to place orders on your behalf. A trader must be knowledgeable in both programming and financial modelling. It is frequently thought of as a strategy better suited for seasoned market traders.
Crypto Range Trading
Price tracking within a specific range is known as range trading. To profit from range trading, traders should be well-versed in concepts like support and resistance lines. Technical indicators such as support and resistance levels can signal trend reversals. Accurate inferences from technical charts depend on historical backdating. An opportunity to buy low and sell high in this range exists, for instance, if Ether is trading in the $ 900 to $ 1100 range.
Cryptocurrency Scalping
Crypto Making profits over a number of trades in a short amount of time is known as scalping. On a per-trade basis, these gains might be lower, but when all the transactions are combined, the gains equal a sizeable sum.
Traders favour highly liquid assets because placing orders quickly requires them. To ensure successful scalping, there should be a market that is prepared to buy the orders at any time. To take advantage of scalping opportunities, traders should have a solid understanding of volumes, price points, news, and any other technical indicators.
Trend-Based Crypto Trading
Trend-based trading involves anticipating price increases by using market signals and macroeconomic developments. For instance, if a new Metaverse token based on a game is released and the game experiences a surge in downloads and an expanding user base over time, the coin's value may increase. Trend-based trading requires a trader to keep an eye out for regular market events.
Advantages and Disadvantages of Crypto Trading
Advantages
Volatile market opportunities can help traders make profits
Trading is open 24 hours-365 days unlike other markets
Algorithmic methods can eliminate manual interventions
Instant settlements
Decentralised Exchanges enable peer-to-peer transactions
Disadvantages
Understanding the market takes time and effort
Users should ensure that they are well aware of all the security risks and trade on secure platforms
Several techniques often confuse newbies on what to follow
Few low-volume tokens can have liquidity issues
Lack of resource material to guide traders
Conclusion
Trading cryptocurrencies offers chances to accumulate wealth. But, like any market, it also carries some risks. Traders need to make sure they are prepared with strategies and backup plans. A methodical approach is essential to outperforming the competition.
100+ Cryptos are now available for secure purchase on ZebPay India. Start trading cryptocurrencies right away.