The popularity of the crypto world has increased rapidly in recent years, especially since the onset of COVID-19. This attracts a wide range of individuals who want to take advantage of the high profit potential. However, the volatile and unpredictable nature of the cryptocurrency market can pose significant challenges for novice and experienced traders alike. To navigate this dynamic landscape, it is very important for every trader to master a good trading strategy.
However, many traders often don't understand how to trade properly, and even their personal trading style still don't know what is more suitable to use. Hopefully this article helps
What Do We Need to Know?
The world of cryptocurrency is unique. Unlike fiat money which is issued and controlled by a central government, cryptocurrencies operate on a decentralized computer network (called a blockchain). This makes cryptocurrencies free from many of the political and economic influences that often affect traditional currencies.
However, this does not mean that cryptocurrency is completely free from external factors. Cryptocurrency prices remain volatile and can be affected by various things, such as:
Market: Just like other assets, cryptocurrency prices are determined by supply and demand.
Media: News and mass media sentiment can also influence investors' interest in cryptocurrency.
Adoption: As more e-commerce and other platforms accept cryptocurrency, the potential for it to become more stable and in demand increases.
Major events: Cryptocurrency-related events or regulations at a global level can impact the entire market.
Exploring Cryptocurrency Trading Strategies
With a basic understanding of cryptocurrency fundamentals, let's dive into various effective trading strategies:
1. Technical Analysis
Crypto technical analysis is a method for predicting cryptocurrency price movements by analyzing historical data, especially prices and transaction volumes. Just like technical analysis in general, the aim is to help traders make decisions about buying or selling cryptocurrency.
How does crypto technical analysis work?
Technical analysis involves studying historical price data and chart patterns to identify trends and predict future price movements. There are many approaches to technical analysis methods. for example in technical analysis:
Moving Average Crossover: Used to identify potential trends and entry/exit points by looking at the intersection between two moving averages with different time frames.
Support and Resistance: Used to identify price areas where a reversal is likely.
Ichimoku Kinko Hyo: Used to identify trends, momentum, and potential entry/exit points by combining several indicators.
2. Fundamental Analysis
Fundamental analysis in cryptocurrency (crypto) is a method for assessing the intrinsic value of a cryptocurrency project by examining fundamental factors that may influence its future value.
Fundamental analysis focuses on evaluating the underlying value of a cryptocurrency by assessing a project's technology, team, roadmap, and overall market potential. This approach prioritizes understanding the long-term prospects of cryptocurrencies rather than relying solely on short-term price movements.
3. Dollar Cost Average (DCA)
Dollar Cost Average (DCA) is an investment strategy that involves regularly purchasing assets with the same amount of funds at certain time intervals, regardless of the current price of the asset. This strategy aims to reduce the impact of market volatility and acquire more coins at lower prices during downturns. DCA is easy to implement and does not require in-depth market knowledge or analysis, making it very suitable for novice investors.
4. Scalping
Scalping is a short-term trading strategy that involves taking many small profits from rapid price movements. Scalpers typically use technical analysis to identify entry and exit points, with the aim of exploiting small price fluctuations.
5. Arbitrage
Arbitrage takes advantage of price differences between different cryptocurrency exchanges by buying cryptocurrency on one exchange and selling it on another exchange at a higher price. This strategy requires fast execution and a deep understanding of market dynamics.
for example, the price of coin A at #binance is $105 and on another exchange it is $100. then we can buy on another exchange, and send to binance for sale
6. Swing Trading
Swing trading is a trading strategy that aims to gain profits from asset price movements over a long period of time. Swing traders look for buying opportunities when asset prices are falling and have the potential to rise, as well as selling opportunities when asset prices are rising and have the potential to fall. They don't focus on short-term price movements like scalpers, but they also don't hold onto assets for long periods of time like investors. This strategy uses technical analysis to identify potential trend reversals and capitalize on larger price movements.
7. Event Based Trading
Event-based trading involves reacting to significant events or announcements that can impact cryptocurrency prices. This strategy requires being informed about industry news and developments and making quick decisions to take advantage of market reactions. Usually trade based news will focus on news that is quite high impact. If the news is good for an ecosystem or coin, then it is very likely that the value of the coin will increase (because demand increases), and vice versa.
for example, the news " #MicroStrategy Acquired Additional Bitcoin Worth Around $786 Million", with this news automatically demand at $BTC increases and this will cause an increase in prices at #bitcoin
the second example "Token $ETH Classified As 'Commodity', by CF Benchmarks CEO" with the hashtag #ETHETFsApproved or news regarding "#SECcloses investigation into Ethereum." This will definitely provide a breath of fresh air for the Ethereum token and several coins in its ecosystem, such as the LSD sector, L2, etc. examples are Optimism, Arbitrum, ETC, and $ENS .
How do we find a trading style that suits us?
Entering the world of trading is like exploring a wide ocean with various routes. Every trader has their own goals, preferences and risk tolerance. Therefore, finding the right trading style is key to achieving success in the financial markets.
Trading style is the approach or strategy used by traders in making investment decisions. This trading style is influenced by various factors, such as:
Personality: Are you patient, disciplined, or impulsive?
Profit target: Do you want to make short-term or long-term profits?
Risk tolerance: How much risk are you willing to take in trading?
Time available: How much time can you devote to monitoring the market?
Tips for Finding the Right Trading Style:
Know yourself: Understand your personality, profit targets, risk tolerance and time available for trading.
Learn different trading styles: Learn how each trading style works and its advantages and disadvantages.
Try different strategies: Use a demo account or small capital to try different strategies and see which one suits you best.
Analyze results: Record your trading performance and learn what works and what doesn't.
Stay disciplined: Apply your trading strategy in a disciplined manner and don't be easily influenced by emotions.
Keep learning: Financial markets are always changing, so it is important to keep learning and expanding your knowledge of trading.
From these several things, we can combine them to find a trading style. For example, A is very busy with work so he cannot monitor the charts, so A can focus on being a swing trader or as an investor.
Finding the right trading style is a process that requires time and effort. By understanding yourself, learning different trading styles, and applying discipline, you can find the right trading style to help you achieve success in the financial markets.
Remember that cryptocurrency trading always involves risk, and you can potentially lose your entire capital. Do your research carefully, invest only what you can afford to lose. DYOR DYOR DYOR
