Best Crypto Futures Trading Strategies for 2022
To help you maximize your profits, most established and best crypto futures exchanges offer you high leverage. Thus, you have the opportunity to earn more money by investing less. However, we cannot deny the fact that the crypto futures market is extremely volatile. As a result, you will need to have the best crypto futures trading strategies to earn profits. To help you, we have mentioned some good strategies here:
The withdrawal strategy
The pullout strategy is one of the most powerful and popular trading strategies. As you can see from the name, the trading strategy is based on price declines.
Price pullbacks are a common thing in trending markets when the price breaks below or above the resistance or support level, reverses and returns to the broken level.
Speaking of resistant levels, this is a price level that the market fails to break above. On the other hand, support levels are price levels where the market finds it difficult to break below.
During an uptrend in the market, price breaks above an established resistance level and reverses and retests the resistance level. Once the retest is complete, you can enter the market by going long in the direction of the underlying uptrend.
On the other hand, during an uptrend, the price breaks below an established support level. Then it reverses and comes back to the support level again. It creates a setbackand you can enter the market with a short position in the direction of the downtrend.
In the market, pullbacks are a common thing, and it shows up when traders start taking profits, pushing the price of crypto futures in the opposite direction from the original breakout. Thus, traders who missed the initial price can wait for the price to drop to the resistance level so that they can enter the market. And this is pushing the price of crypto futures to rally.
Be long or short
Going long or short are two of the best crypto futures trading strategies. By going long, you are hoping that the price of crypto futures will rise over a certain period of time. And when it reaches a favorable price, you simply sell your holdings and make a profit.
As a trader, your job is to predict the direction and timing of the crypto futures market. To do this, you need to learn about technical analysis, which is a study of historical market data and patterns. Moreover, use different indicators to determine the next move of the market.
Also, in addition to being long, you can short sell crypto futures. This means that if you think the crypto futures price is going to drop, you must first sell your assets, and once the crypto futures price drops, you simply buy back your assets. Additionally, with leveraged trading, you can enjoy maximized profits if the trades are in your favor. But if it does not go according to your forecasts, there will also be huge losses.
Trade in small groups
Breakout trading is another popular trading method that is mainly used in day trading. But it can also be used to trade crypto futures. A breakout occurs when the price of an underlying asset breaks out of an established trading range.
Breakout trading aims to capture market volatility when price breaks above support and resistance levels, trendlines, and other technical levels.
Breakouts often occur in the market and you can easily spot them using different indicators and trendlines. And this is accompanied by an increase in the volume of purchases or sales in the market.
In addition, after a breakout, the market experiences high volatility. This happens due to the execution of many pending orders.
You can take advantage of this volatility by going long or short. You should take a short position when the price breaks below the support. Or go long when the markets break through resistance levels.
spread the trade
You can then try spread trading. In this trading strategy, you have to buy 1 crypto futures contract and sell another futures contract at a different time. The main objective of this strategy is for you to profit from an unforeseen change in the relationship between the buy price of one contract and the sell price of another crypto futures contract.
Spread trading reduces your risk in trading. Moreover, every spread is a hedge and trading differences between 2 crypto futures leads to reduced risk for a trader. Moreover, spread trading is also unaffected by market volatility.
Trading the ranger represents a trade bounce off important support and resistance levels in a chart. In this case, when the market finds it difficult to break above a certain level, market participants refer to this level as the resistant level.
And when the price reaches the same level again, some traders will start taking profits and others will open short positions in the market. This will increase the selling pressure on the price of the crypto futures, and the price of it will fall.
Likewise, when the price does not fall below a certain level and reaches the same price level again, traders who have short sales will start taking profits. Also, some traders will start buying at a lower price. This will create buying pressure in the market which will push prices up.
When trading within the range, the first thing you need to worry about is whether the market is actually trading within a range or sideways. If there are no higher highs or lower lows in price, then the current market environment would generally be a swinging market.
Additionally, you can use trend-following technical indicators like the ADX indicator. An ADX value below 25 indicates that the market is not in a trend. So you can place your stop loss at important resistance levels if you short the market or below an important support level if you go long.
Interest of buyer and seller
As a trader, you can also use buyer and seller interest data to decide whether to buy or sell a futures contract. The interest of the buyer and the seller is determined by the Market depth or DOM windowwhich shows the number of open buy and sell orders for a crypto futures contract at a number of price levels.
Additionally, DOM shows the liquidity of the underlying futures contracts. If there are more market orders at each price, it refers to higher liquidity and vice versa.
Some brokers call the market depth the order book, which is common to all exchanges.
The order book is updated in real time and reflects current trading activity in the market. Also, you should be aware that large trading orders will not affect the price of highly liquid securities.
But if market depth and liquidity are low, even small trading orders can have a significant impact on price.
Trading against the trend
Finally, there is contra-trend trading. In this trading strategy, you can take positions against the underlying trend. For example, a countertrend trader would look for selling opportunities during uptrends and buying opportunities during downtrends.
In countertrend trading, your job is to take advantage of the common price that follows each impulse move and set your profit targets at around 50% of the impulse move or at a significant Fibonacci level. However, you should be aware that countertrend trading is extremely risky compared to other crypto futures trading strategies. And you should only follow this strategy once you have gained enough experience in trading crypto futures.
So, these were some of the best crypto futures trading strategies. As a trader, you need to try different strategies, learn technical analysis and follow good money management. Once you have gained enough experience, then you should only risk higher funds when trading.