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Cryptocurrency Trading Strategies

Cryptocurrency Trading Strategies

Varieties of strategies for trading cryptocurrency There are two basic strategies for trading cryptocurrencies. The first, the most popular, is to buy and hold, such traders (hodlers) are more likely investors for a long period. Hodlers bought cryptocurrencies at a low price and are waiting for some price at which they can sell the cryptocurrency.


This applies mainly to bitcoin holders, but since bitcoin absolutely dominates the market, hodlers can potentially have a strong impact on the cryptocurrency market as a whole. For example, if it becomes obvious that cryptocurrencies have not made any revolution in finance and bitcoin will no longer grow, disappointed hodlers will start massive sales of bitcoins.

The second strategy is pumping. It is used by the owners of a large number of cryptocurrencies. They organize informational stuffing that causes excitement in the market and a massive purchase of cryptocurrencies in the hope of further growth, at a certain moment the informational reason stops working and the price falls, leaving most buyers without profits. But an ordinary trader can also make money on the pump if he successfully enters the market. The problem in this case will be to exit the auction in time.

Both basic strategies are little used now, as interest in the cryptocurrency market is declining. But this also leads to the fact that cryptocurrency trading has become more orderly and more meaningful strategies can be used in trading.

Cryptotrading strategies are based on the time frame or typical market situations. Time-based strategies include, in particular, intraday trading. According to this strategy, the trader trades during the trading day and by the end of it closes all open positions. Given the unpredictable volatility of cryptocurrencies, this strategy is very common.

Swing trading is trading within a certain time cycle, quite long. This can be a period of a rise in price, a decline in price, or a flat movement. The trader tries to determine the beginning of the movement, trades along the course of this movement and completes transactions at the end of the cycle.

Scalping is a high frequency strategy in which a trader enters into trades at every fluctuation in the rate. There can be dozens of trades within one hour, but most of them are unprofitable, so the trader expects to "beat off" losses and make a profit for a number of very profitable trades.

Situational crypto trading strategies include, for example, pullback trading. According to this strategy, the trader waits for the moment when on an uptrend the price drops slightly (rollback) and at this moment the trader buys coins, and the trend returns to growth. Conversely, on a downtrend, an upward correction occurs, and here the trader sells coins, and the trend returns to a fall.

Bounce trading is used on a downtrend, when a trader determines a certain minimum price, after which there can be an increase. If a trader guesses this moment exactly, then he has the opportunity to buy cryptocurrency at the lowest price (how to make money on cryptocurrency?).

The impulse trading strategy implies that the trader correctly identifies the beginning of the impulse, that is, the moment a clear trend is formed, either downtrend or upward. Accordingly, if a trader sees the formation of an upward momentum, he buys, but can also buy during a trend, up to extremes, since the momentum allows you to make a profit in this way. In the opposite case, the trader sells cryptocurrency at the moment of the formation of a downward impulse or along its course.

Breakout trading also assumes that the trader can pinpoint when the price will change. For example, on a downtrend, it monitors at what point the price breaks a certain price value, after which the trend reverses. At the moment of a breakout, a trader can buy an asset at the lowest price within a new trend.

Positional trading strategy is that the trader only trades when the asset is in a specific position. For example, a trader enters into deals only when the trend reverses; the trader does not consider other situations.