Using appropriate strategies in crypto-trading brings more profit than trading without them. Strategies are associated with the trade of specific coins, a particular time, typical situations in the market. This variety often prevents new traders from sorting out the differences and choosing the right one. As a result, beginners tend to follow at first quite understandable. This method rarely gives a positive result. Let's consider what is a strategy and how it works.
Let's start with the benefits:
- Understanding the sequence of trade. Strategy helps to work with a huge amount of data. Chaotic actions are hardly able to take into account these data.
- Save time. Strategies involve trading only under certain circumstances.
- Reducing the risk of erroneous decisions taken on emotions. Strategies help to respond less emotionally to market movements. This saves power and increases trade efficiency by reducing errors.
The strategy is a way of working with data.
The more the data taken into account the actions, the higher their effectiveness. Actions that take into account all the mathematical data will be the most effective.
All data cannot be taken into account: there are too many of them, some of them are connected with each other by too complex mathematical relationships.
The strategy uses only a small portion of this data. It is important that the mathematical relationship between them is more or less clear to the trader.
It would seem that the more data a trader understands, the more strategies he can draw up and the more effective they will be. But practice shows that there is no need to know all the strategies of the world. For successful trading on a crypto market, it is sufficient to competently apply 3-5. “Literacy” equals “a confident understanding of under what conditions, concerning which coin it is better to apply this or that strategy and why.”
To trade some coins, you can get by with 1-2 strategies. After numerous experiments, some experienced traders choose one, study it thoroughly and work only with it.
It works for them because a thorough understanding of the strategy significantly reduces the number of errors and their consequences - losses. Most transactions are profitable.
Trading, it is also a trading strategy - a set of rules and conditions that describe the actions of a trader under certain circumstances in the market.
- Entry points to the market.
- Point of exit from the market.
- Approximate time intervals between entry and exit points.
- Approximate time intervals between two consecutive entry points.
- The percentage of capital depending on the conditions under which the position is opened
In drawing up a strategy, it is important to take into account the type of currencies. In the market of popular and volatile coins, the trading frequency can be higher than when trading in little-known and slow-growing tokens. Deals with them may be less frequent since it is more difficult to wait for them to jump or fall.
The strategy is based on a pattern that distinguishes one coin from another.
One token grows at a particular time of the day, and another in response to a certain market situation increases volatility. And so on.
To form a trading strategy, you need:
- Analyze the market behavior of specific currencies
- Select the most important patterns and take them as a basis,
- Supplement with parameters that allow the maximum use of patterns.
- Determine the rules and procedures for the occurrence of the desired market situation
The task is to extract maximum benefits from the features of the market behavior of the coin. It depends on how accurately the trader has determined the patterns and how correctly he has chosen the tactics of reacting to them.
When developing a strategy, you will have to use some methods of technical and fundamental analysis, as well as understand how other market participants behave in a given situation.
The market behavior of each coin as a whole is patterned, unique in its details. Therefore, there are general and individual strategies.
General strategies are based on a course motion pattern. Narrow strategies are based on the unique features of the movement of a particular coin.
Any token is based on a template, so common strategies work as a basis for narrow ones.
The list of template strategies, by which most individual crypto-strategies are based, is finite.
Common trading strategies in the cryptocurrency market
Conventionally, they are classified according to two parameters:
- trading time
- market situations in their basis.
The trader opens and closes positions during the trading day or day before leaving. He does not leave any open position.
It is distributed on the crypto-market among those who do not know what automated trading by a bot is, since, for an uncontrolled period, the price can go in any direction at any speed. Closing positions for a time interval in which it is impossible to control the price reduce the risks.
The actions of the trader depend on certain circumstances and no matter how often they occur. For example, a trader decides to trade only at the time of the trend reversal. Then he waits for a reversal and makes a deal as often as it happens: once an hour, once a day, or once every few days.
The advantage of the strategy is that it is important to respond to a specific change in the market. A trader works with a small number of tools, relatively easily tracks the right circumstances and makes fewer mistakes than traders who try to follow everything at once.
Here it is important to trade within the cycle. A cycle is a situation that develops in a certain period of time. This could be an asset rise, recession, flat, temporary increase in volatility, and so on.
A cycle rarely lasts less than ten hours - usually several days.
How it works:
- trace the beginning of the cycle,
- correctly determine its specificity,
- respond in accordance with it,
- wait until the end of the cycle,
- make another deal and fix income.
If the specifics of the cycle are determined correctly, then one can fairly accurately predict the development of the situation and the end time of the cycle. The trader does not work for short segments within the cycle - he waits for his end and fixes the predicted income.
High-frequency trading, which involves making a profit at every rate fluctuation, including the minimum. Transactions are concluded several times per hour, sometimes - several dozen times per hour.
When scalping, the trader analyzes the deals in the order book, and if he sees a clear excess of the volume of purchases over sales, he opens the deal in the hope of a rapid increase in value.
The advantage of the strategy is that, as a rule, it is not necessary to wait long for the market situation to analyze the market in detail and in depth.
When scalping, each transaction usually lasts no more than a few minutes.
In practice, traders rarely scalp themselves. This is due to the high complexity: the combination of high speed and the need to analyze a large amount of data, mostly scalping trading robots who make decisions about opening trades based on programmed algorithms.
or how to use the periods of correction within the trend.
You can always see a moment when the market price of a crypto active starts to seem overpriced (on an uptrend) or undervalued (on a downtrend). Then there is a slight correction - and the trend continues.
The strategy is to crank up the deal when the asset reaches its maximum as part of the correction. On an uptrend, buy when, as part of a correction, it will decrease to the maximum. On the downtrend - to sell when it rises as much as possible. Profit is obtained as a result of the second transaction, after the resumption of the trend.
To enter, the transaction is usually used as a small percentage of the deposit. As a rule, this figure ranges from 0.5 to 2%.
On the crypto market, this strategy brings significant profits due to strong volatility, and due to which correction and continuation of the trend play a special role.
Trading on the rebound.
This strategy often helps to buy an asset at the lowest possible price.
When the price falls, the trader predicts a mark from which with high probability the price will push off and go up. At this point, he buys coins and sells when the price rises above the average.
The point of rebound is often either an important mark psychologically for a trader or a figure predicted by methods of technical analysis.
Impulse - confident course moves up or down, with almost no corrections.
When a trader sees signs of an impulse, he trades along with a trend: he buys a cryptocurrency when he sees the beginning of a “pulsed” uptrend, sells - when he sees the beginning of a pulse fall.
To make a deal, it is not necessary to wait for a minimum or maximum: the strength of impulse trends brings a good profit when the price approaches extremes.
This strategy is also considered highly profitable. Since the crypto rok is volatile, impulse trends are quite common, and it is relatively easy to track them.
The task is to open positions at the very beginning of the trends on the breakout mark, after which a reversal will follow.
For example, a trader correctly predicted the price level, after breaking through which the downward trend will unfold and go up. Then he will buy coins at the lowest price at the very beginning of the uptrend.
It works in the opposite direction, on uptrends.
The strategy determines the most profitable entry points to the market and brings profit without action within the trend.
This is only a small part of the strategies. It is believed that, if properly executed, these strategies bring profit on any cryptocurrency pairs, regardless of economic and political factors.
They are used on the crypto-market more often than others since they are most convenient for trading volatile and hard-to-predict assets - most cryptocurrencies :).
Buy & Hold: what's important to know
“Buy and hold” is a classic long-term strategy when a position is opened for a period from a month to a year.
In this case, the fundamental factors are analyzed first.
In the long run, the growth potential of cryptocurrency depends on the demand among investors and users, so information about technical capabilities, a roadmap, a project team can help in predicting how the course behaves.
At the same time, it is important to remember that a sharp growth of the coin by hundreds of percent will inevitably lead to the fact that investors start recording profits, which is why the rate will turn down. The most striking example of such a situation is the sharp rise in Sia's cryptocurrency in mid-2017. The red color on the chart indicates unsuccessful entry points, green - good opportunities to buy.
Sia growth chart in the middle of 2017
The main risk when working with this strategy is a sharp collapse or a long fall in the value of the asset.
When investing “long,” it is important to be prepared for an unfortunate coincidence of circumstances where the value of an asset can fall several times.
For long-term storage of funds, it is better not to use cryptocurrency exchanges: the story knows a non-zero number of burglaries and other fraudulent actions with the withdrawal of money. For long-term storage of cryptocurrencies, only “cold” wallets that are installed on the user's computer are suitable.
The Buy & Hold strategy is rarely used for a single asset. Typically, traders make up a full-fledged investment portfolio.
Advantages of Buy & Hold strategy:
- the most relaxed trading style
- does not require permanent storage of currency on the exchange
- brings a high income in the long run
- high risk
- lack of stable income
Using of Smart Trade and Bots partly reduces these risks: the algorithms will sell coins at StopLoss, which will follow the price, sell with split targets, and will not fail on squeeze or on another short-term rate jump - in general, there are many ways to maximize profit. You can learn more in the blog, and try it here.
Which strategy is better to choose?
Behavior beginners crypto trading characterized by two extremes.
Above, we wrote that in the market for some cryptocurrencies, you can get by with 1-2 strategies - and this is often done by professional traders.
And the first category of newcomers, too, often begins with the extended use of one strategy, though for other reasons. In their case, this is less justified, since other strategies may suit the novice trader not less, but even more. Because of this, newcomers are usually advised to alternately try different strategies.
The other extreme is to try to use all strategies at the same time, especially when working with a single cryptocurrency. This is also a mistake, as it hinders the detailed study of each strategy, knocks the trader down and creates chaos in his picture of the market.
The fact is that it’s not the strategies that work by themselves - the adequacy of the trader’s logic works.
How adequately you understand the market and the specific coin - your strategy will be as effective as a consequence.
The strategy is a matter of technology, the execution of which is better to delegate to technology. Someone was afraid - and he came too late, someone started fussing - early. Someone lost their nerves - closed the order in the minus just before the turn on growth, someone persists, unable to admit his mistake - and multiplies the loss. Someone sits and monitors the schedule for hours, and someone - looks at the stock exchange a couple of times a day.
The algorithm doesn't have such problems.
These tools are already used by more than 60 thousand traders from 13 countries of the world and earned them a total of $ 2 million, which is an average of + 15% monthly.
You can find it here, it's free: OPEN
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