Trading cryptocurrency is extremely popular in the crypto space. This is due to how lucrative it can be if done correctly. The crypto market is extremely volatile, which is great for traders, as this presents frequent trading opportunities. However, trading cryptocurrency must be done with a strategy in place. Let’s take a look at some of the more popular strategies that traders are currently using.
By far a popular strategy to use trading crypto is arbitrate trading. This strategy takes advantage of the way in which crypto is bought and sold in the space. For example, if you wanted to buy Bitcoin you could do so on a number of exchanges, such as Coinbase or Binance. However, it is often the case that there will be some slight variations in price across these exchanges as they are different levels of supply and demand. For example, the price of Bitcoin could be trading at $10,000 on Coinbase but $10,100 on Binance. This makes arbitrage especially effective, as you are able to capitalise on the price differences that exist between exchanges.
2. Swing Trading
One thing that makes trading cryptocurrency so great is the volatility. The price of Bitcoin can easily swing by huge numbers over the span of a few hours. This is great for traders that are using the swing trading strategy, as profits can be made on an upward or downward price swing. This strategy is also best used with automated tools, such as crypto bots and crypto signals (e.g. Binance signals). Successful traders using this strategy also have a good eye for when the market is going to swing upward or downward.
3. Fundamental Analysis
This is not exactly a price action trading strategy, but this strategy is also very useful for traders with a longer-term view. The fundamental analysis strategy is focused on identifying assets that are undervalued, and then profiting from price appreciation as the wider market realises the value of the asset. This strategy is normally used in the context of traditional markets (e.g. stocks and bonds), and as a result, the metrics that are used to determine the value of an asset can differ to cryptocurrencies. Whilst in traditional markets the Price to Earnings Ratio and Earnings Per Share Ratio is used, for crypto, metrics such as the quality of the development team and value proposition of the cryptocurrency are more likely to be used.
That concludes our list of crypto market trading strategies that some traders are using to gain an edge in the market. These are by far not the only strategies that are used in the space, so exploring additional strategies is recommended. Finding your trading style and then forming strategies that suit your style are great first steps in being an effective trader in the crypto space.