The cryptocurrency world is quite famous for its volatile nature. This gets worse when one chooses to invest in daily trades; one wrong move could lead to substantial losses for the investor. No defined strategies assure success since the market is quite unpredictable. However, there is a huge difference between an investor that takes time to develop a plan and implements several bitcoin trading sites strategies and the other who chooses to trust their gut feeling. This article will expound on several strategies anyone could implement in cryptocurrency trading. These strategies are beginner-friendly and thus would be useful for new investors in cryptocurrency.
Day trading, also known as active trading, refers to buying and selling cryptocurrency assets, securities, and tokens daily. This is done for financial gain; the buyer acquires the assets at a lower price and sells them when the prices go up the same day. This is the most volatile form of trading as the market fluctuations occur in a second, and a few minutes could change the profit into a negative balance. Nonetheless, it offers the trader the opportunity to exploit the immediate volatility of the market; it is an exciting and fast method of trading and does not put the capital at risk if it is held overnight. However, the charges are quite high as the orders are also significantly high; one has to have a master plan and be attentive because one wrong prediction results in a loss.
Bid-ask spreads exist in cryptocurrency trading because of imbalances in the supply and demand of assets and tokens. Scalping focuses on identifying these bid-ask spreads and exploiting them; they are often wider or narrower than ordinary spreads. The focus, in this case, is not on high volume trades but on small trades that occur more frequently than the former; by the end of the day, the scalper will have made more trades than an investor who waited on high volume opportunities. Some of the merits of scalping include;
- It does not require one to be an expert or possess a technical background.
- The trades are on less volatile assets, which reduces the risks involved in the investment.
- Even with the smallest of variations in prices, one still makes a profit.
Scalping also has its downside, which is characterized by:
- There are high transaction fees as this strategy calls for many orders.
- It is one of the time-consuming strategies.
- To obtain any returns, the upfront capital must be high.
Swing traders are individuals that take chances during the end of the trade. When a trend ends, there is always volatility in the prices of assets and tokens as a new trend tries to stand its ground in the market. During this volatile period, the swing traders make their move and buy assets. Which are held for more than a day but less than the time the trend lasts. This strategy has several merits that include:
- Swing trading requires less time; one only has to be attentive to studying trends in the market.
- Several trading platforms such as Pionex, Binance, Crypto.com, and Immediate Edge offer tutorials and guidelines on how to conduct swing trading.
- When this strategy is implemented, the potential for returns per trade is quite high.
- Trading goes on even when the markets are closed when using this strategy.
Demerits of swing trading include:
- The holdings, in this case, are centralized.
- While focusing on parts of trends, you might end up missing out on more profitable market opportunities.
- The chances of high losses per trade are quite high.