How to Build Cryptocurrency Trading Strategies: What You Need to Know

According to some research, 1 in 10 people invest in cryptocurrency.

If you’re one of those people who are interested in learning how to trade cryptocurrencies, there are a few things you’ll need to know. One of them is coming up with a strategy that works for you.

Keep reading, and we’ll fill you in on all you need to know about how to build cryptocurrency trading strategies.

Day Trading Cryptocurrency

One of the options for cryptocurrencies is day trading. Many day traders do this as a living, and they make most of their profit just from trading crypto each day.

They’ll have to make a lot of exchanges and transactions each day, but if you do it correctly, you can have huge rewards. Keep in mind that you’ll need to spend a lot of time (possibly years) to be successful and make money.

To start with this strategy, you should find an exchange that has a lot of good cryptocurrency pairs. A pair can be any two tokens that can be traded or exchanged for each other. 

You’ll also need a platform that has high liquidity. This means that you’ll have a permanent buyer and seller connection on there. If you don’t, you won’t be able to make a deal when the price starts dropping. 

Before you start day trading, make sure that you read a lot of information and learn all you can about the market. You’ll need to have a really good understanding of how prices fluctuate and how you can use them to your advantage.

Trend Trading

Trend trading is also sometimes called position trading. This is a strategy that will have you holding a position for a long period of time. Sometimes this can even be for a few months.

Trend traders take advantage of directional trends, and they may go into a long position in an uptrend. With a short position, they’ll follow the downtrend.

To successfully use this strategy, they’ll normally use fundamental analysis. This type of analysis focuses on events and tries to estimate how long it will take for them to play out. 

A trend strategy assumes that the asset will keep moving in the direction of the anticipated trend to take advantage of that. Because of this, you’ll also need a good understanding of the market and the swings and trends in the asset that you’re working with.

This can be a good option for beginners as long as you manage your risks and do your homework.

Dollar-Cost Averaging

Dollar-cost averaging is also a popular strategy, and it’s been tested a lot of times and still shown to work. However, you’ll need to use this system over a long period of time in order for it to work.

The concept of this trading strategy is simple. While most people would invest in one cryptocurrency, a person following this strategy will divide that amount into smaller amounts and invest it at different times to lower the average. 

They’ll focus on buying crypto at a certain day and time and then only buy at that time. 

For example, if you want to invest $500 into Bitcoin, you can split that up into amounts of $20. You can then pick different times when you think the price will be lower and keep investing that money into Bitcoin. 

When you invest at different times, you’ll lower your risk of market volatility because you’ll have a more average amount of Bitcoin.

High-Frequency Trading

If you have a cryptocurrency VISA card, high-frequency trading might be a good option to store your money.

This strategy uses an algorithm strategy that quant traders use. You’ll need to understand how to develop algorithms and use trading bots to enter and exit a certain asset. 

When you make these bots have an understanding of the market, they’ll be able to start making trades for you at a higher volume than you would’ve been able to do by yourself.

Keep in mind that you’ll also need a good understanding of computer science and mathematics in order to be able to do this. That’s why it’s better for advanced traders rather than beginners.

Swing Trading

if you’re interested in investing for the long run, you should look into swing trading. You’ll need to hold your positions for at least a day, but no more than a month. 

This is a strategy that is in between trend trading and day trading in terms of length. 

Swing traders use this strategy to take advantage of when the volatility is higher. Then, they’ll let it sit for a few weeks to see how high or low it goes.

They use fundamental and technical factors in order to come up with their strategies and ideas, so you’ll need some level of expertise to be able to do this. 

However, this is still one of the most convenient active trading strategies that are used for beginners. Another benefit of using this strategy is that these trades take longer to play out, but not too long to where you lose track of it. 

Because of this, you’ll have time to think and make careful decisions, which lowers your risk.

Learn More About How to Build Cryptocurrency Trading Strategies

These are only a few tips on how to build cryptocurrency trading strategies, but there are many more that you can try.

Trading with cryptocurrencies can be difficult, but if you’re still not sure what to do, make sure you talk with a financial advisor for more help.

If you found this article enjoyable, explore our website for more financial advice and tips just like this one!