The number of people trading cryptocurrency has exploded over the past few years, with more and more people looking to generate consistent returns each month. Being a successful trader in the crypto market depends heavily on having a good trading strategy. Let’s take a look at some of the more frequently used trading strategies traders are using in the crypto market.
Arbitrage trading is a particularly effective trading strategy in the crypto market because of the way we typically buy and sell cryptocurrency. Buying and selling crypto can be done on a number of different exchanges, which means that there will often be instances in which the price of, for example Bitcoin, will be different depending on the exchange that you buy or sell on. For example, you may have a Bitcoin price which is trading at $11,000 on one exchange but BTC could then be trading slightly higher at $11,100 on another. Arbitrage trading is a very useful strategy in exploiting these pockets of price differences that exist between crypto exchanges.
- Swing Trading
Another frequently used trading strategy is swing trading. This strategy is again well-suited to the nature of the crypto market because it seeks to profit from volatile price swings. This strategy works great for the crypto market due to its volatile nature. Bitcoin can easily swing by over 20% upwards or downwards in the span of a few hours. The swing trading strategy is especially great if you are able to time when the market will enter either an upward or downward swing. Using automation with the swing trading strategy is also helpful to get better price entry on trades. You can also use crypto bots and signal groups (e.g. Binance signals) to get a better result with the swing trading strategy.
- Fundamental Analysis
This strategy is all about identifying assets that are undervalued, taking a long position, and the profiting from upside gains as the market realises the true value of the asset. This strategy is often used in the traditional markets of stocks and bonds, but can be applied to the crypto market. The metrics used to determine if an asset is undervalued can vary, but examples include: Price to Earnings Ratio. Different metrics will need to be used for the crypto market, such as the quality of the team working on the cryptocurrency and the value offering of the project. This strategy is generally a longer-term strategy and will require traders to hold for the longer term.
To conclude, successfully trading cryptocurrency is heavily dependent on having the right trading strategy. There are a lot more strategies than what has been covered in this article. However, the goal is to find a strategy that works well for you.