The newest asset class is crypto assets. Retail investors will soon follow the footsteps of institutional investors who have entered the Digital Asset space. In anticipation of price appreciation, crypto trading is when a trader takes a buy or sell position in Cryptos. When trading Cryptos, the fundamentals of an asset class are often forgotten. You can trade Cryptos using a variety of methods. This article outlines the most popular trading methods.
Trading vs Investing in Crypto
Although trading and investing can be used interchangeably, they are two different strategies that can help you build wealth. Trading is the prediction of a price movement in a short time using a reliable technical indicator. Traders typically buy and sell within a month. Trades can be as short as one day.
Crypto investing is the purchase of an asset and its long-term holding. Most often, more than one year. While it is important to know the price at which an asset was purchased, valuation often takes a backseat when making investment decisions. A fundamentally strong asset will appreciate over time and give handsome returns. Bitcoin and Ethereum, for example, have both provided handsome returns over a long time to investors.
Continue reading: Crypto Investing vs Crypto Trading
This image is from CoinMarketCap: The Bitcoin lifetime price chart, taken on 29/09/2022
Crypto Trading Methods
Although there are many trading strategies, we have highlighted the most popular ones. These strategies can help you decide what trading is best for you.
Crypto Day Trading
Intraday trading is the act of buying and selling assets on the same day. It is entirely dependent on the market forces that affect the price of the asset on a particular day. Inter-day trading is a great opportunity for retail investors to shadow institutional traders who have an effect on the asset’s price. The price of a coin like Bitcoin and Ether will rise if an institutional investor holds a position. These market movements can be a boon for retail traders if they act quickly in these situations.
Learn more: How to choose crypto for day trading?
What is Swing Trading in Crypto?
Swing trading refers to when an asset is purchased and then sold, depending on price movements. Swing trading is different from Intra-Day trading in that it requires you to monitor the price for a longer time. Swing trading also involves combining technical and fundamental analysis of an asset. Example: Traders used swing trading to enter and exit markets at the Ethereum Merge event. Swing trading also requires historical analysis.
rbitrage in Crypto
Arbitrage is a trading strategy that allows traders to purchase and sell assets on multiple exchanges. A trader might buy Bitcoin on one exchange but it is $ 17.500 on another. The trader then transfers the assets to the second exchange and makes a profit. Arbitrage requires that the trader pays commissions to each exchange.
Crypto Futures Trading
Future trading is when you agree to purchase an asset at a future date and for a certain price. The contract binds. Future trading requires the ability to make accurate predictions about price movements.
It involves trading using Algorithmic algorithms that scan markets based upon pre-defined conditions. Bots can place orders for you when high-frequency trading is possible. This requires traders to be proficient in financial modeling and programming. This strategy is more suitable for traders who are experienced in the market.
Crypto Range Trading
Range trading is price monitoring within a specific range. To profit from range trading, traders should be familiar with concepts like Support and Resistance lines. Technical indicators that indicate trend reversals are the Support and Resistance points. For accurate inferences, historical backdating can also be used. A trader might buy low and sell high if Ether is trading within a range between $ 900 and $ 1100.
Scalping in Crypto
CryptoScalping is the process of making large gains on multiple trades in a short time. Although these gains may seem smaller per trade, when all transactions are consolidated, they add up to a substantial amount.
Trades involve placing orders at high speeds and traders prefer liquid assets. To ensure successful scalping, there should be a market that is available to purchase the orders at any time. To capitalize on scalping opportunities, traders should be able to understand volumes, prices points and news.
Trend-Based Trading in Crypto
Trend-based trading is based on taking market signals and macroeconomic developments to predict price appreciation. A new Metaverse token that is based on a video game could be launched. If the game experiences a surge in downloads and an increase in user base over time, the coin’s price could rise. Trend-based trading is when a trader monitors the market for changes.
Crypto Trading: Advantages and Drawbacks
AdvantagesDisadvantagesVolatile market opportunities can help traders make profitsUnderstanding the market takes time and effortTrading is open 24 hours-365 days unlike other marketsUsers should ensure that they are well aware of all the security risks and trade on secure platformsAlgorithmic methods can eliminate manual interventionsSeveral techniques often confuse newbies on what to followInstant settlementsFew low-volume tokens can have liquidity issuesDecentralised Exchanges enable peer-to-peer transactionsLack of resource material to guide traders
There are many opportunities for crypto trading to make money. However, it comes with risks as any other market. Traders need to ensure they have contingency plans and strategies in place. To perform better than the market, you need a well-researched approach.
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