Best crypto trading strategies
Whether you are using trading bots for trading or trading manyally, there are a number of trading strategies you can use for crypto trading.
Some of them can be easy to understand and might be good crypto trading strategies for beginners while others assume more extensive knowledge and as such, are mainly more advanced crypto trading startegies for people who already know what they are doing.
There are numerous different crypto trading strategies you can try. Let's take a look at some of them below.
Smart Rebalance trading strategy.
The idea of smart rebalance trading strategy is simple. The prices of cryptos change all the time, and you could be taking advantage of them. The idea of smart rebalance strategy is to keep the proportion of the cryptos in your wallet always the same.
Meaning, if you initially have 40% of BTC in your wallet and 60% ETH, then this proportion should always be maintained.
If the price of BTC goes up a bit and the proportion grows higher than 40%, you sell some BTC and use the money to buy ETH, therefore restoring the initial balance.
The next day the opposite might happen and then you sell ETH or buy BTC.
In the long run you end up with more BTC and more ETH without spending any additional money.
So occasional portfolio rebalancing can help you increase your crypto holdings without spending a dime.
Of course, it has its pitfalls and it can also be very time consuming if you're mainly just a passive crypto HODLer or if you own a lot of different cryptocurrencies.
Because of that the easiest way to use smart rebalancing strategy is by using crypto trading bots.
Learn more about smart rebalancing crypto bot.
Day trading strategy
The idea of this crypto trading strategy is simply to take advantage of intraday price movements and sell when the crypto price is high and buy when the crypto price is low.
Obviously, you never know when these situations occur. But you can rely on technical indicators to help you with that as much as possible.
By the end of the day, this trading strategy is sort of an advanced strategy and not recommended for beginners.
Range trading strategy and reverse trading strategy
Range trading strategy is another advanced crypto trading strategy where you need to use technical indicators to predict trend reversals.
The idea is to understand the price trends and enter the trade when you see a trend reversal is about to take place or has just occurred.
However, your timing has to be right and making wrong prediction on the reversal or time it wrong, it can be very risky.
One way or predicting reversals is to understand the resistance and support levels.
Resistance level is the price above the current price, the point the price can rise to.
Support level is the price below the current price, the point the price can fall to.
Many traders rely on experienced trading analysts to share those support and resistance levels every day.
If you're a good at technical trading yourself, you can try to figure out those levels yourself. Besides the price levels you can also pay attention to overbought and oversold zones. These can be found by using Stochastic Oscillator and RSI (Relative Strength Index). For example.
But again, this assumes you have already enough knowledge about the technical indicators.
If the crypto price has traded between these levels for a while, chances are that the levels remain the same.
So when the crypto price is close to the resistance level, it might make sense to sell the crypto.
When the price goes near the support level, the price might go up again.
But if the price crosses either the support or resistance level, a trend reversal is possible.
Scalping strategy
Scalping strategy is not about earning a lot from each trade, but rather the volume of the trades. In order to make money with scalping, you need to win with more trades than you lose.
Scalping focuses on making as many trades as possible within as short time period as possible.
No trade should take more than an hour (to buy, and sell).
Scalping strategy is all about taking advantage of the smallest market changes. Make the buy, wait for price to change a bit, and sell it quickly.
Something that you need to keep in mind with scalping, is the trading fee. And if the trading fee is high, making a lot of good trades might still leave you in the minus.
In order to be profitable with scalping strategy, you need to maintain higher win ratio.
The best time to use scalping strategy is on a calm market with low volatility and little volume.
Dollar-Cost Averaging (DCA) trading strategy
DCA or dollar-cost averaging strategy simply refers to investing a fixed amount of money at regular intervals.
The basic premise of the strategy is that it helps building your portfolio in the long term.
Instead of investing a lot of money at once, you invest smaller amounts, but regularly. You can also add the extra rule that you buy the crypto only when the 24h change is negative.
DCA is especially a great crypto trading strategy for beginners as it can help reduce the impact of market volatility.
These days it has also been made very simple - most exchanges offer automatic crypto purchases. So you don't even have to manually buy anything. Just keep money on your account.
Some crypto exchanges where you can use automatic buy option are Binance and Gate.io.
The difficult bit with DCA is to know when to exit exactly, when to sell cryptos.
Golden Cross strategy and Death cross strategy
This strategy is based on moving averages (MA). The golden cross/death cross strategy uses two moving averages.
The moving averages used are generally 50 MA and 200 MA and you are looking for times when the moving average lines cross each other.
The strategy works best over long term MAs where 50 MA is 50-day average and 200 MA 200-day average.
The good time period to use here is 18 months.
Golden Cross
Golden cross occurs when the 50 MA crosses the 200 MA and going up. That's called convergence and is a buy signal.
Death Cross
Death cross occurs when the 50 MA crosses the 200 MA and goes down. That's called divergence and is considered a sell signal.
Golden cross / Death cross strategy works the best in very volatile markets when the buy and sell signals don't occur too frequently.
In case of mainly sideways movements it can give a lot of false signals.
This crypto trading strategy is obviously meant more for advanced traders.
RSI (Relative Strength Index) divergence crypto trading strategy
This trading strategy can help in predicting trend reversals before they actually happen.
RSI calculates the average number of gains and losses over 14 day period. The indicator value ranges between 0 and 100 and it helps to see when the crypto has been overbought or oversold.
RSI mostly moves between 30 and 70. So when it goes above 70, it triggers the sell signal, as based on RSI the crypto is overbought. Similarly, RSI below 30 triggers the buy signal.
Of course, RSI can often give false signals. Especially when used just on its own.
That's where we add the divergence factor to this strategy.
In normal situations, RSI and price move in the same direction.
But if the RSI is rising and the price is falling within a 4-hour or daily window, it can be a good early indicator that the trend is about the change.
So when using this crypto trading strategy, first wait for RSI to cross 30 or 70, and then look for divergence.
If RSI is going up and price is going down, that would be a buy signal.
And if RSI is going down, and price is going up, that would be a sell signal.
Diversification strategy
This strategy is all about logic. It is usually not suggested to put all your eggs in one basket. Instead of just buying one crypto for a lot of money, buy 5, or 100, Just to diversify your portfolio as much as possible.
While in case of gains in one crypto won't increase the value of your entire portfolio as much. Losses in that one crypto don't decrease the money of your entire portfolio that much either.
Arbitrage trading strategy
This strategy assumes you have accounts in multiple crypto exchanges.
Sometimes the value of different cryptos can be slightly different in different exchanges.
Arbitrage strategy takes advantage of that fact and buys cryptos in the exchange where the price is lower and sells the crypto in the exchange where the price is higher.
Obviously the prices are generally not very different, so expect to make only a little per trade. And you also need to be aware of the trading fees.
Follow the trend strategy
Follow the trend trading strategy is all about riding the wave. You only place trades in the direction of the long-term trend. So if the market is going up, you buy; if the market is going down, you sell.
Of course, crypto market is not predictable and what might have looked like a surefire trend might actually not be one. So you always need to have your stop-losses ready to fire as well.
Fade trading strategy
Fade trading strategy is all about betting against the current trend. This, of course, makes it a very risky strategy.
It should mainly be considered when the volatility in the market is high.
How to use fade trading strategy?
Firstly, ideally you could use 2-hour chart.
Conditions to look for to enter a trade
- Look for red candlestick bar
- Look for 10-bar simple moving average
- The most recently closed candle must be red
- The candle must be above the 10 bar SMA.
- If it is below the 10 bar SMA, it must touch the moving average.
Where to place the order
- Add the buy entry stop order 2 points above the high of the red bar
- Add a protective sell stop at the value of the low of the red bar
- If the order hasn't been filled by the next bar's close, so within 2 hours, cancel it, and wait for another setup.
Riding the wave
- If the order was triggered, then it's time to reduce your exposure, reduce risk and place trailing stop AFTER the first candlestick has closed
- Move the protective stop to the low of that bar
- Should the value be lower than the value of the original stop loss, do nothing
- As long as each candlestick moves consecutively higher, change the stop loss to the new low
- Do that until the stop loss is triggered
(We found this neat strategy here)
Suggestions when using crypto trading strategies
- Keep in mind that NO trading strategy is foolproof
- Never make trades based on social hype
- Always do your own research
- The best time to buy is during bear market
- When you use leverage with any strategy, use it with caution
Is it safe to use crypto trading strategies?
Crypto market is very volatile and makes it possible to take very high gains. With or without using cryptocurrency trading strategies.
However, there are no guarantees and you should always know that crypto trading is extremely volatile and can result in huge losses.
Especially if you don't know what you are doing.
This content on Cryptolorium is for informational purposes only and should never be interpreted as investment advice. Nothing in this article should be taken as recommendation to buy or sell any cryptocurrencies. Crypto trading involves high risk and can result in loss of funds. Before investing money, everyone needs to do their own thorough research or seek advice from professionals.
