Many people show interest in crypto trading, but not everyone can do it well.
Often times, in crypto trading, one buys Bitcoin or other cryptocurrency at its market value without gauging whether it is overvalued or undervalued. In the long run, this causes many traders to lose their money and decry the sector.
However, employing good crypto trading strategies will not only enable you to maximize your profits, but also minimize the risks of losing out when buying and selling crypto assets.
While there isn’t a singular correct way to trade, it is imperative tha you create a strong trading strategy for crypto trading. And there are multiple methods to go about building a strong crypto trading strategy, but each trader should adopt what suits their goals best.
Experts are in agreement, though, that a good strategy includes thorough research and analysis, such as market cycle research, technical analysis, and fundamental analysis.
Let’s highlight some powerful trading strategies and methods you can use to get ahead in crypto trading.
Powerful Crypto Trading Strategies
In order to create the best trading strategy, one must understand and respect the basics of long-term and short-term investment approaches.
I. For Long-Term Crypto Investment
If the goal is to attain profits and growth over an extended period of time, say, in five to ten years, then long-term trading methods are more beneficial to a trader.
Fundamental analysis where you analyze securities by determining the intrinsic value of the stock, as well as technical analysis where you determine the future price of the stock using charts to identify patterns and trends are both necessary for a long-term approach to crypto trading to reap long-term profits.
Fundamental Analysis Indicators
In fundamental analysis to understand a given asset's value and future growth, one must be thorough in their research and look into the available data on indicators like:
- Economic Analysis
- Competitor Analysis
- Development Team, and
- Active User Base.
Let’s look at those four fundamental analysis indicators in more detail…
i. Economic Analysis or Tokenomics
Economic analysis of any given cryptocurrency is necessary to determine its value.
Tokenomics is a catch-all phrase referring to an economic model that considers the supply and demand characteristics of a given token or cryptocurrency, incentives governing crypto assets, as well as elements that make a particular cryptocurrency valuable and interesting to investors.
Expert traders learn about the number of tokens released and reserved by the founders, and they often do not favor projects where most of the tokens are with a handful of individuals.
ii. Competitor Analysis and Use Cases
Understanding and mapping out the list of competitors and use cases, like quick and inexpensive payment services and privacy and anonymity features that successful cryptocurrency use, will help determine the best suit for you.
iii. Development Team
A good project is transparent about its development team, which helps one gauge each member's expertise.
iv. Active user base
The number of active users on a given blockchain network helps determine the number of traders for a given cryptocurrency. Projects with a stable user base are worth investing in and are sustainable.
II. For Short-Term Crypto Investment
For quick profit gains trading in cryptocurrencies, short-term approaches are more applicable. These are usually swing trading or day trading methods.
In swing trading, a speculative trading strategy in financial markets, a tradable asset is held for one or more days in an effort to profit from price changes or 'swings'.
The aim of swing trading is to make a lot of small wins that add up to significant returns. For example, a swing trader may earn only 5% gains weekly, but end up earning more in the long run than those traders who wait five months to earn a 25% profit.
In this short-term investment approach, technical analysis should be a primarily focus when assessing an asset's movements during short trading periods. This includes conducting thorough support and resistance levels analysis for short-term trading.
Support and Resistance Levels Indicators
The point at which an asset has dipped but bounced back after buyers stepped in on price levels charts is called the support level.
On the other hand, the resistance level indicates an asset's price struggle to move above or the asset's resistance from getting pushed in a certain direction.
In short-term trading, this technical analysis of support and resistance levels is an important strategy that’ll help you understand how to make quick profits in the short-term while others are unsure.