A recent news story says that more than 10 billion Indians own cryptocurrencies. The number, in all likelihood, may go even higher during this festive season.
But, like trading stocks and commodities, trading in cryptocurrencies is full of risks and traps. For crypto trading to pay off in the long run, traders need to come up with strategies that make trading fun and safe at the same time. Let’s start by talking about some strategies that can help you make money.
Day trading
With this trading strategy, you buy and sell positions on the same day. The goal of a trader using this strategy is to make money from intraday price changes in a cryptocurrency he chooses. For a successful trade, investors often rely on technical indicators to figure out entry and exit points for particular crypto.
Range trading
Market players also rely on experienced analysts, who give out support and resistance levels each day. Resistance is the limit to how high the price can go, so a resistance level is a price that is higher than the current price. Support, on the other hand, is a level that a cryptocurrency’s price isn’t supposed to drop below. This means that a support level is always below the current price.
Scalping
Profits can be made with this trading strategy by doing more trades. Even though trading involves risk, a smart trader pays attention to the margin requirement and other important rules to avoid bad trading experiences. Scalpers analyse the crypto asset, past trends, volumes and choose an entry and exit point within a day.
High-frequency trading is a type of trading that happens quickly (HFT)
Quant traders use HFT, which is a type of algorithmic trading strategy. This means making algorithms and trading bots that make it easy to buy and sell a crypto asset quickly. To make these bots, you need to know a lot about how markets work and have good math and computer science skills. Therefore, it is more suited for advanced traders than beginners.
Dollar-Cost Averaging
When it comes to getting into and out of a crypto market at the right time, it’s best to assume that it’s nearly impossible to time the market. So, “Dollar Cost Averaging” is a good way to invest in cryptocurrencies (DCA). DCA means putting away a set amount of money at regular times. This strategy helps investors build wealth over the long term without having to try to time the market.
But the DCA style could also make it hard to figure out how to leave. It’s important to study the market trend and know how the market works. Reading technical charts can also help you exit at an appropriate time. Before making a call, crypto investors should keep an eye on the oversold and overbought areas. You can refer to WazirX live charts for a better understanding of technical charts of various cryptos.
Create a well-balanced portfolio
Trading in cryptocurrencies is still in its early stages. Several countries are open to trading in cryptocurrencies, but some are still not sure about it. Central banks all over the world are working on better ways to regulate digital currencies, so trading in cryptos is often risky. But there are ways for investors to stay away from markets that are very volatile.
Building a balanced portfolio that includes variety of cryptocurrency like Bitcoin, Dogecoin and Ethereum could go a long way in beating volatility.
Investors can also invest the same amount of money every month in different cryptocurrencies. This will increase your willingness to take risks in a planned way, which will help your portfolio make money in the long run.
Don’t trade based on what people say.
One mistake that new investors often make is to get their news about cryptocurrencies from social media. Social media hype should never be used to decide what to invest in. Digital currency is a popular topic, so false information about it tends to spread quickly.
First-hand research
Research is one of the most important things you can do when trading. You don’t have to be an expert trader to do your own research on the price of an asset you want to buy. This means keeping up with all the news about the cryptocurrency industry. WazirX makes it easy to do this by putting together all the news stories you need to read before you start your day.
Also, before you bet on a volatile asset class like crypto, you should look at your own finances and set an investment goal. You can research Bitcoin, Ethereum, Tron, Ripple, Litecoin, etc. and start investing on WazirX .
Arbitrage
Arbitrage is the trading strategy of buying cryptocurrency on one market and selling it on another. Spread is the difference between the price to buy and the price to sell. Because liquidity and trading volume are not the same, traders can find ways to make money. To take advantage of this opportunity, you must open accounts on exchanges where the prices for the cryptocurrency you are trading are very different.
Bets on the volatility of Bitcoin
Crypto is one of the most volatile types of assets being traded right now, which is not news. Not too long ago, the price of Bitcoin changed by almost 30% in a single session. By trading in Bitcoin futures, you can bet on how volatile Bitcoin will be. To do this, you need to buy a call option and a put option at the same time. Both the strike price and the end date must be the same. When crypto prices drop or go up quickly, you must sell both the call and put options at the same time to get out of the trade.