Cryptocurrencies have gradually become more popular over the years as a growing number of people have begun getting involved in investing. The fact that crypto is a relatively new technology contributes to a good deal of the hype, as people are more interested in the latest developments and are more likely to want to try them out for themselves.
The decentralized nature of the blockchain similarly attracts large numbers of potential users, particularly if they’ve been blindsided by the traditional finance system.
The fact that the system is fully transparent also translates into increased trustworthiness levels for many investors and gives them extra incentive to choose cryptocurrencies. However, crypto is also quite volatile, meaning the prices can change quite a lot, seemingly overnight.
But does that mean there’s no way to see successful outcomes as a trader? Or does it depend more on the type of strategy you choose? Here’s what you should have in mind.
What is simplicity in the cryptocurrency trading environment? When you start trading, you must be aware of the importance of having a strategy. You will need sufficient wiggle room, as you want the freedom to change your mind in case something new intervenes, especially in changeable, fluctuating marketplaces such as crypto, where prices constantly shift. However, having a framework on which you can operate will also take you far.
Simplicity is one of the most important factors to include. It refers to focusing on the basics to ensure the whole endeavor works like a machine. Choosing a realistic objective is the first step here. Think of what you hope to achieve and what are the metrics based on which you’ll measure your success. Exactly how much risk you’re willing to take is an essential aspect in this regard as well.
Look at the important indicators for you, including volume, volatility and momentum. Using too many leads can be confusing and create contradictions that leave you unsure of how to act next. Limiting yourself to three at the most should suffice.
Establish rules for your entries and exits, as well as how you’ll manage risks in case they appear. And, of course, using an automated crypto trading bot will allow you to benefit from good performance and reduce any possible errors and biases, as well as the incidence of false positives.
If you’re a newcomer in the industry, you can learn from what the more seasoned traders did before you. Some of the strategies you can look into when deciding what would suit you best include:
- Day trading: this position allows you to enter and exit a market position during the same day. Since all transactions are typically concluded during a single day, it is also referred to as intraday trading. However, you must be aware of the risks since you’d be dealing with considerable amounts of volatility.
The point of this strategy is to profit from the small, minute movements to support returns. You’ll need to focus on technical analysis and maybe even use a coinbase trading bot. The downsides also include the fact that day trading can be time-consuming and the loss risks that make it more appropriate for more experienced users.
- Hodling: This strategy has become increasingly popular over the past months, as cyber currencies had to deal with fluctuations that had investors reeling due to the losses. Traders focusing on speculative ventures recorded losses of nearly 100%, while those who decided to hold onto their assets emerged almost unscathed.
That’s hodling. It allows investors to make a profit from the increase in an asset’s value. Long-term appreciation does the job for you here since you invest over a long period. This strategy might be more suitable for beginners since it allows you to bypass short-term fluctuations and the pitfalls of buying high and selling low, the opposite of what you should do.
- Futures trading: When you engage in futures trading, you enter a contract agreement to buy and sell a certain amount of a specific cryptocurrency at a previously determined time and date in the future. This allows you to choose between a wide selections of digital coins without thinking about owning any of them. The futures can also protect you against the aftershocks of market fluctuations.
- Arbitrage: If you choose this method, you’ll buy crypto coins in one market and then sell them in another. In this case, the spread is the gap between the buying and selling prices. You can make a profit here due to the differences in trading volumes and liquidity. Registering on exchanges with considerable pricing discrepancies allows you to exploit this opportunity to your benefit.
Greed And Fear
The Fear and Greed Index is an indicator that conducts analysis and generates a number between 0 and 100. One is an indication of extreme fear, while 100 designates excessive greed. The former implies that the investors are selling, while the latter indicates a propensity for buying.
Although it can be quite challenging to keep emotions in check when trading, it is crucial for the success of your enterprise.
Maintaining your composure allows you to follow through with the methodology of your strategy and stick to what you want to do. Since crypto trading is a vibrant environment, you’ll see many different techniques, and it can be tempting to want to follow them.
You must do your best to resist this impulse and not fall into the trap of hubris if you record several vital wins. It can cause you to be reckless in the future.
When you encounter losses, treat them as learning opportunities. Adopting this mindset might take a while since it’s easy to start beating yourself up over failure. However, that’s not at all proactive. What you can do instead is learn from your mistakes and avoid repeating them in the future.
If it was a simple case of bad luck, try not to dwell on it too much and instead set your sights on the long-term.
When it comes to trading, developing a strategy initially is tough. But if you have some key factors in mind, it will become much more achievable.