Crypto Trading Strategies You Need To Know For 2020
By FVP Trade on The Capital
A crypto trading strategy enables people to perform a particular task with the best market and technical analysis. A strategy is in all cases is important, however, with regards to cryptocurrencies, it becomes a major thing. This is a result of the infamous nature of cryptocurrencies and uncertainty associated with it. If you’re thinking of being a crypto trader make sure you’ve done your research.
During January 2018, when the price of Bitcoin crashed, a large number of people experienced huge losses. Unavoidably, lots of people lost large sums of money, however, the people who were more cautious and had a selection of tools and techniques to help make a profit, successfully dealt with the situation. This is the beauty of strategies and having a firm attitude towards them, which helped them “sail that storm.”
7 Crypto Trading Strategies To Go From Rags To Riches.
Trend Trading.
As the name suggests, this strategy is about following the trend, i.e., to trade with the trend. If you believe the prices are trending up, choose a long trade. While if you believe the prices are trending down, then go for a short trade. It is also known as “Position Trading.”
Normally, people don’t go with their instincts alone. Instead, they utilise tools and technical analytics, such as margin trading, which predicts the direction of the market.
Trimming.
For a short term drop in the market, go for a trimming strategy. It suggests, opening your cryptocurrency, for a short period, on a sale trade as you believe that the price is about to drop, to avoid losses. And if the price drops, as per your expectations, you then buy it back at a lower price and you pocket the difference.
Remember, trimming (or ‘hedging’) also has its risks involved as the price can also go against your expectations. This occurs as there are no specific limitations in the crypto market. Therefore, having good risk management ideas in place is a must.
Buy The Losers.
As a beginner, it may not feel right, but a sharp drop in any asset’s price is a great opportunity to buy, especially large drops. As is very probable that the price will rebound as the market regains its confidence. It is a situation of profiting from undervalued assets.
For instance, If we look at Bitcoin, its viewed to be highly sensitive to external events, especially news and media stories. When good news stories are released, people race to buy Bitcoin, and when any bad news stories, people tend to sell.
Averaging.
Averaging doesn’t cost much time and doesn’t require much knowledge, so is great for beginners. This strategy doesn’t require your whole capital to be invested at once. Instead, it advises you to invest a fixed sum at specific intervals.
For example, you want to invest £1000 in Bitcoin for 5 months; however, you don’t invest the whole amount at the start. You buy £200 in 5 installments at the beginning of each month at different rates. This way you mitigate the level of risk which might occur due to price fluctuations.
However, on the flip side, this can also mitigate the potential profit you might have got with a lump sum investment.
Balanced.
If you’re a cautious person, then this strategy could be for you. A balanced strategy consists of investing your capital in various cryptocurrencies rather than just one. This will distribute the risk across your investments over time. However, this trading strategy has drawbacks. Assume one investment rises by 25%, but another drops 10%, so basically you’re mitigating the risk, whether it’s a loss or profit.
Top Tip: Ensure you invest your capital in a variety of cryptocurrencies. For example, one private, one security coin, one equity coin, etc.
Lending.
If you’re not cut out for trading? then this strategy might be right for you. You build a crypto portfolio, so buy some crypto coins, and then you lend them out to someone else. Some websites and platforms like Cryptoland and Nexo can earn you about 10% in interest.
So you don’t have to spend hours glued to your computer checking data and graphs. However, any profits you would’ve made from investing your self will be gone.
Key Point: These lending platforms will only take stable coins or popular ones.
Biased.
The biased strategy works on how you believe a crypto token will perform. It is the opposite of ‘The Balanced Strategy.’ In basic terms, it spreads your investment according to how you think each asset will perform in the market. For example, if you believe Litecoin has been doing well in the market and could be profitable. You’d then invest the majority of your capital in Litecoin and the rest in others, unevenly, as per your belief of their performance capability.
This is the most appropriate cryptocurrency trading strategy for those who have done their research. The only bad and the most frequent outcome is predicting incorrectly and then, therefore, losing capital. So make sure you’ve done the research before you go through with your trades.
Conclusion.
So, now that you are aware of some of the different types of strategies, its time to give it a go and start trading. The majority of people believe that crypto trading is a gambler's game; but, it requires patience, discipline, dedication, some tools, and techniques to master it. Having a good future in trading is solely based on knowledge and experience, however, these trading strategies will give you a helping hand.
