Cryptocurrency is no longer an alien concept to many, even though some people are still hesitant to buy digital money. While some people prefer to invest in a promising cryptocurrency and hope it will increase in value and bring profit, others prefer to actively trade crypto currency. This article explains in simple words some of the most popular trading strategies for beginners to consider.
Understanding A Crypto Trading Strategy
First, what is the cryptocurrency trading strategy? It’s a method used by traders to make educated (based on data) choices and maximize earnings while trading digital currencies. The strategy entails examining market patterns, historical data, and other indications to determine suitable entry and exit opportunities for trading.
A crypto trading strategy is a set of rules and guidelines that traders use to make informed decisions about buying, selling, or holding cryptocurrencies. It helps traders identify potential entry and exit points in the market based on various indicators, patterns, and market conditions. Define your trading goals, whether it’s short-term gains, long-term investments, a combination of both. This will help shape your strategy and determine the timeframes and approaches you use.
Crypto trading strategies range from short-term day trading to long-term investing. The most popular methods that help spot promising crypto are technical and fundamental analyses. The first one uses charts and patterns to predict market changes. The second option considers fundamental elements such as the project’s white paper, developer team, news events, and project advancements.
Risk management is also an important component of any strategy. It relies on traders using stop-loss orders and position-sizing tactics to control potential losses.
Cryptoсurrency Trading Strategies For Beginners
- Beginner traders should choose simple, user-friendly tactics that lay the groundwork for understanding the market. Here are a few beginner-friendly cryptocurrency trading strategies:
- Buy-and-hold (HODL). It involves purchasing crypto and holding onto it for a long period. For instance, you can purchase AXS crypto for a lower price and wait until it increases in value in a few years.
- Copy trading. Copy trading services enable beginners to mimic the trades of pro traders automatically. The profits are lower than the ones by the traders who come up with a strategy, but they are steady and enable to build capital.
- Simple breakout trading. It’s one of the Bitcoin trading strategies. Beginners can focus on detecting simple breakout patterns, such as the price of a cryptocurrency breaking above a resistance level. When there is a breakout, they can enter a position with a pre-determined exit plan.
- Dollar-Cost Averaging (DCA). It means investing a set amount of money at regular periods (weekly, monthly) independent of the price of the coin. This method mitigates the impact of market volatility to help build assets over time.
These are some of the simplest trading strategies that don’t require years of studying and gaining experience.