Cryptocurrency trading strategy.
To date, quite a lot of people know about the existence of the cryptocurrency. Many of them have already realized that you can make good money on this topic. One of the best ways to earn money is trading on the exchange. Relying only on luck, this can lead to a serious consequence, such as loss of deposit.
Experienced traders have long known that the key to successful trading is the right cryptocurrency trading strategy. Unfortunately, many don’t know what strategies exist. We decided to help such people and offer you our top incredibly working cryptocurrency strategies that are relevant in 2019.
1. Swing trading
Cryptocurrency swing trading – this is a way of trading using the moments of rollback (correction) that occurs during the formation of a trend.
The cryptocurrency market has always been highly volatile. Today, Bitcoin can cost eleven thousand dollars, tomorrow nine, and the day after tomorrow all thirteen. Due to the high correlation of bitcoin with altcoins, the latter are also subject to strong fluctuations during unstable periods of “digital gold”. Rising / falling market by 20% for several hours – this is a common thing. Experienced traders use coin volatility to make a profit. The most commonly used cryptocurrency trading strategy for this purpose is swing trading.
This cryptocurrency trading strategy involves the following actions: you hold crypto assets for a certain period of time (day, week, month or quarter), trying at this time to determine the market trend. It can be either upward or downward. The final success depends on whether you can predict the market movement in advance. The strategy is quite difficult to implement and requires practice and rigorous risk management. All correctly opened trades are closed by stop loss or take profit.
This strategy is so simple that novice traders use it most often. Its essence is to buy cryptocurrency on one exchange and sell on another. Naturally, the rate of the coin on the first exchange should be lower than on the second. This strategy stands out from the others in that you do not need to conduct a technical analysis, but you just need to follow the quotes on exchanges and wait for the right moment.
Here is a simple example. On the Coinbase exchange, Bitcoin costs $ 10,000, and on Binance – $ 10,300. In this case, a person using arbitration tactics purchases coins on Coinbase and simultaneously sells his bitcoins on Binance. The result can be a good profit, even taking into account exchange commissions.
It seems that the situation is a bit strange, but thanks to the peculiarities of the cryptocurrency market, this has become possible. There are the following features:
- Slow transaction speed;
- There is no single glass of orders.
It turns out that during a change in the value of a coin on one exchange, its glass goes far up from the market price. At the same time, on the second exchange, the trading volume of the same coin may be completely absent. Circumstances allowed the arbitration to appear and be actively used.
Here is our advice to you: choose exchanges where the discrepancy in value for coins is maximum. Do not forget about the commissions that can eat part of your profits. To automate this process, it will not be superfluous to resort to the help of bots. It is desirable that the difference in value on the two exchanges be at least 2%, otherwise you can be left without profit.
This term has come to the world of crypto assets from Forex. This trading scheme is ideal for both beginners and professionals. The previous case showed that technical analysis is not required.
The essence of the strategy is as follows: in a short period of time you need to carry out a large number of transactions, and then close them in a matter of minutes or even seconds.
Scalpers mainly work with depth of market.
Depth of market – is a window showing the volume of buy or sell orders. It is important for the scalper to determine the direction of large volumes, before which they usually place their orders in fractional lots. The volume is analyze by other market participants, the scalper closes the deal. From the point of view of technical analysis, namely, the entry points on the chart for scalpers are quite accurate. Since the chart is a derivative of the depth of the market orders. The chart is the traces from the participants of the market depth.
For understanding, consider a simple example. You have decided to purchase 100 Waves coins. At the time of acquisition, one asset was worth $ 50. As a result, you paid $ 5,000. After 2 minutes, the value of the coin rose to $ 50.5, after which you immediately sell cryptocurrency. Your income will be $ 50. Admittedly, the profit is relatively small, but it was obtained in just a few minutes. These operations can be repeated many, many times by scalpers
However, to apply this strategy, you should not spend all the funds available on the balance sheet. The value of a coin can not only instantly rise, but also fall. It is recommended to use not the most popular digital currencies (not from TOP-10 or even not from TOP-30 according to coinmarketcap.com rating). Over a short distance, such manipulations will be more profitable if you use second-grade coins.
4. Using bots to trade
You may not want to understand the technical analysis of cryptocurrencies. Maybe you will be too lazy to even monitor the quotations on various exchanges. Then special trading bots for cryptocurrency exchanges, which are software that analyzes the situation on the market, will come to the rescue.
The user needs to configure the bot for themselves (after deciding on a specific option). We’ll immediately warn that there are a huge number of bots (some of them are not of the best quality), so you need to approach the choice with the greatest responsibility.
A good bot will become your indispensable tool for trading. It will automatically conduct operations on exchanges using one or more well-known strategies. In some cases, the user at the expense of the bot will begin to receive passive income, since the latter will do all the work on his own. However, remember that good software costs money, so be prepared to fork out.
One such trading bot is software developed by Holderlab.io Possible to connect any available cryptocurrency exchange using API keys, collect portfolio and set up a rebalancing strategy, thereby fully automating cryptocurrency portfolio.
5. Creating a portfolio of cryptocurrencies
To use this strategy, you need certain knowledge that will help you not to go into a significant minus. It is theoretically necessary to create a portfolio that will consist of undervalued or overheated coins. The best option is to purchase coins, the value of which will not change much in the foreseeable future. It is still important to choose coins whose degree of correlation between them will be minimal.
You can evaluate the degree of correlation of your portfolio with the help of the correlation matrix tool in Holderlab.io
For example, you purchased Bitcoin and Ripple for the same amount. At some point, the cost of BTC began to decline, and the price of XRP – to increase. So, in this case, it is necessary to purchase a falling bitcoin and sell an increasing in value Ripple, conducting the so-called balancing. In other words, the essence of this cryptocurrency trading strategy is to buy cryptocurrency in the fall and its further sale in the growth.
However, do not buy coins that have a high correlation between each other (something about one), since in this case there is a risk of quickly losing all invested funds and it will be impossible to balance.
6. Seize the moment
This strategy is partly reminiscent of the previous one (although we must admit that they all have something in common), but the concept itself changes slightly. Some traders call this strategy “Seize the moment.” You need to purchase coins in a downtrend. When need to choose such a moment when the rate is guaranteed to begin to unfold soon.
First you buy several orders, wait a certain time, and then sell them. But how to determine the moment of a turn? That can be calculated by trading volume. If the trading volume has significantly decreased, then you can safely buy. This fact tells us about the dissatisfaction of participants with such behavior on the stock exchange. At such a moment, large holders can take some measures to correct the course. Unfortunately, powerful levers are in their hands, and when traders are dissatisfied, then usually react appropriately.
The second important point is growth.
Again, only large coin holders determine how long it will last. They like to manipulate the market in their own interests, therefore, most likely, they will allow the coin to increase in value, and then collapse it again. The essence of this strategy is to determine the moment of rise and sale of all assets purchased during the drain.
This cryptocurrency trading strategy also carries a certain risk, but it is possible and very good to earn if you learn to catch those very moments that we wrote about a little higher.
This article is not a recommendation for investment or investment in cryptocurrencies, as well as perceived as investment advice. Be careful, because investing in cryptocurrencies is very risky and you need to consult with your financial advisor. Past earnings do not guarantee future earnings.
Holderlab.io is a fully automated cryptocurrency portfolio management laboratory. Analysis of the cryptocurrencies correlation, searching for the optimal cryptocurrency portfolio weights. Uses crypto trading bots and the auto efficient crypto portfolio index.
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