Overview
The cryptocurrency market is a lucrative and fast-paced financial market that may seem intimidating, especially to beginner traders who have not yet mastered the art behind effective and profitable trading.
However, this should not dissuade novice traders as there are several different trading strategies that they can use when trading in the cryptocurrency market.
Dollar-Cost Averaging
This trading strategy is popular, it has been thoroughly tested, and it works best when used over long periods.
The concept involves investing a large investment amount into smaller amounts which are invested in several different cryptocurrencies, with trades executed a particular time and day of the week, and buying only during this timeframe.
When traders buy at regular intervals over a long period, it reduces the impact that market volatility may have, allowing traders to get more cryptocurrency for their capital as opposed to traders spending their capital all at once only on one coin.
Another reason why this is one of the best strategies for beginners is that traders can automate the process by using trading bots.
Golden Cross/Death Cross
This trading strategy uses two different moving averages in the crypto market, which is a technical indicator that shows the mean average price of a cryptocurrency pair over a certain period.
When using this strategy, traders look for crossover between the 50 MA (which is an average of the previous 50 days) and 200 MA (an average of the past 200 days) over longer chart timeframes such as the weekly and daily charts.
Traders will look for the convergence, or the golden cross, at the point where 50 MA crosses above the 200 MA, or the divergence or death cross, where the 50 MA crosses below 200 MA. Convergence indicates that traders should buy while divergence indicates that traders should sell.
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RSI Divergence Cryptocurrency Trading Strategy
This trading strategy is a technical analysis strategy that can be used to time trend reversals before they occur. Reversals happen when the price in a volatile market starts to move in the opposite direction.
Relative strength index (RSI) is a chart indicator that measures momentum. This is done by calculating the average number of gains and losses across two weeks.
With this strategy, traders can identify when the trend is likely to change before it occurs, allowing them to place their stop loss and take profit orders accurately.
Long-Term Holding (HODL)
This is a very simple trading strategy that is often used in the stock market and involves traders buying and holding cryptocurrencies for long periods. Holding, or HODL, does not require a significant amount of knowledge and this is because most major digital assets have experienced significant growth long-term.
It simply involves purchasing a digital asset that the trader expects to appreciate and holding it without having to consistently check price movements.
Scalping
Scalping is a popular way for day trading cryptocurrencies and it is a fast-paced way to make small, quick profits. Scalping allows traders to capitalize on microfluctuations in a digital asset over short timeframes, either one, three, or five minutes.
Scalping is an effective trading strategy in crypto markets because of the market volatility and rapid price fluctuations.
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