Trading Crypto Without a Strategy is Bad. We Collected 4 Good Ones Here.

Olga Shirimova
July 22, 2020

You’ll win consistently at blackjack only if you count cards. Same in poker — you need to know all hands and think ahead to come out on top. And don’t even get us started on chess. What’s similar about those games? They all require planning. Trading is no different. Without a clear battle plan, you have to rely purely on luck, and that rarely works out in your favor.

Thankfully, that’s an easy fix.

We’ve collected 4 awesome crypto trading strategies that will help any beginner trader take their game to the next level.

Wait, a Crypto Trading Strategy? What’s That?

Good question.

A trading strategy is a framework that helps avoid rash decisions. It’s like a battle plan that dictates when to buy or sell assets, what tools and metrics to apply, and when to enter and leave the market.

There are well-known crypto trading strategies that everyone uses. Some traders modify them with personal rules like “never trade after drinking”.  You can make your strategy as extensive or as concise as you wish.

Still Not Convinced? 🤔

Let us paint an example.

Imagine a trader who bought a hyped coin. After following the price for three months, waiting for the big break, he or she notices a shart drop. Panic forces our hero do sell the holdings. Hopefully, at least a part of the profits will be restored.

Two months go by and the price starts growing as predicted. Was it bad luck? Not really.

Traders without strategy are gamblers. Occasionally, they get lucky, like everyone else. But in the end, they risk losing everything on a bad day. Having a trading strategy is crucial because it takes the gambling element out of trading.

An effective crypto trading strategy:

  • Gives a clear plan and saves you from doubtful thinking. When a trigger event occurs, you always know what to do. 
  • Helps control FOMO and emotions — the worst financial advisors ever.
  • Allows traders to reach their financial goals on schedule and reduces the risk of money loss.

But there’s a catch. Even a great trading strategy won’t work if you choose the wrong asset.

Regardless of Strategy, Here are a Few Pointers

There are over 2,000 cryptocurrencies. If you choose the wrong one, no matter how good your strategy is, it won’t be of any help. So how do you pick an asset? Here are a few tips to narrow down the options.

  • Choose an asset with high liquidity: liquidity guarantees that you will be able to execute an order exactly when you need to.
  • Pick the right trading pair to maximize profit potential: the most popular currencies to include in a pair are USD, BTC, ETH, and USDT.
  • Select assets that fit your strategy: for instance, volatile currencies are perfect for day trading and scalping.

After picking an asset you need to figure out how to trade it. Depending on your approach, you will have to base your strategy on different indicators to predict price trends.

Let’s take at 4 different strategies with advice on how to apply them to get you started.

1. Day Trading

Day traders enter and exit on the same day and make money on the daily price fluctuations.

Day trading is a very mainstream strategy. In fact, the pop-culture image of a guy staring at three giant, chart-filled monitors usually paints a typical day trader.

The term “day trading” comes from the traditional stock market schedule. Note that the crypto market never sleeps — it’s open 24/7, no holidays. So, you can be a night trader, if you wish.

A few tips for successful day trading:

  • Choose a volatile asset: day traders require volatility, they need a coin that jumps back and forth during the day.
  • Make sure your assets have high liquidity: you will buy and sell fast, multiple times a day. One of the best options is BTC. Trading smaller coins is riskier: not-liquid assets can stop you from selling when you need to.
  • Know your goals: set yourself a goal for every trade and stick to it. Having a clear goal and a time-frame keeps you focused and disciplined.
  • Use stop-loss/take-profit orders: allow the trading platform to automatically sell your positions when the price reaches a set mark. Stop-loss orders will help you avoid losing more than you can afford. Take-profit orders sell your coins as soon as an asset reaches a target level of profit (say, 2%).

If you feel like trying out this strategy, read our Day Trading Guide for more details.

Scalping strategy on a trading chart. Image source: Forex MT14 Indicators

2. Scalping

This strategy focuses on micro price movements rather than on large trends and huge value jumps. Scalpers profit from tiny ups and downs that occur countless times during a day. How is this strategy different from day trading?

The simple answer is — scalpers buy and sell more frequently. They never hold assets for prolonged periods. Sometimes, a scalper buys and sells within a matter of minutes. Or even seconds.

A few tips for successful scalping:

  • Opt for a volatile asset with high liquidity: just like day traders, scalpers require price swings. Perhaps, even more so. Bitcoin is a less risky option because of its stability. Altcoins are a riskier choice, but potentially more profitable thanks to higher volatility.
  • Master the tools. Knowing how to read trading charts is an absolute must. Also, learn the basics of technical analysis (TA). Without these tools, it would be impossible to predict and exploit tiny price movements.
  • Have a clear plan and stick to it. Use stop-loss/take-profit orders and don’t forget about the fees when calculating your costs. Have a firm exit strategy to avoid big losses that can ruin many small gains.
Swing trading on a simplified trading chart. Image source: Sued Rahman

3. Swing Trading

As we know, сryptocurrency prices go in cycles. Swing trader’s task is to buy low when the swings go down and sell when the swings reach the highest point. So, swing traders take advantage of regular waves of volatility.

Sometimes, swing traders hold positions for up to several weeks, though, they rarely any longer. The high point is that while two previous strategies require a constant presence in from of the terminal, swing trading does not. You can go about your day and still trade successfully.

A few tips for successful scalping swing trading:

  • Follow industry news: the events that affect asset prices are diverse: bans, technical updates, hacks, and new government regulations — all these things have the potential to redirect the swing. Keep your eye up for market news to predict short-term price movements.
  • Learn technical analysis: technical analysis will help you recognize predictable price patterns on the charts.
  • Be watchful: Swing traders don’t need to be glued to their monitors all day long. Regardless, they keep track of the market to spot the right moment to buy or sell.
An uptrend on a trading chart: there are minor ups and downs but the price is growing steadily. Image source: Trade leader

4. Position Trading

Position, or as they are sometimes called, trend traders try to predict and use an incipient price trend. Traders who use this strategy track events like major, value-adding blockchain updates to pick promising assets.

After buying, trend traders hold assets until the first signs of a downward trend. At this point, they sell their coins to make a profit. The buy-sell cycle can last for a few months, or even longer.

A few tips for successful position trading:

  • Try this strategy if you are a beginner: trend trading is less demanding than active strategies. Watching out for trend indicators requires less dedication than something like scalping, where you need to react to price fluctuations immediately.
  • Consider Bitcoin: recent history shows that the market-leader still has the potential to bring massive monthly profits. It’s a good trend-trading option.
  • Prepare to have your funds tied up: trend traders keep their money locked for several months. It’s part of the strategy. Only use funds that you are prepared to dedicate to trading long term.

Over to You

Reading about trading strategies is great, but the only sure way to find out what works for you is to actually give them all a go on the Exscudo Exchange. The exchange features a user-friendly interface, a good choice of currencies and trading pairs, and best of all, you can learn the ins-and-outs with our free in-depth trading guide.

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