This strategy helps investors do away with the cumbersome job of timing the markets and building wealth in the long term. However, exit strategy could also be tricky in the DCA style. It requires the study of the market trend and understanding of the market cycle.
Reading technical charts can also help you exit at an appropriate time. Crypto investors should monitor oversold and overbought regions before taking a call. You can refer to WazirX live charts for a better understanding of technical charts of various cryptos. Build balanced portfolio Crypto trading is still at an evolving stage. While several countries welcome trading in the cryptos, some are still skeptical about it.
Central banks across the globe are working on better ways to regulate digital currencies and therefore, trading in cryptos is often a risky affair. However, there are strategies that can help investors steer clear of extreme volatility.
Building a balanced portfolio that includes variety of cryptocurrency like Bitcoin, Dogecoin and Ethereum could go a long way in beating volatility. Besides, investors can also maintain a fixed amount of regular investments in different cryptos.
This will increase the risk appetite in a systematic manner and will help your portfolio to yield favourable returns in the long term. Avoid making trading calls based on hype Relying on social media for news on cryptocurrencies is among the mistakes that new investors tend to make. Investment decisions should never be based on hype created on social media. Since digital currency is a hot topic, false information on this topic tends to travel very quickly.
Primary Research One of the most important trading strategies is to do primary research. You need not be an expert at trading to conduct primary research on the value of the asset you wish to purchase. This involves being updated with all the news flow regarding the crypto industry. WazirX helps you do that quickly by collating all the news items that you need to read before the start of your day. Besides, you must evaluate your own finances and set an investment goal well before placing a bet on a volatile asset class such as crypto.
Arbitrage Arbitrage refers to the strategy under which a trader buys crypto in one market and sells it in another. Owing to the difference in liquidity and trading volume, traders can find an opportunity to book profit. It also lets you profit from cryptocurrency prices dropping as well as rising.
This is important because they are all quite different and require different techniques. In some cases, the same cryptocurrency exchange will offer several different types of trading. There are 3 main ways of making short-term cryptocurrency trades. Trade cryptocurrencies directly against each other You can trade a pair of cryptos against each other or against fiat currency, with the goal of making a profit through buying low and selling high.
This might mean buying a cryptocurrency before an important event for example, Cardano adding smart contracts and selling it into a stablecoin once the hype begins to wear off. If you do it right, your funds grow. If you do it wrong, your funds shrink over time, as bad trades and changing markets can eat away at your holdings.
This method requires timing the market accurately, which can be difficult and requires a lot of research. Good for: Avoiding excessive risks, keeping things simple. There are several types of derivatives, such as futures, options and perpetual swaps, all of which have their own nuances and can be used simultaneously. Crypto derivatives trading often includes using leverage, which can substantially magnify gains and losses. Traders can also open short positions to directly profit from cryptocurrency price drops, mitigate their risks by hedging and make big trades even if the markets are relatively quiet.
Derivatives can also be a very fast way of losing money. Not so good for: First-time cryptocurrency traders. Our guide to Bitcoin futures trading C. Trade cryptocurrency CFDs Cryptocurrency CFDs contracts for difference are a specific type of derivative that lets you place bets on the price movement of an asset.
Like other derivatives, they let traders go long bet on price rises and short bet on price drops , and utilize leverage without owning the underlying asset. While most cryptocurrency derivatives treat crypto as a commodity of sorts, CFDs typically approach cryptocurrency similar to forex trading. Good for: Leverage, large profits or losses even in flat markets, fast gains or losses, people who are experienced with forex trading and want to try their hand at crypto.
Learn how to place trades and read charts Before you start trading, you need to be sure cryptocurrency trading is right for your circumstances and that you understand the risks associated with it. The red and green box at the top is the price chart. At the bottom is where you place your buy and sell orders. Sandwiched between them is where you can click through to derivatives if this is offered in your country.
CRYPTO GIVEAWAY BOUNTY REVIEW
The techniques have existed for generations and have successfully been implemented for traditional financial assets. Often they are used complementary to each other, but it is possible to apply either independently. Through FA, you will be able to know whether that asset is either overvalued or undervalued at the current valuation. If you can figure out that question, you can then decide whether or not to invest, when, and for how long a period you would look to keep the investment.
Fundamental analysis for cryptocurrency involves evaluating two important factors — on-chain and off-chain metrics. Luckily, with cryptocurrency, most of the networks are public such as Bitcoin and Ethereum making access to these on-chain factors easy. To track both Bitcoin and Ethereum on-chain metrics, you can use Bitinfocharts. This website has loads of crypto-related data and is extremely simple to use and navigate. Off-chain metrics basically include community engagement, exchange listings, government regulations, etc.
TA uses a host of technical indicators to achieve this, including trade volume, moving averages, trend lines, candlesticks, chart patterns, and more. At the end of a technical analysis, a trader should have identified trading opportunities and a potential entry point.
Cryptocurrency technical analysis can work for any trading timeline, from scalping and day trading to long-term investments. FA vs. TA — which is better? It entirely depends on the trader profile. Do you want to be the kind of trader that prefers to get in and out of trading positions multiple times a day i.
Then crypto technical analysis will be your best friend. Instead, do you prefer to research and make informed bets every time i. Then — a mix of both is the way to go. Applying both FA and TA will give you the best chance of identifying the best trading and investing opportunities in the crypto market.
This is because the two techniques complement each other in so many ways. For instance, you may use FA to determine that an asset is worth investing in. What you may not uncover with FA, however, is the right time to invest. For this, you will have to rely on technical analysis.
Conversely, if you are using TA to work out future price movements for a given asset, you can use FA to confirm whether or not the price trend you are witnessing is poised to continue. Therefore, there are advantages to using either technique over the other at various moments in your research, but to have a more complete picture, use both. Cryptocurrency markets When it comes to the available cryptocurrency markets, just like the traditional financial instrument markets, there are two classes: the spot and the derivatives markets.
The spot market is made up of two kinds of traders: Makers — these are the initiators of a trade. As a maker, you list a potential trade on an exchange. For instance, if you want to sell your Ethereum coins, you will open a trade at a particular price point, inviting a potential buyer to fulfill your order. Takers — on the other side of the equation will be the trader that fulfills the order, and these are referred to as takers.
There are makers and takers on either side of the purchase coin. There are makers for both buy and sell orders, and consequently, there are takers for both buy and sell orders. An order book is the ledger on which available orders yet to be fulfilled are recorded. For instance, if you are a buying taker, you could scan through the order book and opt to fulfill take an order that already exists or place an order. The platform will automatically match your purchase order with an already existing sell order.
Note: The derivatives are typically contracts of two or more parties with these contracts deriving their value from underlying assets such as Bitcoin, Ethereum, or other digital assets. Just like their counterparts in the traditional stock markets, there are multiple derivative products in the crypto sphere. Common crypto derivatives examples are futures contracts , options contracts , contracts for difference CFDs , leveraged tokens , and token swaps.
Please note: Derivative instruments should only be used by experienced crypto traders. Cryptocurrency trading strategy To be successful in cryptocurrency trading, you will need an effective trading strategy. What is it? A trading strategy is simply a plan that you will follow when executing your trades. In this section, we will discuss some of the most common crypto trading strategies. Although keep in mind that you can always create your personal strategy that works for you.
It could be based on these broad strategies or something completely new. Having and maintaining a trading strategy is akin to having a map. It guides your trades, helping you know when to trade, how, and why to perform a certain trade. Keeps emotions at bay. One of the biggest challenges facing traders is the interference of feelings and emotions. In cryptocurrency, this happens so frequently that it easily leads to an emotional roller coaster. Successful traders have learned to keep trades free of emotions by sticking to their trading plans.
Risk management. Having a trading plan effectively forces you to do the research necessary to create one, and part of that research is the risk factor to consider for every trade. Risk identification is the first step toward risk management. As mentioned earlier, virtual assets are currently extremely volatile, which works to the advantage of a day trader.
The day trading strategy is a game of numbers strategy. A day trader will make multiple trades within a day, buying low and selling high within little gains that compound to large sums by the end of the day. Typically, sometimes it gets hard to perform this manually. To succeed in this strategy, you will need to consider automating your trades using trading applications or crypto trading bots like Coinrule.
Important: It is not recommended that you begin your trading journey as a day trader. Scalping a trading strategy in which traders profit off small price changes is a part of day trading but typically involves concise trading periods. Think minutes. When either day trading or scalping, many trades will result in both wins and losses. Score more wins to consider your strategy a success. Swing trading When it comes to swing trading, the time period varies.
Whilst in day trading and scalping, traders typically open and close positions multiple times within a day. In swing trading, this happens within a much longer period. This could be anything from a few days to a few months. A crypto swing trader will aim to take advantage of an incoming or ongoing trend. It means buying when the price is low and selling when the price is high. Extensive application of both FA and TA techniques is necessary when using this strategy.
Position trading HODL Also called trend trading or following the trend, this strategy involves long-term investing in assets. The only difference is the long time periods between opening and closing a position. Trades set up through this strategy could take months and sometimes years. It is an ideal strategy for investors favoring a more hands-off approach. A crypto trader would invest in a coin or token and hold it even when the prices are plummeting. Adopted from the traditional stock market, it involves a trader using borrowed capital to open positions on a trading platform.
As anticipated, the results from trading on margin are greatly amplified to either direction of the trading position. If you score a win, the reward is much larger, and the reverse is also true. If the trade goes sideways, you also lose a lot more. Margin is the amount of capital you stake in a position. Leverage is the amount of capital you borrow to open a larger position. Liquidation is the price at which a trade is automatically closed when the price moves against your position.
The larger the leverage, the closer the liquidation price to the entry price. To better understand leverage, assume you enter a trade with 5x leverage. It is another essential part of your success journey. Risk in crypto trading refers to the chance of an undesirable outcome happening.
You may have heard that trading cryptocurrency is risky, and that is true, but so is trading all other financial instruments, including stocks and bonds. What differs is the level of risk. There are different kinds of risks, and in this section, we will discuss those related to cryptocurrency trading.
Market risk. Liquidity risk. Refers to a situation where you are unable to exit a position. Legal risk. Refers to a situation where a government regulation or policy negatively impacts an asset or a trading platform. This could lead to liquidity problems if buyers for your asset are barred from purchasing it. Also, if a trading platform is banned from your jurisdiction, you could end up losing your funds stored with the exchange.
Operational risk. It is the risk inherent if a trader cannot perform a trading activity such as exiting or opening a position. It could be caused by the failure of a trading platform or malfunction of a trading application etc. Systemic risk. Refers to a loss incurred due to a failure in the entire trading system. Closely related to the market risk, but this one is much direr given that it is caused not just by the market downturn but also the collapse of crucial systems within the marketplace.
Think of the financial crisis. This stands for Fear Uncertainty and Disinformation. FUD is when people or organizations try to get people to not invest in an asset by telling them they will lose all their money or something similar. You should always do your own research before jumping to any conclusions. Use Google to find out if the information you hear is correct. Be wary of the Youtubers you watch and listen to. They will often be paid by cryptocurrency projects to promote their coin.
This could increase the price in the short term but could end up decreasing in the long term. So, always do your own research first. If you have read our guide so far, you should now have a good understanding of what cryptocurrency trading is, the difference between short-term and long-term trading, and the things you need to be careful of.
Guess what? How to Start Trading As you are looking to trade cryptocurrencies, the first thing we need to do is get you some coins! The easiest way to do this is with Bitcoin, as almost every exchange accepts it. If you decide to buy Ethereum instead, then you can still follow the guide below. However, wherever Bitcoin is mentioned, swap it for Ethereum.
If at this point you already have Bitcoin, you can skip to the next part of the guide! The quickest way to buy Bitcoin is to use your debit or credit card with Coinbase. Coinbase are an exchange broker and will sell you Bitcoin at a really good rate.
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DAY TRADING CRYPTOCURRENCY - 1-2% PER DAY
