Cryptocurrency trading is by far the most lucrative activity that most people do in the cryptocurrency space. The volatile market produces numerous trading opportunities that can generate consistent returns for the most skilled traders. Being a skilled trader starts with having a strategy, and this strategy will differ from trader to trader. Here are some of the more popular trading strategies that profitable traders employ in the crypto market.
This trading strategy is extremely well suited to the cryptocurrency market. This is because an interesting feature of the space is that there are numerous exchanges at which people can buy and sell crypto. Each exchange is essentially a self-contained market of buyers and sellers, and as a result, there will often be instances in which the price of cryptocurrencies such as Bitcoin will differ from exchange to exchange. For example, the price of Bitcoin could be $12,000 on Coinbase and $12,100 on Binance. Arbitrage trading allows traders to profit from these price differences to generate consistent returns.
2. Swing Trading
Swing trading is another crypto trading strategy that is often used in the market. Swing trading is particularly great for crypto because it seeks to capitalise off volatile market swings. As we all know, the crypto market is extremely volatile, with Bitcoin often experiencing wild price swings in the span of a few hours. This is great for swing traders, because more volatility means more trading opportunities to benefit from. The key to being a successful swing trader is being able to time when the market will enter an upward or downward swing. Traders will often use automated set ups such as crypto bots and signal groups (e.g. Binance signals) to better execute on the swing trading strategy.
3. Fundamental Analysis
Another crypto trading strategy that is often used by traders is fundamental analysis. The focus of this strategy is to find assets that are undervalued by the market. By buying undervalued assets, you will be in a good position to benefit from any upside gains as the market realises and then starts to buy that asset. There are numerous ways to determine if an asset is undervalued. If we take a look at traditional markets such as stocks, metrics such as the Price to Earnings Ratio and Earnings Per Share Ratio are used. However, these metrics will not work in the crypto market, as we are not dealing with companies, but digital assets. Thus, different metrics such as the following are used: value proposition and quality of the development team.
These are just a few strategies that are being used by traders in the space, with some good results. However, there are tons more strategies to use, the aim is to find strategies that work well with your trading style.