Exploring Profitable Forex Mining Techniques – Crypto trading is potentially the most lucrative way to make money in cryptocurrencies. However, there is one important thing to make consistent profits in cryptocurrency trading: a trading strategy. In this article, we will explore the best and most popular crypto trading strategies, as well as explain how to use them.
Crypto trading is a method of making money in cryptocurrencies by buying and selling cryptocurrency assets at a favorable price. It’s a high-risk, high-reward way to make money. While trading cryptocurrencies is similar in many ways to trading more traditional financial instruments, there are also a number of differences. The main reason for these differences is the young and under-regulated nature of the cryptocurrency market, as well as the relatively low turnover.
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When trading cryptocurrencies, you cannot rely on luck. You must have a clear strategy to open positions effectively and make profits. A trading strategy is a set of rules that describe your trading activities. It usually includes the following:
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Experienced traders tend to use different strategies depending on the market situation and refine and update them as they use them.
Because there are many different conditions that influence the choice of trading strategy, there is no one universally best strategy for trading cryptocurrencies. In addition, the choice of trading strategy also depends on the length of time you hold a trading position. So, all other things being equal, the best cryptocurrency day trading strategies will differ from the best strategies for position trading. Below, we will explain some of the most popular crypto trading strategies.
Range trading is a fairly simple strategy used during sideways price movements. When the price moves sideways, it sets identical or almost identical to the local high and low, creating a resistance level and a support level. While lower volatility reduces the potential for profit, the relative predictability of those highs and lows can mean less risk.
Before you open a position in range trading, it is important to first confirm the range. This means that the price must have made at least two identical highs and lows without breaking above or below at any intermediate point. Once the range is established, the simplest trading strategy is simply to buy near the support and sell near the resistance. Experienced traders also often open short positions near resistance and close them near support, taking advantage of price movements in both directions.
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A Stop-Loss in range trading sets out the range limits. However, it is worth watching for signs of an impending breakdown, such as an increase in trading volume.
A variation of range trading is channel trading. In this case, the basic principles remain the same. However, it does not trade in a horizontal range but rather a channel formed by dynamic support and resistance lines. Unlike range trading, this strategy is used when there is a clear bullish or bearish trend.
Breakout trading is a very popular crypto trading strategy thanks to its versatility. A breakout is a situation where the price breaks through certain key levels. After an upward breakout, the old resistance level acts as new support. Similarly, after a downward breakout, old support levels act as new resistance. Outages are a common situation in the market. Typically, the most notable price movements are the result of breakouts in price channels or price patterns, such as triangles, flags or wedges.
In breakout trading, a position is opened once the price has passed a key level, such as a resistance level or a trend line. The classic way to open a position is to enter the opening of a new candle after a breakout. The Stop-Loss is set slightly below the break level (or slightly above in the case of a short position). The Take-Profit is often placed before the next key level. Sometimes, a Trailing Stop-Loss, which moves behind the price in the direction of the breakout, is used as Take-Profit.
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It is important to be able to recognize a false breakout, that is, a situation where the price has broken through a key level but soon returns to it. A common sign of a false breakout is low trading volume at the time of the breakout. Also, a good indication that a breakout is true is a large breakout whale body.
In addition, many traders prefer to minimize risk by opening a position after the price has returned to the breakout level and bounce back from it rather than at the moment of the breakout.
This is a very old and well-known strategy that often allows you to identify a trend change. This strategy is based on the use of two moving averages (MA) with different time periods: one with a longer period and one with a shorter period. Traders who prefer swing trading often use MAs with time periods of 50 and 200 days. For day trading, MA and time period of 9 and 20 candles are more suitable.
In order to at least partially screen out false signals, the RSI indicator is used. When the short MA crosses the long one above, and the RSI is above 50, this is a signal to open a long position. Similarly, when the short MA crosses a long one below and the RSI is below 50, this is a signal to open a short position.
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A position is usually closed either by receiving an opposite signal from an MA crossover or by using a Trailing Stop-Loss.
This strategy works best when there is an apparent trend. It is not recommended to use it during sideways price movements. Also, since moving averages are lagging indicators, crossovers do not provide the best point to open a position.
MACD (Moving average convergence/divergence) is one of the most popular indicators in trading. However, it is not possible to build a consistently profitable strategy on MACD alone. That is why other tools, such as Stochastic, RSI, Parabolic SAR etc., are usually used together with MACD.
A very popular and simple strategy is the use of MACD in conjunction with Parabolic SAR and exponential moving average with a period of 10 candles (EMA10). With this strategy, the signal to open a long position is a combination of the following conditions:
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Because this combination of indicators can always give false signals, it is recommended to use a Stop-Loss.
The MACD is not well suited for trading in lower timeframes. It performs best on timeframes of one hour and above.
The price of the same cryptocurrency on different exchanges varies. Usually, the difference is small, but during periods of high volatility, it grows and can reach several percent. An inter-exchange arbitrage strategy involves operating on two exchanges at the same time. This strategy, unlike the previous ones, does not require knowledge of technical analysis and is quite simple:
Despite its apparent simplicity, however, this strategy is quite demanding and stressful. When looking for trading opportunities, you need to consider withdrawal, transaction and exchange fees. In addition, there is always the risk that the price of a cryptocurrency will change significantly due to high volatility, and that you will both lose profits and make losses. This is especially true for cryptocurrencies and slow transactions.
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Given the volume of information that must be processed and the speed required to take advantage of an emerging arbitrage opportunity, this strategy is very difficult to execute without the use of trading bots.
The choice of a trading strategy is an individual decision. It depends on many parameters: the amount of time a trader wants to devote to trading, the trader’s experience, stress tolerance, discipline, self-control, willingness to learn, goals they are pursuing, etc. In order to choose their own best. crypto trading strategy, new traders should ideally try many different strategies. Later, as they gain experience, traders usually try to refine the chosen strategy and adapt it even more to their own preferences.
There is no single crypto trading strategy that is the most profitable of all. The same strategy applied by different traders gives different results. Therefore, the most profitable trading strategy is different for every trader.
Perhaps the easiest crypto trading strategy is to use a technical analysis tool, such as MACD, Stochastic, Bollinger Bands or others, and a simple risk management tool such as a Stop-Loss order. With technical analysis platforms like TradingView, it is really easy to use them. However, using a single indicator gives too high a percentage of false signals, so it is always better to adopt more complex strategies.
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It is worth noting that all crypto trading strategies described here are fairly simple and suitable for beginners, with the exception of inter-exchange arbitrage.
There are many crypto trading strategies today, both simple and complex. Advanced strategies usually require some special knowledge or a deep understanding of the market. These strategies include, for example, using the Ichimoku indicator or trading based on the news.
Before using a trading strategy, study it thoroughly and make sure you understand how to implement it. Determine if it suits you and your trading style. Then backtest this strategy on assets and time frame where you plan to implement it, taking into account the current market trend. If the backtest is positive, try trading using
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