So as we already know that trading in cryptocurrencies is not only difficult but also equally tiresome for those who choose this instrument for their trading niche.
But in this course of action, we will make you pro in crypto trading by imparting in-depth knowledge of some milestone strategies and technical knowledge of charts and shorting techniques to churn out profit from this volatile market.
After the launch of cryptocurrency (e.g., Bitcoin), it has gone through several leaps and downs. So even pros cannot predict the up price and the down price of any cryptocurrency without having the necessary knowledge.
So to decrease the risks of trade in cryptocurrency (in this case: bitcoin) and to make it more like any other trading instrument, the CME group introduced options for (BTC) bitcoin future. So nowadays cryptocurrencies can be uncashed in exchange for submitting BTC tokens.
It was such a big reform in the crypto trading industry that after 2017 the market capitalization of cryptocurrency has reached $237 billion from 2013th to $10 billion. And the growth of individual bitcoin trading accounts has yielded up to 60 per cent per year.
This technique leveraged it with some regulations, and hence trading in it is now as similar and profitable as in stocks and complex financial derivatives.
And the outlook of cryptocurrency is kept changing from mere bitcoin to Ethereum, Qtum and many more.
Earning profit from these currencies is subjected to domain knowledge and expertise. So, let us discuss more trading strategies involved without further ado.
Strategies used for trading in cryptocurrencies
- HODLing – This is the oldest strategy and is practised since 2013. In this method the bitcoin or the altcoin is held for a long time in the wallet with a perception that it will gain leverage over time but due to the non-regularization and spontaneous nature of cryptocurrency, this method did not result fruitfully.
- Hedging – This technique is the most popular among investors who trade in cryptocurrency. As in this method, the trader reduces its risk from exposure of crypto by simply investing in Complex Financial Derivative. By investing in derivatives, one need not have to sell its cryptocurrency in Liew to purchase anything short. i.e. he has to submit a token in the exchange and take the cash.
- Trend trading – One can learn it from a famous proverb: when in Rome, be like Romans. It simply means that one can hold its position as open as long as he thinks that the market will go up and up and sell his bitcoin to earn a profit. Conversely if one feels that the market will see a downfall, then he can again buy his sold bitcoins to compensate for the loss from the interests or difference.
One can keep an eye on market trends by using indicators which include Moving Averages, (RSI) Relative Strength Index, and Stochastic oscillator, which we will see further in this course.
- Breakthrough strategy – Take advantage of its volatility. As it happens once that the market crosses the support or resistance level. According to this strategy, one is advised to do an early start and visualize the market. Once it crosses the break out levels take the decision or sell short or buy a cryptocurrency.
- Investing rather than trading – A trader uses day trading, swing trading and scalping techniques while doing business in regular stock trading but in another hand when we talk about trading in cryptocurrencies, it could not be that much fruitful due to its volatility nature. However, investing for a long time may give you great returns because rise and fall do not affect the long-term investment. After all, over a period, the whole effect is compensated with accumulated interest prices of the held asset.
This technique works well for those who have expertise in understanding charts and technical indicators, and likewise, they are able to predict the future prices of the cryptocurrency with the help of them.
Hence investing for a long time in a cryptocurrency could assure you a profit.
- Stacking and Landing – In this strategy, an investor can earn a reward on stacking his altcoin on a PoS (proof of stack) network. Here stacking means an investor can stack some specific altcoins like NEO and Stellar (XLM) in his digital wallet and the rewards are gathered by validating a transaction on the PoS network.
Now Landing means an investor can land his bitcoins to the other trader and earn interest on landing. That can be done via P2P or bitcoin exchanges and even by DeFi (Decentralized Financial Applications)
- Use Crypto social media – There are several social media platforms that reward STEEM (a native coin) for writing content for them. One can write and curate content for crypto social media like Narrative, Sapien and Scorum and earn a STEEM. The spread between STEEM and BTC complex financial derivatives is very tight as of 0.02; hence one can then sell its STEEM coin and purchase BTC, which is of relatively low value.
So, in a nutshell, one can earn a STEEM, and by selling it in exchange for BTC, he can earn a profit.
- Mining of cryptocurrency – This was the oldest technique to earn in blockchain technology. The work of a miner is to verify the transaction and securing the PoW (Proof of Work) network, and in return, he gets a reward of bitcoin.
This technique is not suitable for all rookies as it involves the mind of a software developer and specialized hardware.
- Airdrops and Forks – This method is useful for beginners or the one who wants to play around the cryptocurrency market. i.e. as an individual will do not purely govern this, hence it can’t be purely termed as a strategy but then also if someone wants to increase his coin base, this technique is really excellent.
So, in this technique, a crypto exchange spreads out some Tokens aka Airdrops to increase its userbase and increase awareness among people about cryptocurrency trading.
And the forks are aka the upgrade in a blockchain network. So, when there is an upgrade in the fork, the user or the coin holder of the original chain gets a reward of a coin.
Technical Analysis – After honing on strategies, one will need to do technical analysis. Here technical analysis refers to the in-depth study of the past market scenario. i.e. here in case of cryptocurrency, one has to analyze past price fluctuations of cryptocurrency.
These measurements can be performed with the help of charts, graphs, and market indicators.
Charts used in Technical analysis of trading in cryptocurrencies
- Candlestick chart – candlestick chart comprises two candles like sticks, one represents the bullish market, and the other one represents the bearish market. The bull market is represented by either green or white colour, and the bear market is represented by red or black colour.
In the bullish market, the close point is represented above the open price and in the bearish market, the close point is below the opening position in the candle. Learn to read charts
- Line chart – line charts are easiest to understand. This chart shows the trend of cryptocurrency prices. There are perks in the lines called higher high, higher lows, lower high and lower lows.
- Renko chart – This chart is similar to that of the candlestick chart except it shows the fluctuation of the price in cryptocurrency in the form of bricks. Each trend change is indicated by a 45 degree up or downshift in brick position.
- Point and figure chart – Unlike the above all charts, this chart employ just the Price instead of Time and Volume. The chart is used by traders who are only interested in price fluctuation irrespective of the time it took to change.
The indicators used for Technical analysis of trading in cryptocurrencies
- Moving Averages convergence and divergence – This type of indicator is used to determine the type of fluctuation a market is trending and the strength of the bullish and bearish market
- (RSI) Relative Strength Index – This indicator is used to measure the magnitude of a bullish and bearish market. This graph is generally drawn beneath the price graph of an asset. And this RSI, which is an oscillating graph, is drawn between the two extreme lines, i.e. the over brought and the oversold.
The market is called bullish if the oscillator spikes above the 70 per cent mark and conversely it is called as bearish when the lower spike of the oscillator drops below the 30 per cent mark of the bottom end.
- Stochastic oscillator – This indicator is a handy tool to calculate momentum by comparing the particular closing price of the trading instrument (in this case, cryptocurrency) with a range of fluctuations over a fixed period.
These were some of the best methods for trading in cryptocurrencies. Crypto trading is trending and the new method of trading and investing. The crypto market is highly volatile and might be risky. For successful trading, you should choose the right broker which can guide you in your trading journey. ROinvesting is the best crypto broker. It also provides trading on a wide range of trading instruments other than cryptos such as forex, stocks, commodities, etc. Explore detailed ROinvesting review.