A Quick Glimpse
Crypto trading is the buying and selling of assets in the crypto marketplaces to make profits. Crypto trading has become an everyday term in the lives of more than 200 million worldwide. Due to this increased popularity, traders are shifting to automated trading with the support of crypto trading bots.
Common Terms In The Crypto Space
Crypto Investing: Crypto investing is the method through which you deposit your cryptos and earn profits (interests) on them. It’s similar to the Fixed Deposit in our traditional banking system.
Trading Strategy: It is a plan designed to help traders with their trading. To be clear, the fate of the trader depends on the credibility of the trading strategy.
Stop-Loss: It is a condition that helps traders to avoid losses in trading.
We’ll be elaborating on the basics of crypto trading starting here.
Crypto Trading Strategy: What Is It & Why Do You Need It?
It is a plan or formula you use to buy or sell crypto assets.
Since the crypto market is highly volatile, predicting the exact prices of currencies could be tedious. The strategies vary based on your requirements, market conditions, and money.
Having a good strategy has become an essential part of crypto trading, not only to make profits but also to adapt to disciplined trading.
2 Things To Know Before Creating A Strategy
In Fundamental Analysis, traders and investors get insights on the project that backs the crypto they’re investing in, such as its future scope, use cases, and the team behind it.
It is used to evaluate a cryptocurrency, on the whole, using qualitative factors (technology, scope, competence) & quantitative factors (mining speed, user base).
Crypto investors or HODLers usually prefer Fundamental Analysis.
In Technical Analysis, traders buy and sell cryptos based on historical stats, such as volume and movement. The price action, volume, and chart patterns are depicted using technical indicators.
It helps to understand the present value of a crypto, evaluate its past performance, predict its future, and place short-term trade orders.
Crypto traders usually prefer Technical Analysis.
3 Widely-Adopted Trading Strategies
Dollar Cost Averaging (DCA)
The DCA or Dollar Cost Averaging is a popular trading strategy that yields good results when done over longer periods.
In the DCA method, traders split their money and invest in different cryptos instead of one. The trade orders are placed at predefined times.
What’s the benefit? Trading at regular intervals with multiple investments over longer tenure helps traders bypass the market volatility.
DCA is considered a good trading strategy for beginners. Moreover, traders can automate their DCA trading strategies with the help of crypto trading bots like NexFolio.
Golden Cross (& Death Cross)
The Golden cross/death cross is a little complex yet powerful trading strategy. It uses two moving averages to determine the probability of a crypto’s price.
The Moving Average (MA) analyzes the historical prices and shows the mean average price of a crypto asset.
Relative Strength Index Divergence (RSI Divergence)
The RSI Divergence strategy is best suited for identifying trend reversals in the crypto market in advance. In simple terms, this strategy helps to time the reversals like downtrend to uptrend or uptrend to downtrend.
RSI tracks the average number of profits and losses over a 14-day period to measure whether a crypto asset is overbought or oversold.
So out of 100, when an asset crosses 70, it is marked as overbought, and when it falls below 30, it is observed as oversold.
4 Common Types Of Traders
Day traders trade on a daily basis. All profits and losses are calculated on a 24-hour period. They are known to make small profits (or sometimes huge) by buying & selling assets within a day.
Day traders will probably be professionals who have a thorough knowledge of how the market works. They usually follow Scalping and Range Trading strategies.
Swing traders’ trading patterns range between a couple of days to a couple of months. They listen to market trends and plan their trading strategies accordingly.
Swing traders use both Technical and Fundamental Analysis to determine the undervalued cryptos and invest in them.
HODLers (or commonly called long-term traders/investors). With a clear and bigger picture in mind, they aim for maximum profits.
For example, people who bought bitcoin before 2015 and sold it when it reached a new ATH in 2017 (or holding it until now) are considered HODLers.
Bot traders make use of crypto trading bots to their advantage. Bots are computer programs that make trading a hassle-free experience by making better trading decisions.
NexFolio offers traders a suite of bots to trade effortlessly in the crypto space. Each of our bots is developed with a unique trading strategy.
We Welcome You To The Most Practical Crypto Tool
Trading? Earning? We have everything. Begin your crypto journey with NexFolio.