Whether you are holding for the long term or day trading crypto, you need a viable strategy to profit from the current bull market’s price moves.
That said, your crypto trading strategies shouldn’t be overly complex to avoid grave mistakes like misinterpreting signals.
For that reason, we have collected the best three crypto trading strategies both beginners and advanced traders can use to gain exposure to the rapidly-growing digital asset market.
Let’s see them!
1. Momentum Trading
Momentum trading is one of the most beginner-friendly crypto trading strategies out there.
In the financial industry, momentum refers to the speed at which an asset’s value is changing in either direction.
Instead of buying the dip and selling high, momentum traders ride the wave, entering a trade when a cryptocurrency’s price has already grown considerably while exiting their positions at a trend’s peak.
Using both fundamental and technical analysis tools, momentum traders screen the market to find assets that have recently entered into a strong trend. Once they spot one, they open long positions, which they only exit after a trend reversal occurs.
Even after a trend reversal, momentum traders may decide to enter the market again to short the asset if the downtrend is strong enough.
While it may sound counterproductive at first, this type of cryptocurrency trading strategy makes great sense in the digital asset space, where momentum occurs quite often.
For example, in the current bull market, a sudden increase in the demand for an asset, positive news for a project, or even just fear of missing out (FOMO) kicking in can all create strong, rapidly accelerating uptrends.
Momentum traders can take advantage of all the above while leveraging key indicators like market volatility, the Bitcoin trading volume, and timeframe analysis to gather crypto trading signals.
On the other hand, as with all crypto trading strategies, momentum trading also involves some risks. For that reason, effective risk management is crucial to achieving success with this strategy.
2. Swing Trading
Swing trading is also an excellent beginner-friendly crypto trading strategy.
Unlike long-term holding or day trading crypto, this strategy aims to make short- to medium-term profits on digital assets’ price movements.
With trades lasting from a couple of days to multiple months, swing traders use a combination of fundamental and technical analysis to spot crypto trading signals.
While increasing the time on the market allows traders to maximize their short-term profit potential, swing trading doesn’t involve as much effort as day trading. Instead of checking charts every day, swing traders enter and exit positions once every few days or weeks.
On the other hand, swing traders have to regularly monitor the market for potential reversals to minimize their risks and increase their profits.
Scalping is a straightforward, high-frequency crypto day trading strategy in which traders aim to make quick profits on digital assets’ minor price changes.
Since they only focus on extremely short-term price movements, scalpers don’t take an asset’s fundamentals into account. Instead, they rely exclusively on technical analysis to enter many quick trades.
Since the profits are small for each trade, those using this crypto trading strategy usually enter and exit hundreds of positions in a day.
Scalping is based on the following three trading principles:
- Less exposure to the market limits traders’ risks as the probability is much lower for getting impacted by an adverse event than for longer-term strategies.
- It’s easier for an asset to make smaller moves than larger ones (e.g., a $10 change in the BTC price is more likely than a $1,000).
- Smaller moves are much more frequent than bigger ones, even when the market is relatively quiet.
In addition to the above, scalpers must be disciplined while using strict entry and exit strategies to limit their risks since a large loss is enough to take away most of their profits.
It’s also essential for traders utilizing this crypto trading strategy to pick an exchange with cost-efficient fees as high spreads can easily turn their gains into losses.
For that reason, the Digitex exchange is the perfect choice for scalpers and other high-frequency traders as they can enjoy a free crypto trading experience to maximize their profits.