Are you interested in trading cryptocurrencies? Given that this volatile asset has become immensely popular these days, it is not surprising that a massive number of people are turned towards this market. However, this doesn’t mean that everyone who steps into the world of cryptocurrency trading is able to achieve the success they want. There are a lot of challenges you have to overcome and this is easier said than done. You have to bear in mind that in the volatile market of cryptocurrencies, you have to have a winning game plan, nerves of steel, and an intuitive trading platform.
The last two are something you can find through research, research, and more research. But, the winning game plan is where you have to make some effort. There are a ton of trading strategies that exist; this is easy enough to find. But, not all of them will be suitable for you. You need to go over the options and decide which one is in accordance with your trading style and can help you in achieving the goals you have set for yourself. Let’s check them out below:
Range trading
There are times when a cryptocurrency trades in a certain range for a long period of time. For instance, Bitcoin traded between the range of $8,601.40 and $10,210 for almost 30 days. This range may seem to be a bit volatile at 9.4%, but you will soon realize that Bitcoin can undergo a 42% change in 24 hours. The caps in the crypto market are small enough that a single big mover can actually manipulate them. There are times when these big movers manipulate the price of a coin systematically up and down in order to profit from a range. You can take advantage of these patterns if you notice them.
If you decide to participate in range trading, then you need to pay attention to oversold and overbought zones. The latter means that buyers have already satisfied their needs and they will probably start selling it off, whereas the former means the opposite. You can find these zones with the help of chart indicators. Relative strength index (RSI) and the Stochastic Oscillator are some of the common indicators that are used here.
Scalping
Scalpers make a profit by taking advantage of the increased trading volume. They sometimes exit a trade within seconds of entering it and many boost the frequency of their trading cycles by using automated bots. In ideal situations, scalpers want to exit a trade before a short-term fluctuation or a news item has a chance to bring a change in a coin’s market sentiment. If you want to use this short-term crypto trading strategy, you have to have a significant amount of capital at your disposal. Although you get a small ROI on every trade, staking a large amount means that you will be able to make a substantial return.
Arbitrage
This particular crypto trading strategy involves purchasing a cryptocurrency in one market and selling it in another at a higher price. The ‘spread’ refers to the difference between the buy and sell price of an asset. Since the crypto market is generally unregulated, it enables anyone to make an exchange. This can result in some massive differences in the spread because there is a difference in trading volume and asset liquidity. Where the crypto market is concerned, traders usually have a portfolio on the exchange they use for trading.
If you want to make use of arbitrage, then you need to open accounts on exchanges you believe will show a significant difference in the price of the same asset. However, if you do decide to use arbitrage, you shouldn’t forget to consider the trading fees. The gains that you make from the trading spread may be wiped out by the fee you have to pay in an exchange for making a trade, so it is best to consider it beforehand.
