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Why You Need a Trading Strategy
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11 Best Crypto Strategies for Beginners

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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
By Niki Nikolaou
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With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
on March 21, 2023 | 7 min
Updated on Jan 11, 2024
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Charles Archer
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Charles Archer is an experienced financial writer specialising in monetary law. With a background in stock market and private equity analysis, he’s worked for many years as a freelance investment author, and has had articles published in a wide range of regional and national titles, both online and in print. He holds a Master’s degree in Law from the University of Law, the UK’s largest legal training institution. Charles believes the key to successful investing lies in quality research, and aims to offer a unique viewpoint that investors cannot find elsewhere.
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Cryptocurrencies have only been around for a decade and a half and have largely gained the confidence of millennials, Gen Zs, and Gen X. The digital currency market presents traders with plenty of opportunities. This article explains the basics of how to begin trading cryptocurrency and outlines the best crypto strategies for beginners, so read on if you’re getting started with trading crypto.

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Why You Need a Trading Strategy

The best crypto trading strategy for beginners needs discipline and practise. Practise the popular cryptocurrency trading techniques on a demo account and cultivate the discipline to follow them diligently while trading in live markets. Here are the top 4 reasons why beginners need crypto strategies.

1. Confidence in Your Edge

Building a cryptocurrency trading strategy and practising it on a demo account boosts confidence. You go through self-analysis to identify your strengths and learn to take advantage of them in the market.

2. You Always Have a Plan

Learning the most popular cryptocurrency trading methods prepares you for all kinds of situations in the market. Although trading may remain unpredictable, you will be in a better position to deal with those situations.

3. Build a Map

Developing an understanding of beginner crypto trading strategies helps you to build a roadmap for the volatile market. A well-designed plan helps prevent emotional trading. This ensures that all trading decisions are backed by rationality.

4. Risk Management

Beginner crypto trading strategies are incomplete without proper techniques to mitigate risk. While risk cannot be eliminated, minimizing the impact of unfavorable market movements helps you protect your portfolio better when unprecedented events take place.

Best Crypto Strategies

1. Day Trading

Day trading involves entering and exiting a position during a single trading session. It is also called intra-day trading. The goal is to open a few positions and accumulate profits by the end of the day. The duration of each trade may range from a few seconds to 24 hours, as the cryptocurrency market is open 24×7. Relative Strength Index (RSI) and Bollinger Bands are two of the most popular technical indicators to day trade cryptocurrency.

2. Scalping

One of the most popular trading strategies is cryptocurrency scalping strategy. Traders open many small positions to make tiny profits in each. The goal in scalping is to accumulate small profits in multiple trades to book substantial profits by the end of the trading day. A single position may be open for 30 seconds up to a few minutes.

3. Swing Trading

Swing trading is one of the beginner crypto trading strategies that suits patient traders. It takes advantage of price movements over a few days, a week, or even a month. Swing traders are very active and vigilant of market movements, as cryptocurrency markets often make drastic moves.

4. Trend Trading

The trend trading strategy involves taking advantage of a continuing trend, which is why it is also known as riding the trend. Position sizes are based on trade duration. Trend trading positions can be taken for a few minutes to a few months. Traders open long positions when they see an uptrend and short positions when they see a downtrend. A common technique is to use simple moving averages (SMA) and enter a position when the 50-day SMA crosses over 100-day SMA.

5. HODL (Buy-And-Hold)

HODL is an acronym for Hold on for Dear Life, although it came about from a mistype on the word HOLD. This is a long-term strategy that often demands sitting through deep drawdowns and can be very risky as there is ultimately no risk mitigation in this strategy. It demands extensive fundamental analysis and patience to wait for a coin to reach its destiny. If you must HODL, only do it with money you can afford to lose.

6. Arbitrage Trading

This cryptocurrency trading strategy relies on the price difference of a cryptocurrency in different exchanges. Traders need to quickly buy from one and sell on the other to take advantage of this trading strategy. Retail traders must evaluate the cost of trading against the profit potential before attempting to capitalise on the opportunity. Traders open long positions of the coin on one exchange and short on another. This is not going to be a viable strategy for most new traders as it requires a very fast server and some expensive software and hardware to execute successfully.

Did you know?

‘Kimchi Premium’ is a popular scenario that occurred multiple times in which Bitcoin traded at around 40% higher on South Korean exchanges than on US exchanges.

7. High-Frequency Trading (HFT)

HFT is an automated trading strategy that involves entering and exiting multiple trading positions every minute. Market-making, liquidity, and momentum are three of the popular types of HFTs. This strategy requires extensive technical analysis and deep coding knowledge or initial investment to support a software-driven bot, so again, it is not likely to be suitable for beginner traders.

8. Dollar-Cost Averaging (DCA)

Crypto traders use DCA for longer-term trading plans. Traders invest a fixed amount or an amount with fixed increments at regular intervals to smooth out the effects of volatility. They buy both highs and lows. The strategy is based on a fundamental analysis of the cryptocurrency and does not involve technical indicators. For example, if a trader decides to invest $5,000 in crypto, they may decide to invest $500 every week. Alternately, they may follow an incremental approach and add 10% more each week, like $500 in the first week, $550 in the second week and so on.

9. Range Trading

A range trading strategy uses resistance and support levels of a cryptocurrency that is fluctuating within clear boundaries and looks likely to continue. Traders look to go short at resistance or long at support, expecting that the range will hold.

10. Index Investing

Index investing is one of the lesser known but powerful cryptocurrency trading strategies. A crypto index holds a portfolio of coins and is used by traders to gain exposure to multiple coins at the same time. Crypto indices are like stock indices, in that both are baskets of assets based on some criteria.

Did you know?

There are a dozen S&P cryptocurrency indices and index-related products designed with a selection of cryptocurrencies to serve as benchmarks of the crypto market’s performance.

11. News Trading

This is also called event-driven trading. In this strategy, traders take advantage of the volatility during and around a major event that moves the crypto markets. News like acquisitions, restrictions, upgrades, takeovers, and forks can result in volatility. The strategy is quite simple – buy the rumour, sell the fact. Among the most market moving events are Elon Musk’s tweets, which tend to attract buy orders for the coins he likes and vice versa. This can be a tough strategy for beginners to navigate successfully.

Cryptocurrency Trading Techniques

Crypto analysis can involve analysing the asset from two different angles:

Fundamental Analysis (FA) – The Foundation

FA is the assessment of underlying encryption algorithm, blockchain technology, whitepaper, and tokenomics. As no ‘real’ asset backs digital currencies, it becomes important to analyse business fundamentals, leadership, vision, and business roadmap to gauge the coin’s authenticity. This is an assessment of the potential of the cryptocurrency to yield returns in the long term.

Technical Analysis (TA) – Market Perception

Technical analysis in cryptocurrencies is like that in traditional markets. Traders analyses price charts with the help of statistical indicators to predict future movements and make trading decisions. Some of the most popular crypto indicators are Relative Strength Index (RSI), Bollinger Bands, Stochastic Oscillator (SMO), Moving Average Convergence Divergence (MACD), and Exponential Moving Average (EMA). They are also used to calculate Daily Returns v/s Volatility Indexes (DVSI) to compare the performance of different cryptocurrencies over a certain period.

4 Things to Know Before Investing in the Cryptocurrency Market

The cryptocurrency market is relatively new, decentralized, and largely unregulated. So, traders must consider a few things to make the most of the opportunities.

1. Understand What You Are Investing In

A cryptocurrency may not be backed by anything ‘real’ (except for the ones pegged with a fiat currency). So, it is important to perform your due diligence, considering the underlying blockchain, level of decentralization and transparency, and the coin’s roadmap.

2. Watch Volatility

Crypto markets can be much more volatile and unpredictable than traditional markets. Even the most trusted cryptos such as Bitcoin and Ethereum have had phenomenal spikes and lost significant value in just a couple of months. So, it’s important to be in touch with market volatility.

3. Manage Risk

Crypto traders and investors should not ignore risk management. This includes trading with a plan, deciding on position size according to your risk appetite, limiting your leverage as per your trading goals, always being aware of the risk-reward ratio, and placing hard stop loss orders in every trade.

4. Don’t Invest More Than You Can Afford to Lose

The single most important piece of crypto trading advice is to never invest more than you can afford to lose. Crypto trading is costlier than Forex trading in terms of trading fees, and there is much more uncertainty. While the high volatility offers the chance to made outsized profits, it also poses larger risks.

How to Choose the Right Crypto Exchange or Broker to Use

Beginners can start by choosing the most reputed exchanges or brokers, as they offer high liquidity and a wider range of coins to choose from. Check out what they do to ensure safety and security of transfers. Find out all the fees they charge. Also, consider whether they are regulated and what compliance norms they follow.

Conclusion

Cryptocurrency trading is the science of taking advantage of the inherent volatility in this unique class of assets. Traders typically combine fundamental and technical analysis to make trading decisions, although the use of technical analysis and trends alone can be sufficient to be profitable without the use of fundamental analysis. However, this market is still in a nascent stage and needs adequate due diligence and risk management.

FAQ

  • Is trading cryptocurrencies profitable?
    Yes, if done correctly trading crypto can be very profitable, because cryptocurrency is much more volatile than most other asset classes, which present lucrative opportunities that traders can tap into. However, risk management is essential in this.
  • What is the most profitable crypto trading strategy?
    There is no single crypto trading strategy that will always work. However, as cryptocurrencies tend to have long streaks of uptrends and downtrends, trend following is considered the most robust crypto trading strategy, as well as being profitable.
  • Which crypto trading strategy is best for beginners?
    The best crypto trading strategy for beginners is likely to be trend following, because it is easy to execute and has a proven record of working.
  • How much should I invest in crypto as a beginner?
    Beginners should evaluate their risk appetite and invest only as much it allows. A popular recommendation is to begin investing no more than 1% of your portfolio in cryptocurrency.
  • What is the fastest way to make money with crypto trading?
    The fastest way to make money with crypto trading is to take big risks, but you should instead trade in a way where you put the odds in your favour by waiting patiently for the right crypto market opportunities to come along. The fastest way for a skilled trader to make money in crypto is to be long of an emerging crypto in a crypto bull market.
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About Niki Nikolaou
With 25+ years of financial marketing experience, Niki has an extensive knowledge of the forex, fintech, stocks and cryptocurrency sectors. Niki is a founder and director at the Contentworks agency.
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