Introduction to Finding Your Best Trading Strategy
Have you ever gone to the store without a grocery list? If so, you probably bought more than you intended and spent extra money on things you didn’t really need. This is how crypto trading could look like without a strategy.
A developed strategy guides you through market storms, helps to mitigate risks, and aims to fix and optimize profits. It can even help you even to automate your transactions, while having no strategy usually means you’re gambling relying solely on luck.
Let’s explore long- and short-term strategies, delve into technical and fundamental analysis, and maybe try hybrid systems.
Trading for long-term goals
HODL is the most popular long-term trading strategy. The approach involve buying assets or maintaining positions for extended periods, often for years. The concept best suits crypto enthusiasts who believes that assets can grow in time, no matter what happens to the industry.
Buy and Hold
Ever heard the saying, “Rome wasn’t built in a day”? Similarly, wealth accumulation often requires time. Buy and hold is a strategy rooted in patience and long-term growth.
This strategy involves acquiring assets and inventories below their intrinsic value. It’s like going to a yard sale and finding a rare, underrated item that everyone has overlooked.
If you’re the type who loves action and quick results, short-term strategies might be your jam.
The goal of this strategy is to make at least small profits from price movements within a single trading day. In other words, no matter what, you have a schedule to open/close your orders every 24 hours.
Swing trading approach is very similar to the surfing, where crypto market is your ocean of price waves. A trader using this strategy aims to catch the ‘waves’ and capitalize on short-term momentum.
A trader applying it is usually looking to exploit tiny price gaps generally created by order flows or spreads in scalping. Scalp traders prefer highly liquid markets because it is quite predictable when to enter or exit the market. Whales or large traders usually use this strategy to trade large positions.
Why Every Strategy Needs Technical & Fundamental Analysis
Technical analysis is about chart patterns and price action and fundamental one dives deep into the company’s financials, economic indicators, and market news. Together they provide a basement for your well-informed trading decisions.
Chart Patterns and Indicators in Technical Analysis
Candlesticks can form different figures and shoes on charts providing traders with some hints about further price direction. Using chart patterns and indicators involves analyzing the historical price changes supposing that past events are likely to happen in the future under similar circumstances. The chart patterns names are only restricted with a trader imagination. Some of them has gained trust as a reliable signs, others have been invented as a joke that actually worked (like Bart Simpson formation). If you’re looking for crypto trading platform offering professional tools and deep liquidity, you may discover the CEX.IO Exchange Plus.
Basics of Fundamental Analysis
Analyzing a cryptocurrency requires obtaining all available information about the asset through a thorough research. This includes studying its use cases, its network capabilities, the team behind the project, etc. By looking at these factors, you can determine the underlying project’s fundamental value. Here’s how you can study a crypto project:
- Read the projects white paper. It should be publicly available via their website.
- Find the team members on social media
- Study on-chain metrics
- Explore the project’s tokenomics
- Check the market cap, trading volume and liquidity
- Find the project community and analyze their attitude
Essential Factors to Consider When Choosing a Strategy
- Realize Your Risk Appetite
Risk tolerance is your willingness to withstand market volatility. How much are you really ready to loose in case of the negative trend? The next question you need to ask yourself is how much do you trust the project?
- Define Your Financial Goals
Are you planning to receive $10 in a month or want to buy a car with your crypto incomes in less than a year? Understanding your financial goals is essential to build your own best strategy.
- Time Commitment
Financial analytics believe that trading is like a full-time job, while others trust the time and prefer to HODL. You need to decide which camp you belong to set up your strategy.
Why to trade cryptocurrencies
- Frequent price fluctuations
Because of their high volatility, cryptocurrencies tend to attract speculative attention. Price movements can give traders excellent profits in a day or even an hour, but they naturally carry more risk, such as a sudden downward trend in price.
- Striving to anonymity
The purchase of goods and services for cryptocurrencies is carried out online and usually does not require the disclosure of personal information. Also, cryptocurrencies can offer nu,ber of benefits for those concerning about privacy and identity theft. The KYC process used by exchanges allows financial institutions to limit financial risk while maintaining the anonymity of wallet owners.
- Programmable intelligent functions
Other benefits include restrictions on ownership and voting rights. Partial ownership of physical things, such as artwork or real estate, can also be included in a cryptocurrency portfolio.
- Round-the-clock market
Due to it’s decentralized nature, cryptocurrency market doesn’t have working hours and available even on weekends. Another benefit of decentralization is that transactions are not carried out from one place, removing the possibility of a single point of failure. That also means individuals can transact with digital assets in various locations around the world.