Cryptocurrency has come a long way from Bitcoin’s inception in 2009. One statistical report shows that over 10000 different cryptocurrencies exist as of 2022.
Besides the ever-increasing number of cryptocurrencies, there is a growing interest in digital currency trading. One survey report showed that 16% of American adults trade in cryptocurrency. Moreover, 75% of them cite an easier alternative investment as their primary reason for trading in crypto.
However, blindly jumping onto the cryptocurrency trading bandwagon can only lead to losses. Therefore, you must adopt a viable crypto trading strategy, and below are the top most profitable cryptocurrency trading strategies.
Day Trading/ Intraday Trading
Day trading is arguably the most profitable cryptocurrency trading strategy. The cryptocurrency trading strategy capitalizes on crypto’s overall price volatility; unlike the traditional stock market, cryptocurrency prices can fluctuate by up to 10% within seconds. Therefore, the cryptocurrency day trading strategy entails taking advantage of the frequent price swings to generate profit for the trading party by entering and exiting the trading market within the same day.
However easy as it sounds, day trading is more complex than it sounds. Although the strategy yields high returns, it has equally high inherent risks.
Therefore, you must possess technical cryptocurrency trading competencies like VeChain price prediction to evaluate and predict the value and profitable zones for specific cryptocurrencies. Competency matters because not all cryptocurrencies qualify for day trading, and trading blindly will likely lead to losses.
Cryptocurrencies ideal for day trading typically has high liquidity and trading volumes. You can employ various cryptocurrency day trading tools to determine whether a specific currency will yield daily trading profits.
Such tools include using analysis indicators like chart patterns and price volumes. Also, having a solid day trading strategy helps improve your chances of yielding profits from your trading ventures. Popular crypto day trading strategies include high-frequency trading (HFT) and technical analysis.
HFT entails using a trading software body to buy and sell digital currency within seconds to maximize profits. On the other hand, technical analysis entails using statistical calculations to establish market trends and speculate crypto price fluctuations.
However, different day trading strategies apply to other trading platforms and cryptocurrencies. Moreover, trading goals also influence the implementation of the ideal crypto day trading strategy.
Balanced/ Diversified Portfolio
The cryptocurrency trading market is volatile. However, some currencies are more volatile than others. Also, different crypto investments have different risk levels.
Putting all your resources behind one digital currency is like putting all your eggs in one basket, exposing you to a higher risk of volatility. Therefore, consider diversifying your crypto assets to spread the risk evenly and maximize your profit potential. Below are tips to consider when diversifying your cryptocurrency portfolio.
First, determine your risk appetite and spread the risk according to your risk tolerance. For example, established cryptocurrencies like Bitcoin and Etherium, while volatile, are more stable than most new currencies. Nonetheless, some emerging cryptocurrencies have great potential though they present a higher risk of loss.
Experts recommend creating a portfolio with 70% low-medium risk digital currencies and 30% high-risk currencies. Although high-risk currencies have a higher reward, low-risk currencies can cushion your portfolio against irrecoverable losses.
Second, include short-term and long-term assets in your portfolio. Third, consider including digital currencies with diverse use cases in your cryptocurrency portfolio. Famous cryptocurrency use cases or categories include online payments, asset tokenization, and crypto banking, although you can view other types included in various crypto trading platforms.
Moving Average Crossovers
Although the moving average concept originates from traditional stock markets, it also applies to cryptocurrency trading. A moving average is an indicator that helps financial analysts to identify the trend direction in a given market over a given period.
Trading markets feature moving averages, including short-term and long-term moving averages, appearing on price charts. Individual moving averages can give false signals in a sideways market or a market trend without distinct changes.
However, a moving average crossover occurs when the two market averages cross on a price chart. The phenomenon indicates a golden cross, which is the best time to trade.
Dollar Cost Averaging
Profitable cryptocurrency trading depends mainly on speculating the ideal time to enter or exit a market. However, not all traders have the time to monitor such trading factors, which is where dollar cost averaging comes in.
The Dollar Cost Averaging (DCA) strategy is an effective cryptocurrency trading strategy whereby traders invest a fixed amount periodically to counter timing risks. DCA trading entails choosing the assets you wish to invest in and the total amount you intend to spend, then dividing it into specified durations. Its primary advantage is buying low and selling high.
Scalping
Scalping is a short-term trading strategy entailing buying and selling during a highly-volatile market. It involves leveraging small profits from a fast market to yield high returns. However, it is a high-risk strategy, and determining the ideal market entry point is paramount to navigating a tight market.
Conclusion
Cryptocurrency trading is anything but a way to make easy cash. It requires market and technical knowledge and a robust trading strategy that aligns with your trading goals. While the trading strategies above are proven effective, research each process to select one or a combination of techniques that best meet your trading needs.
