Cryptocurrency Trading Strategies

If you are interested in cryptocurrency trading, it is crucial to know the Bitcoin trading systems that experienced traders use in 2024. This article explains the subtleties of making profits in the crypto market, reviews the most effective crypto trading methods, and provides the best crypto trading strategy for different trading styles.

Apart from instructions and rules, every strategy provides insights into analyzing market movements, essential for making informed trading decisions and grasping what influences the actions of bulls and bears.

The article covers the following subjects:

Major Takeaways

• Crypto trading strategies allow traders to choose the appropriate market analysis method to open and close trades effectively.
• Cryptocurrency trading requires understanding market volatility and using flexible strategies to mitigate risk.
• The right investment strategy can help achieve long-term goals and generate stable profits in the crypto market.
• Experienced crypto traders combine technical analysis, fundamental news, and sentiment analysis to trade successfully.
• The best strategies for trading cryptocurrency include swing trading, day trading, scalping, and long-term investing (HODL).
• Proper risk management plays a key role when dealing with highly volatile assets such as cryptocurrencies.
• It is essential to test strategies regularly on a demo account and adapt them to the current market conditions for successful trading.

Cryptocurrency Technical Analysis

One of the basic market study techniques is technical analysis. It includes strategies tailored to different periods, from scalping in 1-2 minute time frames and swing trading in hourly time frames up to day trading and position trading in daily and weekly time frames. Technical analysis is subdivided into a few types based on the approach and instruments used.

Pattern analysis

History repeats itself! Crypto strategies based on chart analysis imply searching for repeated chart moves or patterns, including Triangle, Wedge, Head and Shoulders, Double Top, etc. Chart analysis will help identify price reversals or trend continuation patterns, even if you’re a beginner.

Another tool is support and resistance levels. They indirectly measure a trend’s strength, determine eventual profit fixing points, and help you place Stop Loss and Take Profit.

Candlestick analysis

That’s an appropriate analysis method for trading crypto that allows quickly getting information on the current market sentiment. With candlestick analysis, you can predict price directions based on the results of previous trades. This technique is one of the easiest methods for beginner traders to learn.

Algorithmic method

A lot of crypto selling strategies are based on algorithmic methods. They include all trading strategies that use technical indicators, such as moving averages, the golden cross, or the death cross. Counting all the technical analysis indicators would be hard since there are dozens of thousands of them.

Volume analysis

To have an idea about the market’s current state, we can use trade volume indicators for various time frames. Comparing these data to the periods of quotes’ growth and fall, traders can figure out what is happening in the markets.

News and Sentiment Analysis

News trading is a strategy borrowed from traditional trading. Crypto quotes can be affected by the news about a particular crypto project or the crypto market as a whole. When trading crypto assets, analyze BTC-related news. Political and economic developments can also impact on crypto pairs, just like central bank decisions. For example, a ban on crypto-trading will significantly drop crypto rates.

The ETHUSD chart above shows drastic upward and downward price movements. All of them are related to important events. Traders must note assets that are under pressure. For example, the Fed’s key rate changes affect the dollar cost. As a result, a crypto buying strategy can extend to other USD pairs, while Ethereum creator Vitalik Buterin’s tweet will likely impact only on the ETH price.

Creating a medium-term news trading strategy for cryptos is impossible. Unlike in Forex, there’s no economic calendar for the crypto market. So, we don’t have reporting publication dates, statements, or central bank decisions. The websites that position themselves as crypto calendars can only offer an approximate idea of possible events. Such information can be used only as an additional factor to place stop-loss orders more accurately, thus lowering eventual risks if the price reverses sharply.

Top 7 Cryptocurrency Trading Strategies

We have gathered a few crypto trading ideas used by most successful traders. Once you’ve tested some of those, you will no longer consider cryptocurrencies a mysterious, high-volatility asset.

Position trading

This crypto trading technique suggests holding positions for a long time. It’s called HODL (hold on for dear life) in the crypto world. That’s a pure investment philosophy when investors firmly believe in a bright and rich future for all those who continue holding cryptos, whatever happens.

Position traders base their decisions on an assumption that assets yield profits in the long term. Potential growth relies on fundamental factors, macroeconomic analysis, and long-term market cycles connected with Bitcoin’s halving.

Position trading suggests holding assets for a long time, so traders ignore short-term market fluctuations or crypto day trading, rather focused on global trends.

Swing trading

This strategy is used to make profits from short-term and medium-term price movements. Swing traders hold positions from a few days to a few weeks. The strategy is based on the idea that prices move in cycles, growing and falling. 

Market participants use chart patterns and fundamental analysis to identify potential entry and exit points. They look for strong trend signals and try to enter the market at the best price to make the biggest profits. This cryptocurrency trading strategy demands a deep understanding of trend indicators, patience, and discipline.

Day trading crypto

It’s probably the best cryptocurrency trading strategy and the most popular one! Under this strategy, traders open trades and exit the market on the same day.

Such a strict time frame was first meant for trading in traditional markets, where trading activity was recorded only during particular hours — the working hours of a stock exchange. Intraday traders never kept their positions open overnight because the market was closed at night.

Daily crypto futures and currency trading strategies can now be used because crypto stock exchanges are open 24 hours a day. So, the “day trading” term now implies short-term trading where trades aren’t held for more than 24 hours.

To develop trading strategies cryptocurrency traders use technical analysis, chart and candlestick patterns, and other techniques. Day crypto trading can turn out highly profitable on small time frame charts due to high volatility, but the risk is also high. Almost all crypto pairs suit intraday traders.

The BTCUSD chart shows an example of day trading using the MACD indicator. We have a bullish reversal signal on the H1 chart at the end of the previous day as the indicator’s line crossed the signal line from below to above. So, we open a long trade at the candle’s closure, with a stop loss at the nearest local low (the red line).

There formed a reverse signal. Given that the MACD indicator generates signals with a lag and a correction has obviously started developing in the chart, we should close the trade at the green line level.

Range trading

Range crypto trading aims to profit from non-trending, directionless markets and flat periods. Assets are sold when they are overbought, and vice versa.

Range trading algorithm:

1. Identify support and resistance levels.

2. Buy an asset at a price close to the support level.

3. Sell it when the price has reached the resistance level but not yet crossed it.

To efficiently trade ranges, traders use volume data as the market sentiment indicator. There can be increased trading volumes ahead of a price movement. This regularity can be used to confirm pullbacks from support/resistance levels.

Let’s examine an example of range trading. The purple lines mark support and resistance. A pullback occurs once the price reaches the lower boundary. The volume chart shows market activity growing, so we can conclude that the price will be rising, and we open a long position at the candle’s closure (the blue line).

Then, trading volumes fall once the chart approaches the support level, meaning most market participants don’t want the price to grow further. These signals give us the reason to close the trade at the green line level.

Scalping

Scalping is a good technique for traders who are not afraid of risky Bitcoin trading strategies and want to have a favorable return on the slightest price fluctuations. This method is best suited for trading high-volatility cryptocurrencies, and the market must be analyzed on the smallest time frame charts. Scalpers fix profits after just a few points move, so remember to consider commissions. A trade can be opened when the chart has crossed the moving average or the price pulled back from support or resistance.

The price crossed the MA from below on the five-minute ETHUSD chart. So, we can open a trade at the candle’s closure once a breakout is fixed. A market entry point is marked with a blue line. A stop-loss order should be placed below the EMA at the candle’s opening level.

Next, wait for a moment when the price stops rising. A correction starts as a red candle two candles later. Once it’s closed, fix profits and exit the market (the green line).

HFT trading

High frequency trading (hft) is a group of quantitative strategies implemented through algorithmic trading methods. HF traders use complex algorithms to profit from market fluctuations that last seconds or milliseconds.

HFT trading strategies are best used for volatile asset classes with simultaneous monitoring of several trading platforms. This trading technique suits only those traders who can develop and test a trading algorithm. You will need good knowledge of math and programming and skills for analyzing the effectiveness of trading bots.

Arbitrage

Arbitrage is a popular crypto sell strategy among those who trade on several stock exchanges simultaneously. It is based on making profits from the difference in an asset’s prices on different trading platforms.

Making money through arbitrage is possible since the crypto market isn’t regulated. The difference between quotes on different stock exchanges can be significant.

The only inconvenience of this strategy is that identifying a money-making opportunity can be hard. You need to analyze hundreds of pairs on dozens of trading platforms, which is hard to do without using dedicated software.

How to Avoid Mistakes While Crypto Trading

To trade cryptos with profits, finding a considered strategy isn’t enough. It’s important to avoid mistakes that beginner traders make:

• Fear of missing out (FOMO);
• Overtrading and Too many ideas syndrome;
• Trading More Than You Can Afford to Lose;
• Superficial market research;
• Revenge trading;
• Too much trust in another person’s opinion.

Trading FOMO

You have probably met people who are always afraid to miss out on something. Beginner traders constantly do that! It’s called a FOMO effect (Fear of missing out).

It shows itself as a strong and sometimes uncontrolled fear of being out of the market, even for a short time. Such people continuously follow quotes and news and open trades as soon as possible. Such trades aren’t effective, let alone the quality of market analysis.

Overtrading

This mistake of beginner traders is somewhat similar to the previous one, with the difference that overtrading is an itch to buy or sell all the time, irrespective of FOMO. Such traders tend to trade continuously without noting trading prospects and risks.

Trading is, first and foremost, deep analysis and patience. A position should be opened after some potential has been identified. In some trading strategies, a few trades are opened a week or even a month, but they yield profits that exceed the effort spent opening dozens of positions.

Cognitive mistakes

Trading psychology is as important as crypto market analysis. Even the best traders can make psychological mistakes and lose money. For example, traders often invest more than they can afford to lose while running after big money.

Closing a bad trade in time and getting off with small losses is sometimes hard because you simply can’t part with your money. So, you continue hoping that the market will reverse in the right direction. Finally, the trade closes all the same, but the loss is much bigger.

Not Doing Enough Research on Your Own

The information field is overflowing with expert analytical materials. Many beginner traders don’t even try to learn to analyze the market thoroughly, relying on Internet forecasts. But think: if everything were so simple, millions of traders could make stable profits without developing their own crypto trading strategies.

Thus, the best option would be to make trading decisions based on your own analysis. At the same time, don’t ignore analytical reviews: they are a good basis for research. You will also find missed signals in other traders’ predictions. Considering other traders’ errors, you can correct your own forecast.

Making trading calls based on hype

A craze for whatever can be groundless. Even if most traders believe in the fast growth of a coin, it can turn out that all the craze comes from a well-thought-out hype campaign. Don’t think that a new token will be forever popular, and think carefully before investing in little-known projects.

Bitcoin trading system: volatility

Cryptocurrencies are a few times more volatile than traditional assets, so an options trading bitcoin strategy called “straddle” has adequately proven itself in crypto trading.

Two types of a position are singled out under this strategy:

• Long straddle means that a call option and a put option are bought simultaneously, with the same strike price and expiration date. You can exploit a straddle position amid growing volatility, irrespective of where the market is moving.

• Short straddle is when a put option and a call option are sold with the same strike price and expiration date. While selling, traders earn a profit during low market volatility. The less the market moves, the higher profits are.

We should note that options trading in the crypto market is a niche business only professionals engage in. Regarding regular speculators, bitcoin volatility trading is the most popular with swing traders. They often use volatility indicators, such as Bollinger Bands, Average True Range (ATR), and Volatility Index (VIX).

Key points

The cryptocurrency market is dynamic, providing a good opportunity to augment your capital quickly. At the same time, risks are also higher as predictability is lower than in traditional markets. The time window for making a decision is much smaller in the crypto market. You need to act fast and react to changing market conditions.

It’s important to choose the right crypto strategy and time frame for crypto trading. For short-term traders, a strategy must comply with two requirements: be efficient in high-volatility conditions and produce leading signals so that you can respond quickly to any changes in the trading environment.

A long-term strategy implies few false signals and minimum lagging.

We did our best to collect all trading techniques that proved themselves efficient in the crypto market. You can pick one that suits you the most and adjust it to your time frames and assets.

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