Cryptocurrency is virtual currency but has real market value like any other currency. It was designed as a unit of exchange which need not rely on a central bank to store assets. Cryptocurrencies are secured and fast means of payment. The number of cryptocurrency traders has increased at an alarming rate in the last decade. Traders hold long term positions or conduct short term trading, leverage trading, range trading and so on, according to the market condition and their objective. The price of Bitcoin, Etherium and other cryptocurrencies vary.The market for trading these digital assets is highly volatile. A wide variety of trading strategies and techniques are used by the traders to trade bitcoins and other cryptocurrencies. It is important to analyse the market before you start trading cryptocurrencies.
Trend trading strategy
Trend trading strategy is one of the most popular cryptocurrency trading strategies. Trend lines capture the direction in which the market is moving. Cryptocurrency trend line charts show volatility that is prevalent in the market. Usually, the selection of highs and lows indicated on the chart form a linear pattern. An upward trend is denoted by a series of highs and the downward trend by a series of lows. The trendline chart which shows sideways movement signifies that the cryptocurrency is moving in either direction. Long, short and intermediate trend lines are observed on the trendline charts. A cryptocurrency trader should keep this in mind when breaking down the trendline chart. The veteran traders can identify a trading opportunity easily and trades in favour of the prevailing trend.
Price action trading strategy
Price action, simply put signifies the changes of a security’s price. All financial platforms of cryptocurrencies generate data regarding movements of the market. These are displayed on the price charts. Even though no one can exactly foretell the highly volatile cryptocurrency market, price action charts go a long way in understanding the future market of the cryptocurrencies. It is dangerous and non-reliable to use price action trading strategy in the lower time frame when trading cryptocurrencies. The professional traders usually trade the higher time frame and this technique has some advantages. The false signals and spikes are mostly observed in the lower time frame so it is prudent to use the higher time frame.
Support and resistance trading strategy
The horizontal lines on a cryptocurrency trading chart express levels of resistance and support. The line that almost touches the lowest price is the support level while the line that almost touches the highest price is the resistance level. The support level is considered to be the ideal place for the traders to open a position. This is because the cryptocurrency is priced low at the support level. The crypto traders make more profit by closing the position near resistance level as the cryptocurrency is at the highest at the resistance level. In case of lateral movement, the trade-offs generally occur between support lines and resistance lines. A breakout is often followed by a new support level when a new trend is established.
Moving average trading strategy
Moving averages basically simplify the analysis of the cryptocurrency trading charts for a crypto trader. It depends on the average price of the coin in a given timeframe. A line is formed by connecting all the moving averages. EMA or exponential moving average gives more stress on the calculation of price values observed in the last few days than in the previous days. The lagging indicators are the key factors to apply moving average cryptocurrency trading strategy. A trader should take the help of a reputed broker to trade the cryptocurrencies using the moving average strategy. By using this strategy for trading cryptocurrencies, the trader usually trades the higher time frame in order to avoid false signals in the market.
Margin trading strategy
The margin trading strategy adds leverage to the investment and is mainly used by the experienced traders as it involves high risk. Unlike standard trading (leverage is 1:1) margin trading lets the traders open position with greater leverage. Margin trading strategy can be applied because of the fact that bitcoins and altcoins can be traded on borrowed money. In some exchanges, the user also lends out for the margin markets while in other cases, the exchanges themselves provide loans. In the first case, the users not only earn profits by trading the cryptocurrencies but also from the interest collected from lending out altcoins and bitcoins. The only condition is that the coins have to be stored in the exchange’s wallet.
The trader should meticulously analyse the cryptocurrency trading market and news, especially unexpected ones. The trendline charts, price bar charts, numerous indicators are offered by the brokers which aid the traders in trading Bitcoins, Etherium, Altcoins and so on. The success behind trading cryptocurrencies lies in devising a strong strategy after analysing the market properly.