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Cryptocurrency trading: Choosing the right strategy

Trading cryptocurrencies is as risky as it is rewarding. In just one year, the crypto markets have returned to their thriving golden days in which a small investment can turn you into a millionaire with little to no effort.

Knowing this, many people buy Bitcoin and other cryptocurrencies and are now trying to learn how to trade efficiently. With such a low barrier of entry, education and practice is now a matter of personal responsibility, and the results depend solely on your timing and experience.

What we’re trying to point out is that the market is not, for a lack of better words, complicated, if you know how to implement a strategic plan. And this is exactly why we wrote this article. Over the next few chapters, you will discover four different trading strategies that can help you differentiate the tactics you need to use to increase your profits.

So let’s delve in and look at all the strategies you can use, who they are meant for, and what you need to do in order to become an expert in this category.

Day trading

The most common and complex form of investing is that known as day trading. The process entails the entry and exit of multiple positions on a daily basis, in order to catch rising trends and capitalize on the volatility of the markets. Day traders are usually individuals with not a strong conviction of the long-term survival of the markets. Instead, they are leveraging the market’s fluctuations in order to increase their USD value in the quickest way possible. This is done by studying candle charts of multiple cryptocurrencies across several trading pairs, gaining theoretical education of technical analysis and price indicators, and combining them all into one.

If you wish to explore this trading strategy we recommend you read through this article and start following successful traders on social media platforms. When it comes to the latest, the goal is simply to understand their thought patterns, not to copy their trades. This, in turn, will enable you to expedite the learning curve and start profiting from the markets in no time.

Swing trading

Swing trading is a more mid-term trading strategy that is based upon sentiment analysis of market participants. Users that engage in this form of trading are usually present across many social platforms and track several metrics to understand the level of fear or greed when it comes to a certain cryptocurrency. They are more interested in serving a temporary trend than capitalizing on a coin’s fundamentals, which is why the term “swing” was created. In short, you aim to jump onto an upward swing and exit before the price starts dipping.

If you want to learn more about this trading strategy, start by closely observing the markets through Twitter, Reddit, social tracking platforms like Lunar Crush, and other platforms in which non-affiliated users are expressing their opinion. Aside from that, you can also watch the following podcast episode:

Position trading

Position trading is a strategy that focuses on a combination of market sentiment and project fundamentals. By combining information derived from these two forms of analysis, position traders allocate part of their funds to promising projects with growing community interest. Some could say that it is a rather “longer-term” swing trading concept, and one which requires strong conviction when it comes to certain cryptocurrencies. 

For most, this type of trading requires an increased amount of patience and understanding of the long-term potential and use cases of certain projects, as well as enough capital to invest for long-term gains. By taking a position in the market, you, therefore, adopt the role of an investor who can sell within a mid-term period to maximize profits from volatile cryptocurrency prices.

HODLing

Finally, let’s talk briefly about HODL, an investment method that is by most not considered to be a trading strategy but rather a long-term lifestyle. The term originates from a funny BitcoinTalk post that ended up going viral in the early days of the popular cryptocurrency, when trading was not yet as popular as it is today.

In short HODL or hold, is a strategy that involves the in-depth research of a coin’s fundamentals, before buying it with a prospect of holding it for a long term (usually more than a year). While the practical aspect of this strategy may seem like the simplest of them all, it is actually one of the most stressful investment methods to undertake. Your conviction will usually drift from positive to negative depending on price action, and you will need to have the strong emotional intelligence to remain unaffected by the overall market sentiment.

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