Cryptocurrency Trading Strategies For Beginners

Trading cryptocurrencies is a great opportunity to increase your assets, but at the same time, it comes with some risks. Market volatility and innovations in the field affect the assets’ value and do it at any time. Therefore, it is essential to use the right strategy for the purchase and sale of digital assets to benefit from the process. In this article, we’ll talk about the main strategies for crypto trading and give you tips on how to choose the one that suits you.

Main Strategies Of Crypto Trading

As we have already said, the crypto market is unpredictable, as it is influenced by many factors, such as supply and demand, technical innovations, government regulations, and media presence. To minimize the consequences of these changes, crypto activists have developed various trading methods. Thus, a trading strategy in crypto is a set of rules and approaches for buying and selling digital assets on crypto exchanges.

There are many strategies, but several are most often used by crypto traders, including beginners. They are the following:

1. Scalping.

2. Day Trading.

3. Swing Trading.

4. HODLing.

5. Arbitrage.

6. Dollar-Cost Averaging (DCA).

All of them are based on following market trends, when traders constantly monitor the current situation and determine prevailing tendencies. For making forecasts, they use various technical indicators, such as trend lines and RSI (Relative Strength Index) charts. If the price movement is identified correctly, then the trader can profit from its difference in two time periods.

We talk about each strategy in more detail further in this article.

Scalping Strategy

Scalping is a high-frequency trading method where profits are made from price changes over a very short period of time, usually from a few minutes to seconds. So, scalpers make dozens of trades during the day. The strategy requires advanced trading skills in technical analysis to quickly determine market changes.

Example. The scalper trades Bitcoin, the price of which ranges between $90,000 and $90,010. The trader notices that after the fall, BTC rapidly rises in price again. He buys a coin for $90,000 and sells it for $90,010, earning $10. He does this process several times a day, making a small but steady profit.

Day Trading Strategy

Day trading refers to buying and selling the cryptocurrency within one day; this strategy allows you to earn from short-term price fluctuations. Traders use technical analysis to understand trends. They make a lot of trades during the day in order to make a small but steady profit. And to minimize losses, they use stop-loss orders.

Example. A day trader monitors Ethereum and plans to earn on it. In the morning, the price is $3,000, and the trader notices bullish trends using RSI analysis and charts and buys ETH at the current price. After a few hours, the price of Ethereum rises to $3,200; so the trader sells it and makes a profit of $200.

Swing Trading Strategy

Swing trading means a medium-term strategy where traders try to predict price changes during several days or weeks. They buy coins when the market is bearish and sell them when it is bullish. Swing traders use technical analysis and RSI to make forecasts.

Example. A trader monitors the Bitcoin price, which has been falling for a long time but has recently started to grow. When it drops, for example, from $90,000 to $85,000, the trader uses the RSI to confirm the price increase. He buys BTC for $85,000, and a few days later, when the price reaches $90,000, he sells the crypto, earning $5,000.

HODLing Strategy

HODLing is a long-term investment strategy where traders buy crypto and hold it for a long time, despite price fluctuations. Hodlers consider that even if there is a high volatility in the market, the assets’ value will grow significantly in the future.

Example. An investor buys Ethereum for $3,000. Over the next few months, the coin's price fluctuates; it falls to $2,500 and grows to $3,500. The investor still believes in the ETH prospects and retains it. After a few years, when the Ethereum price rises to $10,000, the investor sells it, making a big profit.

Arbitrage Strategy

Arbitrage is about a trading strategy based on earning on price differences for the same coin on multiple exchanges. Traders buy crypto at a lower cost on one platform and sell it more expensively on another, profiting from the rate difference. Using arbitrage is beneficial due to errors in market pricing, which exist for a short time; for this reason, it is necessary to act quickly.

Example. The Bitcoin price on the first exchange may be $89,500, and on the other, it is $89,510. A trader buys BTC on the first platform and immediately sells it on the second, earning $10 as a difference.

DCA Strategy

Dollar-cost averaging is a long-term trading approach that assumes investing a fixed amount of money in the coin at certain intervals. The purchase takes place regularly, regardless of the crypto price, which is why the DCA strategy is quite simple. This approach helps to avoid market volatility, and over time averages the price at which an asset is bought.

Example. The trader decided to invest $500 in Ethereum monthly for the next six months. In the first month, the ETH price is $3,000, so the trader buys 0.33 of it. The following month, the coin price drops to $2,500, and the investor purchases 0.04 ETH. Thus, by the end of the sixth month, he will buy Ethereum at an average price that smooths out fluctuations.

How To Find The Best Strategy For You?

It's not enough only to know about strategies; when trading cryptocurrencies, you need to consider your investment strategy and market trends in general, as well as act cautiously and gradually. We tell you about it in more detail:

• Consider your goals. Think about whether you are targeting short-term or long-term profits. The choice of an appropriate strategy will depend on this decision.

• Start small. If it doesn't matter to you, at the beginning of your journey, trade using the simplest strategies with long-term storage of funds. As you develop, you will be able to analyze the market faster and use short-term approaches.

• Manage risks. Use as much money for trading as you can afford to lose. Also, always use stop-loss orders.

• Follow the market. Monitor the news of the crypto field to keep updated on trends and current forecasts. You can find price predictions for different coins and useful guides on the Cryptomus blog.

Follow these recommendations and trade crypto efficiently. If you find it difficult to make decisions, you should consult with experts in the cryptosphere.

We hope this guide has helped you learn more about crypto trading, and now you can make an informed decision about the strategy. If you still have any questions, feel free to ask them in the comments!