The popularity of cryptocurrency has skyrocketed in the past few years. Cryptocurrency trading refers to the procedure of purchasing and selling crypto through blockchain exchanges that works digitally. Owing to the decentralised approach of crypto trading while they are not influenced by economic concerns, various external factors like demand and supply make them fairly risky.
Being a beginner in crypto trading, you should be aware of the crypto trading strategies to ensure earning more returns down the line. To know more about some proven strategies, keep reading.
6 Best Crypto Trading Strategies for Beginners
Owing to the unpredictable and volatile nature of cryptocurrencies, it makes sense to pursue unique strategies before getting involved in the trade. In fact, crypto trading refers to an activity of predicting the movement of crypto prices through a CFD or ‘Contract for Difference Trading’.
While involving in such predictive trading can help you gain lucrative profit without having to possess much capital, it could be equally risky for your financial life. Mentioned below are the basic strategies in crypto trading for beginners:
The approach of crypto day trading involves entering into and withdrawing from a position in the market on a specific day before the crypto trading hours. This strategy is also called intraday trading since trades are generally carried out within one day. Therefore, you can execute day trading with Bitcoin volatility all day.
The main objective of day trading cryptocurrency is to generate profit from small but important market movements. Since crypto is volatile, there remains a chance of risk, which can cause further trouble in the future. However, following day trading strategy in the cryptocurrency market can be substantially rewarding. The approach is formulated by skilled day traders through their technical analysis. However, this approach is much more time-consuming.
Swing trading strategy is intended for relatively longer-term trading that suggests holding currencies for more than a day, not beyond a certain week or a month. One notable point of swing trading that makes it a dynamic trading strategy for newbies is that swing trades take a minimal waiting time to keep close track of the wave of volatility.
While playing, you must not wait for more than a specific time that makes it challenging to trail the trade. Swing traders adopt a mix of technical and basic influencing factors in order to formulate such trade ideas. This is why analysing chart patterns is important to be a gainer in this trading.
Crypto Futures Trading
Another well-known crypto trading strategy for beginners is the crypto futures trading approach. This strategy requires formulating a contract between two different parties who agree to purchase and sell a predetermined amount of any underlying crypto such as Bitcoin a definite future price on a pre-specified time and date.
Futures trading strategies come with an extensive range of cryptocurrencies. However, it does not require you to hold any of them. For instance, people holding crypto may utilise a futures trading approach in order to safeguard themselves from unforeseen and unavoidable market fluctuations.
Dollar Cost Averaging (DCA)
Dollar-cost averaging (DCA) is a time-tested and proven strategy that works effectively due to its scientific concept of trading. DCA trading approach suggests you to invest your money in specific cryptocurrency in smaller amounts by dividing it, rather than investing at a single time. In this method, you need to select a specific day and time of the week and buy crypto at that specific time only.
For example, you want to invest Rs. 20000 in Bitcoin. Accordingly, despite investing the whole amount at a time, follow the DCA strategy and make sure to divide your money by 20 times, which comes to Rs. 500. Now, choose a specific day and time of the week for buying Bitcoin. Say, you have chosen Friday at 10 AM as per your local time. Now, continue buying your desired cryptocurrency every Friday at the same time for 20 weeks.
Investing in fixed intervals over a longer span will enhance the likelihood to lessen the impact of the volatility of the market. On average this will return you more bitcoins in your wallet than if you had invested your money at a single time.
Many traders depend on arbitrage options in order to gain more profits via cryptocurrency. In economics, arbitrage is the strategy of purchasing and selling commodities, securities, and currency across various markets to enjoy variant pricing for the same asset. Traders can reserve profit derived from the differences in liquidity. They register on exchanges with the price differences for the cryptocurrency they are trading to grab the benefit of this strategy.
Another great crypto trade strategy is scalp trading. In this trading approach, traders typically aim at making a small margin of profits by involving in several deals over a short-term period. This consequently enables them to earn substantial revenue generated through multiple small gains.
However, this strategy requires a good degree of awareness of the crypto market. You can gain this knowledge by conducting market research and studying the prevalent trends.
How Beginners Trade in Cryptocurrency?
Mentioned below is a step-by-step procedure that may help a novice crypto trader to commence their journey in the world of crypto trading:
Step 1: Thoroughly check the reviews online and choose your desired platform for crypto trading.
Step 2: After a successful registration, you can gather the necessary assets in your wallet. If required, you can refer to the respective platform's suggestions in order to get an idea regarding the best cryptocurrencies.
Step 3: According to the nature of trading, choose your preferred option or the one that suits you the best. Being a beginner, you should adhere to some medium or long-term investments owing to their lower risk and easy accessibility.
Step 4: Take expert assistance and go through the in-app technical indicators and expert analysis sections in order to conduct your research.
Step 5: Purchase units of crypto and keep them for a pre-determined period in your wallet till you find the perfect opportunity to sell them for earning profit.
Upon completion of these steps, you will be eligible to trade in cryptocurrency.
What Are Some Noteworthy Cryptocurrencies Available?
Mentioned below are some important cryptocurrencies available:
- Bitcoin Cash
So, from the above discussion, being a potential investor and beginner in cryptocurrency trade, you can leverage strategic trading to earn more coins. The cryptocurrency market is promising but risky as well. Therefore, before entering into the trade, make sure to gain good knowledge about this market considering its benefits and risk factors.