After a rough end to 2022, cryptocurrencies are seemingly rebounding. Crypto trading can be very profitable if you use the right investment techniques.
Investors use many crypto trading strategies. Which ones will get the best results for you? Read this crypto trading guide to learn more about 4 of the best strategies.
1. Crypto Futures Trading
Futures trading lets investors profit from the future price of crypto without actually owning cryptocurrency. Futures are trading contracts between two parties. They represent an agreement to buy or sell a certain amount of crypto at a fixed price on a certain date.
The main advantage of crypto futures trading is that the exposure is regulated. For this reason, many futures traders are institutional investors. Futures contracts limit your risk exposure because of the position and price limits.
2. Crypto Day Trading
Day trading means that you enter and exit a market position within the same day. Another name for this strategy is intraday trading. It relies on the volatility of the cryptocurrency market.
Two of the top-day trading strategies are scalping and arbitrage. Scalping and arbitrage can also be classified as high-frequency trading. They use algorithms and trading bots to quickly enter and exit a position.
Scalping lets you profit from small price changes over a short amount of time. Positions usually last less than an hour. You take advantage of inefficiencies in the market.
The profit from a single trade is usually very small. A large trading volume can make scalping profitable.
Arbitrage trading involves buying crypto on one platform and selling it on another. You make a profit because of the price difference between the two platforms. With hundreds of spot market exchanges, the opportunities are almost limitless.
Arbitrage is relatively low-risk. Traders don’t need to predict future prices. Arbitrage can start making profits right away.
Traders pay the deposit, withdrawal, and trading fees twice when using arbitrage trading. This can reduce your profits. With enough capital, though, small profits will grow.
3. Swing Trading
Swing trading is a crypto trading strategy for the short and medium term. Traders hold a position for longer than a day but usually not longer than a few weeks. Traders of all skill levels can be successful with swing trading.
The cryptocurrency market moves in cycles. The price “swings” over the course of days or weeks. Traders use technical analysis and fundamental analysis to take advantage of these price fluctuations.
You can use one of several approaches, like catching an uptrend or buying on a pullback.
4. HODL (Position Trading)
HODL is a long-term strategy. The word “HODL” started as a typo for “hold.” This strategy can also be called position trading.
Traders using a HODL strategy buy cryptocurrency and hold it for a long time.
Holding helps you avoid short-term volatility. You’re more likely to avoid buying high and selling low. However, setting clear goals is still important.
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Finding the Right Crypto Trading Strategies
The best crypto trading strategies include day trading, swing trading, and HODL. Crypto futures trading is also gaining popularity. The best crypto trading strategy for you depends on your risk tolerance and investment goals.
Cryptocurrency is highly volatile. This creates greater risk but also the possibility of greater profits.
Check out the rest of our articles for more great ways to take advantage of cryptocurrency.