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A lot of people want to trade cryptocurrencies by looking at the amount of returns some of them have delivered. But the inherent volatility of cryptocurrencies makes them extremely risky to trade if done without proper knowledge. This is why new traders should adequately research the best beginner crypto trading strategies.
Trading strategies help an investor organize the various mechanisms of making trades into an organized framework for their easy application. These are necessary to develop in order to derive maximum long-term benefits from the crypto market and therefore every kind of trader including crypto traders should have a clear idea about the kind of strategies they are going to apply to their trades. You can also follow crypto trading discord rooms for live education and trade alerts.
If you are a beginner, you might find it difficult to devise your own strategies.
7 Best Crypto Trading Strategies For Beginners in 2023
7 Best Crypto Trading Strategies For Beginners in 2023
1. Follow the trend strategy
The easiest and the most risk-averse strategy in crypto trading has to be going with the market trend. As per this strategy, a trader opens long trades only when the market is trending, and when the market falls, they go short. A trader following this strategy should note that only when a trend has been established in the market it should be followed, and on the flip side when the trend changes, the trader needs to end his position quickly. Basically, it is sort of a position trading.
A plethora of tools such as margin trading may be used in combination with this to maximize the number of gains. However, as the crypto markets are extremely volatile and trends can change anytime one needs to effectively shield themselves against sudden price changes.
2. Buy on the dip and hold strategy
Buying on the dip strategy is also a beginner-friendly one. As per this strategy, when the market is down is prices are low it is a fantastic buying opportunity and definitely not the time to remain away from the market. Just like stocks, the cryptocurrency market is also strong and every dip in this market is also followed by new highs. The crypto market is known for its extreme volatility and changes at any time so one can never know when the price again starts shooting up. Further, time holds immense importance in this strategy so one needs to have a great understanding of the market conditions to make the most out of this strategy.
3. Momentum trading
Momentum trading is also one of the easy beginner crypto trading strategies where the trader’s focus has to be to understand the market’s momentum and make the best out of it. Riding on the wave of the ongoing market momentum one has to decide their trade. Though it may seem to be a very simple one it does involve a lot of risks and can even be considered one of the riskiest crypto trading strategies. Volume plays an important role over here and usually defines the volume that a particular trend aims to generate.
4. Dollar-cost averaging (DCA)
This is the perfect strategy when it comes to finding the perfect entry and exit points in the crypto market. As it is impossible to time the volatile crypto market, the DCA approach can be applied. As per this strategy, only a fixed amount needs to be invested at a fixed interval and the focus should be on building long-term wealth. However, while exiting one has to understand the market cycles and its trends. Moreover, traders need to always monitor the oversold and overbought regions before arriving at any conclusive decision.
5. Day Trading
Day trading is an advanced strategy compared to the earlier mentioned ones and requires a lot of observation. It can sometimes look quite stressful as it demands a lot of time and attention. Day trading is a short-term trading mechanism in which a trader must take a position and thereafter close it on the same day itself, profiting from the daytime price fluctuations of his desired cryptocurrency. Generally, for this trading style price actions are used and technical analyses are performed while developing the trading ideas. Day trading may also be used in combination with other techniques to identify market inefficiencies.
6. Scalping
Scalping is a rapid trading strategy that focuses on small movements of coins, abuses them, and consistently records small profits. Basically, it’s like taking advantage of liquidity gaps, bid-ask spreads, or other inefficiencies in the market. Scalping is accompanied by an increase in trading volume, and scalpers often open and close positions within seconds. Scalping does not involve a lot of time and ideally should not exceed an hour, as the main motivation here is to allow the maximum number of transactions while making a small profit that is summed up over time.
However, in order to get the most advantage out of this strategy, you need to have a deep knowledge of market mechanisms.
7. Range Trading
In range trading, the traders basically depend on experienced traders and market analysts who extend help to them by discussing and giving out the support levels and resistance levels each day. The “Resistance level” is usually the price point up to which the price of a coin might go up and it always exceeds the ongoing market price level. The Support Level on the other hand is the price point beyond which the price of crypto is not supposed to fall. Due to this support levels are always below the ongoing market price level. For performing range trading, one needs to master the candlesticks chart pattern.
Crypto trading is still evolving but following well-defined beginner crypto trading strategies can help newbie investors do away with the extreme market volatility. Moreover, one should build a balanced portfolio including multiple cryptocurrencies like Bitcoin or Ethereum to cut back on the risk levels largely. Again, one should assess their risk appetite while investing in any of the coins and should only increase their risk exposure in a systematic manner.
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