Five Crypto Trading Strategies Used By Beginners
Crypto day trading has become a popular form of trading because traders can take advantage of daily price fluctuations to make a profit. One of the great things about crypto trading is that you can do it whenever you want, regardless of the time or day. These trading strategies are made up of the same structures as those used in the financial markets. Seen that nearly 40% of day traders only trade for a month due to failure, people interested in day trading would need to know which strategies are best to use for investing.
Scalping is a strategy used where traders aim to make profits on small price movements over small periods of time. Examples of these are spreads in the market bid-ask spread or liquidity spreads. To take advantage of price fluctuations, these traders trade using leverage, such as margin or futures contracts, in order to increase their profits. This strategy works both ways, where it can work against traders by increasing their losses. To avoid this, these traders can use volume heat maps, order book analysis or technical indicators.
Traders who use the scalping strategy should use the services of DayTradingTrainer.com. This website offers a service that provides trading signals for the top 50 cryptocurrencies. A private algorithm and indicator produce the trading signals, which are very precise and streamed. These signals are great for scalp traders as they can be broadcast every five minutes. According to Cody Rose, the founder of DayTradingTrainer.com, the website aims to “educate the public and provide professional advice.”
2. Technical analysis
This strategy uses mathematical indicators and chart patterns to predict price movements. Technical indicators are generated by computer programs, but some are generated by people analyzing the latest charts. These indicators help traders avoid day trading at risky prices. Moving Average Convergence Divergence (MACD) is a trend following momentum indicator that shows the relationship between two moving averages of a security’s price. The moving average convergence divergence (MACD) is calculated by subtracting the 26 period exponential moving average (EMA) from the 12 period EMA. MACD triggers technical signals when it goes above (to buy) or below (to sell) its signal line.
3. News and sentiment analysis
This strategy sees traders looking at the headlines as well as market sentiment, and is often used for Bitcoin day trading. This is because big news can affect the crypto markets at a rapid rate. One example is when Turkey banned Bitcoin and other cryptocurrencies as payment options in April 2021. This caused Bitcoin to drop 10% due to a massive sell-off in the global crypto market.
4. Range negotiation
This strategy assumes that prices move within a specific range. Traders using this strategy watch the candlestick charts, as well as the support and resistance levels. This can lead to buying when prices reach support levels and selling when prices reach resistance level. Traders should keep in mind that a limitation of this strategy is that the assets will fall out of the range at some point. Pivot points are an essential part of this strategy. If traders are able to calculate pivot points, they will have a more informed perception of the price levels they will be facing.
5. Bot trading
This strategy, also known as High Frequency Trading (HFT), allows traders to use algorithms as well as trading robots that are programmed to complete a large number of trades at a rapid pace. This strategy is essentially automated scalping. Traders should note that this strategy will require the trader to have more in-depth knowledge of trading strategies and programming, but can prove to be extremely lucrative if done correctly. It is often assumed that once programmed, trading robots do all the work, but this is not true. These traders should be prepared to continuously monitor, test and update the algorithms they use to ensure that trading robots perform optimally under specific market conditions. Traders should be wary of prefabricated trading robots that are sold. It is not common for dealers to sell very profitable trading robots. Therefore, those for sale may not be a wise investment.
The bottom line
Day traders buy and sell cryptocurrencies during trading days in order to make a profit. Although it can be extremely profitable, day trading can also generate large losses. The range of strategies mentioned are all equipped to create profits for traders, if used correctly. To find a strategy or strategies, day traders should explore and research all the options to find out which strategies are suitable for their goals.