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Strategies for trading in Cryptocurrency!

Strategies for trading in Cryptocurrency!

As with the boom in the crypto market, many traders have started day trading in the cryptocurrency market. Previously the traders focused on long-term investing in cryptos as it was very volatile to be in intraday trading, but now as many of the major cryptos like Bitcoin, Ethereum, etc. have shown a huge amount of growth consistently, the traders are considering investing in this market.

Stable coins such as bitcoin, ethereum, and litecoin are good options to trade in the long term.

Let us have a look at some of the strategies in crypto markets:

1.         Dollar-cost averaging (DCA)

It is one of the most effective and well-tested strategies if implied in long-term investing. The concept is simple. Instead of investing all your money in a particular cryptocurrency at once you divide it into small amounts, choose a particular time and day of the week, and only buy at those times. Buying at regular intervals like this over a long time helps reduce the impact of the market volatility – when prices rise and fall sharply.

The major benefit of this trading strategy is that it eliminates emotional investing, reduces risks, and avoids bad timing.

2.         Scalping

This strategy is more concerned with short-term trading. Scalping is a process whereby a trader watches several small profitable trades within a span of hours and makes trades accordingly. Scalpers take advantage of increased trading volume to profit. Scalpers may exit a trade seconds after entering, and many use automated bots to increase the frequency of their trading cycles. Ideally, scalpers want to exit a trade before any news item or short-term fluctuation has a chance to change the market’s sentiment on a coin.

The major advantage of this technique is that it is relatively safer than other trading strategies. And since this strategy employs minimal time frames, it is possible to exit the trade anytime, even if you have a series of bad trades. This technique empowers users to control how much they win and lose.

3.         Golden cross/Death cross

This is one of the other long-term trading strategies which you can consider while trading in crypto. This crypto trading strategy is a method that uses two moving averages (MAs) – a chart indicator line that shows the mean average price of an asset over a defined period of time. For this strategy, you are looking for crossovers between the 50 MA (an average of the previous 50 days) and 200 MA (an average of the previous 200 days) over long chart time frames such as the daily and weekly charts. Because it deals with observing price activity over wide time periods, this is another long-term trading strategy that works best over 18 months and onward.

There are two types of crossovers you are seeking:

•          Convergence (golden cross): When the 50 MA crosses above the 200 MA

•          Divergence (death cross): When the 50 MA crosses below the 200 MA

Convergences are a signal that short-term momentum is exceeding long-term momentum, which is a buy signal. This happens when buyers return to the market and drive prices higher. Divergences are a signal of the opposite, that short-term momentum is falling compared to the long-term momentum. This is a sell signal. Divergences arise when large numbers of traders decide to exit the market and sell their assets.

4.         Range Trading

In any of the financial markets every stock, currency pairs, or cryptos perform in a particular range. As we are discussing cryptos let’s take an example of Bitcoin which is traded between $8,601.40 and $10,210 for a 30-day period. This ±9.4% range seems volatile until you realize that Bitcoin can realize a ±42% change in 24 hours.

If you are range trading, you want to pay attention to overbought and oversold zones. Overbought means that buyers have saturated their needs, and the stock will probably sell off; oversold means the opposite. Chart indicators will help you to find these zones. Common indicators used for this purpose include the Stochastic Oscillator and relative strength index (RSI).

5.         Arbitrage

Arbitrage is the process that basically defines trading and business, it involves buying cryptocurrency in 1 market and selling it in another market at a higher price. The difference in the buy and sell price of an asset is known as the “spread.” As a generally unregulated market, crypto allows anyone to create an exchange. This can lead to major differences in the spread because of asset liquidity and trading volume differences.

In the crypto market, traders usually hold a portfolio on an exchange they are trading. To start an arbitrage opportunity, open accounts on exchanges you believe will show significantly different prices for the same asset.

Traders should also take trading fees into account when attempting arbitrage. The fees to make a trade on an exchange may wipe out the gains from the trading spread.

#Cryptocurrency #btc #bitcoin #ethereum #scalping #arbitrage #investing #trading

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