Crypto Trading Strategies... Made EASY!
Trading in the volatile world of crypto can be SCARY! You'll need nerves of steel, good intuition, and a winning game plan if you want to WIN!
Research, research, and more research is the way to do it. Let's take a look at few trading strategies you'll use.
When you're a noob looking to invest long term (LT):
Dollar Cost Averaging (DCA)
One of the popular and well-tested strategies, DCA is simple and works best for longer periods of time. Instead of investing all your money in a particular cryptocurrency, you divide it into smaller parts and only buy at a certain time frame.
For example: Hendry has $10,000 to invest in Bitcoin. Using the DCA method, he decides to divide his $10,000 into 20 lots of $500. He then chooses a particular time and day of the week to buy Bitcoin - let's say Monday at 12:00. Over the next 20 weeks, Hendry manually buys $500 worth of Bitcoin every Monday noon until he invested his entire $10,000.
Buying at regular intervals like this helps minimize the impact of market volatility. When prices rise and fall, Hendry will likely get more Bitcoin for his money than if he had spent it all at once.
When the market lacks direction with no discernible LT trend in sight:
Usually, a cryptotrading will trade for a long term within a certain range. Bitcoin, for instance, traded between $8,601.40 and $10,210 for a 30-day period. This ±9.4% range is nothing compared to the usual Bitcoin ±42% fluctuations in 24hrs.
Cryptomarket caps are relatively small enough that they can be manipulated by a single large mover. These movers usually try to manipulate the price of a coin up and down to profit from a range.
For this strategy, you would want to pay attention to overbought and oversold zones. Overbought means that buyers are saturated and the stock will probably sell off; oversold means the opposite.
When the market is volatile:
Take advantage of increased trading volume to profit. Scalpers usually would want to exit a trade before short-term fluctuation has a chance to change the market's sentiment. Although the ROI of each trade is very small, staking a large amount means a substantially large return.
When you're feeling bullish and market is highly volatile:
Golden Cross/Death Cross
The "golden cross" occurs when a short-term moving average crosses over a long-term moving average (MA) toward the upside. For this strategy, you are looking for crossovers between the 50 MA and 200 MA over long chart time frames (daily or weekly). This is another long-term strategy that works best over 18 months and onward.
There are two types of crossovers you are observing:
- 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 signal that short-term momentum is exceeding long-term momentum, so BUY!
Divergences signal the opposite, that short-term momentum is falling to the long-term momentum, so SELL!
The images used are from a TradingView account. You will need to change the MA settings and adjust the length respectively.
In the chart below, the last golden cross on the Bitcoin chart was around $8,000. This means that if you have been using this strategy for the past year, you would have received a buy signal at $8,000 and still be holding Bitcoin, which is currently $38,600 (as of writing time).
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