7 Simple Crypto Trading Strategies Explained

Discover 7 of the Most Used Crypto Trading Strategies

Crypto Trading Strategies are a way to make money fast in your favor. It helps you predict the cryptocurrency prices for buying low and selling high your coins at the right moment.

What are crypto trading strategies? How does it work? What are some good cryptocurrency trading strategies? This post will give you the answers!

What is a Crypto Trading Strategy?

Crypto Trading Strategies aim to predict cryptocurrency price movements. Traders who choose this option probably understand the market, and they are interested in making a profit from the price swings. 

That's why they are engaged in creating strategies for their investments. If the strategy has a decent win ratio and has an effective risk management strategy, it can help traders get more money. 

The main goal of crypto trading strategies is to clearly understand the market and the market trends so you can buy low (or lower) and sell high (or higher) at the right time. 

This is a challenging task for most traders, but a fine-tuned crypto trading method will help you make steady gains.

How does a cryptocurrency trading strategy work?

A crypto trading strategy is based on concluding the data gathered in the market for cryptocurrencies. Traders will analyze the market, and they will notice certain trends. 

Then they'll set up their tactics to make profits. Besides, traders can learn more about cryptocurrency trading plans by using popularly used social networks, such as Facebook, Twitter, and Reddit. Facebook groups are perfect for this purpose.

What are some good cryptocurrency trading strategies?

The Crypto trading strategies will help you to buy and sell at the right time. 

The following is a list of 7 useful cryptocurrency trading strategies:

1- Dollar-cost Averaging AKA "Buy the Dip."

When a trader uses this strategy, he or she will simultaneously purchase a certain number of coins. The trader will buy coins over an extended period of time, and then they'll sell them for profit at the end.

This works when a buyer chooses a coin that is dropping in value because over time, he will keep buying as the price drops, and his/her average buy price will become lower with each purchase. 

This can make some nice profit when the price rises back up. Think of it as buying something at a discounted price or when it's "On Sale." 

2- Margin Trading

Margin trading is more like traditional trading. The trader buys crypto coins for a certain amount of money and sells them when they have made a profit.

This means traders must have enough money to buy coins and have enough cash to afford the selling price when the trade is over.

In bitcoin margin trading, the investor can borrow money from a broker to buy bitcoins. This can be risky if the price goes down while you are buying because you'll have to pay the money back, and the bitcoin price will be lower than when you sold it.

Shorting bitcoins using margin trading is a hazardous strategy. Crypto coins drop unexpectedly sometimes, and investors who are shorting are losing a lot of money.

Think of it as buying and negotiating with "somebody else's money" (like a credit line); this is beneficial and will bring you huge profits fast, but beware because if used wrong, it can get you liquidated in a heartbeat, so use it wisely and don't jump on it unless you understand it completely.

3- Limit order and Stop-loss Limit order

A limit order can restrict an investor from selling a certain coin when its price drops too much. A good example would be using this strategy to sell Bitcoin at $50,000 or less (your set limit). If the price goes down to that dollar amount, you can go to your exchange and sell your Bitcoin for the current market price.

If this is done correctly, you won't make a loss. But, if the crypto coin drops further than your set limit and you had big losses, then it will be easy to recover.

In this way, traders will buy low and sell high. If their buys are successful and they sell their coins for a profit, they will make more money because of the profit they made on top of their losses.

This can also be a perilous strategy because you will have to sell before the price goes down and buy back at a lower price. Or else, you might not recover your loss because of the amount of money you invested.

So, Stop-Loss is actually "Stop before a Bigger Loss" because if your "stops-loss" is triggered, that means the trade didn't go the way you wanted but is protecting you from a bigger loss if the prices continue to drop, therefore "cut your losses early."

4- Buy and Hold strategy.

This is probably the easiest and most popular cryptocurrency trading strategy. Investors will choose a coin and hold it for as long as they can. The best coins to use this strategy with are those around for a while, and you're done some fundamental analysis to them, such as Bitcoin and Ethereum. 

Although there is still a risk of the coin dropping in value due to market fluctuations, it is not as big of a risk as other lesser-known coins with little or no use case, community behind it, etc...

This strategy isn't recommended for new traders because they can lose more money than they have invested if the price goes down; this was a common cause in the ICO frenzy of 2017. Most of those coin Holders have not recuperated their investment yet.

HODL is appealing to new investors, fairly easy to do, and it can give you huge returns, but keep in mind what coin you will Hold and get tons of patience to wait for the right time (for you) to cash out.

5- Golden Cross and Death Cross

This is a fundamental technical analysis concept to understand when it comes to cryptocurrency trading strategies.

• A death cross is a moment in which a cryptocurrency's price goes down to the lowest in its history. In other words, a death cross only happens when there is no countertrend movement on the cryptocurrency's chart.
• A golden cross is a moment in which a crypto coin goes up dramatically, and its price looks undeniable like it can go higher than ever before. It seems that it will never drop again.

What does it mean?

A golden cross or death cross can indicate the beginning of the end of a bear market. If you don't know, you can always use it in your crypto trading strategy, and you will see it for yourself.

That, of course, is the broad definition and normally measured using the 200 and the 50 Days Moving Averages, but you can still use the same "cross up and down" methods in a shorter time frame for your daily trading strategy.

6- Buy Above-average Volume

This is a risky strategy, but many traders like to use it because of its reliability and profitability. It would be best if you always bought above-average volume in the top 10-20 coins. You should also have at least $1,000 worth of cryptocurrency before you start this strategy. 

A good example would be buying Ripple (XRP) when there is high volume on Binance (or another exchange).

So, the logic behind it is: if there is a higher volume on a particular coin, it implies high involvement of buyers and sellers when there's high volume, and high price people are buying, when there are high volume and low prices, people are selling.

7- RSI Divergence Crypto Trading Strategy

This strategy is used to avoid the false signals of divergence which many crypto trading platforms give. For this strategy, you will always check the relative strength index (RSI) indicator on your chosen coin and only use it with strong signals. 

When you see that RSI is diverging, bull and bear conditions are going on simultaneously.

For example, if RSI is diverging and there is a powerful bear signal, you should sell your investment right away because it will go down faster than ever. However, if RSI is diverging on a strong bull signal, you should buy your investment even more because it will go up faster than ever. 

The idea behind this strategy is that you can be sure that the market will go down or up when the conditions are right and not in between.

If you prefer to use this concept with cryptocurrency trading platforms that don't have this tool, then there are other indicators you can use instead of RSI, which will give similar results like the Stochastic or similar oscillators.

Conclusion

These are seven of the most popular and simple cryptocurrency trading strategies. The truth is that there are many more than these, but you will have to learn to make your own crypto trading strategies and not copy them from others. 

However, if you start with these seven strategies, you can always modify and improve them to fit your needs.

If you are interested in a strategy that is not on this list, then feel free to make your own because there are many ways that you can come with on your own. Use common sense and learn about the market before using such strategies to minimize risk.

Please visit my blog to find out more if you're interested in learning about new and profitable crypto trading strategies and How to Trade Effectively with Automated Crypto Trading Bots.