Cryptocurrencies: The Best Trading Strategies

March 17, 2022 4 min read

Cryptocurrencies: The Best Trading Strategies

Cryptocurrencies: the best trading strategies

What are the best crypto trading strategies? Cryptocurrencies, Bitcoin above all, have now become a topic of public domain. Many are wondering if it is worthwhile to invest some of their savings in Bitcoin or other emerging Altcoins.

Operating on markets, currencies, equities or cryptocurrencies is not simple and can lead to losses when you are not clear about what you are buying.

In particular, the cryptocurrency market is still characterized by extreme volatility, and therefore it is essential to develop an investment plan that considers every aspect.

The general rule is not to invest more than you can afford to lose.

Secondly, since each cryptocurrency is linked to a specific project, it may be useful to study and analyze the organization, evaluate the potential and only then decide to invest.

In this article, we will look at some crypto trading strategies that can be adopted by beginners.

It is good to specify that they are not strategies that will lead to a sure profit but must be considered as general methodologies that can constitute an important basis for planning future investments.

It is also stated that to understand the information contained in the article, a little familiarity is required which mainly translates into the knowledge and understanding of terminologies such as candlestick charts, trend lines, mobile indicators, pattern analysis.

Cryptocurrencies, which strategies?

Swing Trading

Those who have a lot of free time can consider adopting the Swing Trading strategy. The basic idea is to constantly monitor the currency trend in real-time.

When you don't have time to follow the graph, you can set up an alert. That is a notice that draws attention to the occurrence of a certain condition.

Well, what you should watch for are bullish or bearish peaks. Cryptocurrencies, being characterized by high volatility, appreciate or depreciate consistently several times during the week.

By carefully analyzing the chart, it is clear that every substantial rise or fall is followed by a more or less important correction.

The skill of the trader who applies this strategy is to take advantage of the corrective phase by entering the market the instant before the cryptocurrency reverses the trend and exiting at the precise moment in which the trend will resume upwards or downwards.

Despite the trend of a virtual currency being characterized by hundreds of corrective situations, failing to predict the exact moment means finding yourself against the market.

The news

Another strategy that you can think of adopting simply requires information. Cryptocurrencies, as well as classic currencies and shares, are subject to rising or falling phases depending on the news that can directly or indirectly change their value.

For example, well-known entrepreneur Elon Musk invested $ 1.5 billion in Bitcoin in February 2021. Those who have learned the news live have in turn invested in Bitcoin benefiting from the bullish trend driven by Elon's choice to invest in virtual currency.

The example shown above is striking but it must be considered that minor news items are quite frequent and may concern: the development of a new process, the recognition of Bitcoin as a payment method, or other relevant news.

Following the news can therefore be an effective cryptocurrency investment method. However, even in this case, skills and knowledge are required.

The trader's skill should be to recognize when news can lead to a bullish or bearish phase. Having identified this, it is also necessary to understand if the news is positive and therefore a rise or negative is expected.

Finally, the relevant news is the unexpected ones, or to put it in the jargon of traders: not already discounted by the market.

In other words, if the injection of capital into Bitcoin by a multinational is planned and everyone is aware of the day the operation will take place, the market will hardly change because it has already discounted them.

Technical analysis

The world of traders is divided into schools of thought. Some trade, as we have seen, on the news, those who use special software that develops optimal strategies based on the historical data, there are lovers of technical analysis. Or some have a long-term strategy based on a few operations, some an intermediate strategy up to those who dedicate themselves to scalping, carrying out many small daily operations.

On the net, you will find any information. Experts in favor of technical analysis, experts who consider it ineffective. Experts in support of one or the other strategy.

There are so many true or alleged theories.

In any case, relying on technical analysis is a fairly common strategy which, simplifying, is based on identifying prices where the market behaves the same way every time it reaches them.

Simplifying the technical analysis is based on the so-called supports and resistances. A detailed graphical analysis leads the trader to identify resistance prices (upwards) and support prices (downwards).

Identifying supports and resistances is the first operation to do and on which to base your trading strategy.

Buy and keep

Investing in cryptocurrencies today is in the opinion of many experts very complicated. Although the web is full of ads ready to guarantee you to get rich by investing 500 or 1,000 dollars, the reality is quite different.

Underlining again the informative nature of the text and collecting the most authoritative opinions on the web, to date the least risky strategy to implement with cryptocurrencies is the so-called: buy and hold.

It might make sense to build a basket with the best cryptocurrencies and invest the right amount to maintain them over the long term. In other words, it is a question of investing in the eventuality that technology can continue to be used and improved in the years to come, especially when most countries in the world decide to regulate the use of virtual currency as it happens with classic currencies.

Conclusions: the best crypto trading strategies

Investing in cryptocurrencies is considered by most traders to be a risky operation, both as we have seen due to the high volatility and because the technology is still very young and no sufficiently large history can lead to a reliable forecast.

It is therefore not wrong to argue that putting money into the cryptocurrency market is a gamble today and as such, it can turn out to be a winner or a loser.