The 7 Crypto Trading Strategies Every Trader Should Know

Each crypto bull run seasonally brings a wave of new traders looking to capitalise on market uptrends. While some of these traders make a bang for their buck, others spiral downwards unable to cope with the volatility of the market. This isn’t mere luck, the winners have a secret: a trading strategy. 

While some of these traders will eventually move back to traditional lesser volatile financial markets, we’ll help you avoid this. This article equips you with the knowledge of efficient crypto trading strategies to navigate a turbulent market and make decent profits. 

Key Points

• Learn and apply various crypto trading strategies, including HODL, day trading, swing trading, scalping, position trading, news trading, and dollar-cost averaging.
• Recognise the unique aspects of the crypto market, such as its volatility, and 24/7 trading opportunities including the essentials of CFD trading for leveraging price movements without owning assets.
• Select a trusted, user-friendly trading platform with a favourable fee structure, comprehensive charting capabilities, and strong customer support, to enhance your trading experience.

What is Crypto Trading?

Crypto trading is the art of buying and selling cryptocurrencies. Why we call it art because in order for the trade to end in a success, it has to end in profit. This is a skill that takes time and practice to develop. 

Why crypto? The past few market cycles have proven that the crypto market is volatile, has wider spreads, and allows traders to trade 24/7 as opposed to the stock market which only operates for a designated time of day. Furthermore, CFD trading accounts facilitate traders leveraging the opportunity that the market presents.

CFD trading involves speculating on the price movements of cryptocurrencies without actually owning the underlying asset. Instead, traders enter into a contract with a broker to exchange the difference in the price of the cryptocurrency from the time they open the trade to the time they close it. This approach allows you to profit solely from the price fluctuations of cryptocurrencies without the asset ownership. The alternative way is to create an account with a broker where you own the underlying asset.

Crypto Trading Strategies

Now, in order to maximise your chance of profitability, it is essential to understand that there is no one-size-fits-all strategy. However, there are a few key points to consider before diving into any trading strategy. 

• Understand the crypto market — The crypto market is vastly different from conventional markets. The macros affect it differently, volatility is high, and spreads are wider. To become successful in this market, a trader should begin observing and studying how it behaves.

• Manage your risks — A proper risk management strategy can help you minimise losses. Since we’re operating in a volatile market, having appropriate margins, monitoring your trading strategy, and applying stop losses are extremely necessary. 

• Create track of your profits — Short-term trading strategies often give an illusion of being in profit, however, it is essential to keep track of profits on each trade by subtracting all transaction costs, platform fees, and margins. 

That being said, let’s take a look at some of the most popular trading strategies of the crypto market:

• Buy and Hold (HODL)
• Moving Average Crossovers
• Swing Trading
• Scalping
• Position
• News Trading
• Dollar-Cost Averaging (DCA)

Buy and Hold (HODL)

Hodl is a slang coined by the crypto community that means “hold on for dear life”. This denotes a long-term approach to crypto investing regardless of market conditions. 

Since this is a long-term strategy, it requires patience and belief in the token fundamentals. If an investor decides on this strategy, the best idea is to diversify your investments in the top tokens that you think have the best potential in the long term.

• Pros: This strategy is simple and requires initial diligence. Since HODLing does not take market conditions into account, it reduces emotional trading. Furthermore, it also does not take up any of your time as compared to active trading.

• Cons: Lower potential profits compared to active trading.

Moving Average Crossovers

Moving average (MA) crossovers is one of the intermediate crypto trading strategies that use simple technical analysis techniques to identify the best buy and sell opportunities.

A moving average crossover happens when two or more moving averages cross paths signaling a shift in momentum of the market. One of these moving averages is generally short-term while the other one plots a longer-term average. The point to consider while employing this strategy is that MA crossovers are lagging indicators especially when considering long-term crossovers. This means that when we see two MA lines crossing for a bullish signal, there’s a high chance that the uptrend rally has already started and is probably exhausted. So, the best idea is to consider short-term MAs like 5-day and 10-day plots. 

• Pros: Allows for systematic trading based on clear signals, potentially profitable in trending markets.

• Cons: Relies heavily on technical indicators, which may lag real-time events. Requires constant market monitoring and can be stressful during volatile conditions.

Swing Trading

Swing trading involves holding a position for a few weeks to a few months. This trading strategy is highly dependent on technical analysis to forecast price movements. This trading strategy is used to trade relatively stable coins, so the top 10 to 50 currencies work best for swing trades. 

Swing traders use their charting skills along with technical indicators to forecast buy and sell opportunities. The goal is to create a plan to make profits within a few weeks to a few months. Swing traders try to get their biggest chunk within this period and then move to the next opportunity. 

Swing trades work best for traders who have technical analysis knowledge, look to have intermediate involvement, and wish to capture wider price swings in a single trade.

• Pros: Aims to capture price swings

• Cons: More complex than buy-and-hold, requires active monitoring. 

Scalping

Scalping is a trading strategy that takes advantage of fluctuating prices to make small profits in a very short time (typically a few minutes). Scalpers do not run for big profits. Instead, they celebrate small wins and get their chunk by making multiple successful trades in a day. To break it down, scalping consists of the following elements:

• Short-term trades
• High frequency
• Low profits margins

Some traders use leverage to increase the trade capacity, increasing the risk and reward for each trade. Automated trading systems have also helped execute profitable trades without the need for the active involvement of the trader. However, since this trading method requires technical analysis and knowledge of margins, risk management, and quick exits, it is not best suited for beginners.

• Pros: High potential profits in volatile markets.

• Cons: Very high risk, requires constant monitoring, not suitable for beginners.

Event Driven Trading

Crypto prices are heavily correlated with macroeconomic triggers as well as news surrounding the token itself. Any major announcement, news, or event surrounding a cryptocurrency affects the price and those who react early take the bag. Forming a strategy solely around these events and triggers is what we call event-driven trading.

This strategy is popular in other markets as well. Traders usually use this coupled with their other strategies. The rule of thumb is to buy when there is positive news and sell when negative news comes out. 

One thing to consider here is that it is essential to verify the news before taking any steps. In case of false news, the market can react unexpectedly. 

• Pros: Potential for high profits on positive events, can be used with other strategies.

• Cons: Requires staying updated with crypto events, risk of false information or unexpected market reactions.

Dollar-Cost Averaging (DCA)

According to Tony Robbins, Investing $300 per month in the S&P 500 for a period of 7 years can make you a millionaire on your retirement. This strategy is called Dollar-Cost Averaging, or DCA. Why not invest all at once? Because crypto is a volatile market you’re never sure if you’re getting the best price. DCA helps eliminate market volatility by giving investors a mid-market price that ensures profits in the long term.

For example, you decide to DCA into Bitcoin. The investment capital you have will be divided by the number of weeks you prefer to invest. So, if you have $1,000 to invest for a year. You’ll divide 1,000 by the number of weeks (52) to get roughly $20 that you’ll invest every week at the same time regardless of market conditions. 

This strategy is suited for investors who have a long-term plan to invest passively. 

• Pros: Disciplined approach, reduces emotional trading, and reduces the impact of volatility.

• Cons: Requires patience and discipline; Lower potential profits compared to buying at the right time.

Choosing the Right Strategy

Considering all the different kinds of trading strategies, you might’ve noticed that each one is suited for a specific kind of investor. To find the perfect fit for you, it is essential to identify your goals. This includes your initial capital, time period, and risk tolerance. 

Risk tolerance – Only you can define your risk appetite considering your financial and social orientation. If you’re somewhat risk averse, DCA and HODL might be the best strategies for you. 

Availability – If you’re actively available to trade, you might want to learn a technical analysis technique or two. In this case, you may find success scalping or day trading.

Focused efforts on limited currencies – Crypto prices move fast. So, focus your time and efforts on a limited number of currencies and set clear goals and success metrics for your trades. 

For relatively new investors, the crypto space can be tricky to navigate. So, always do your primary research, avoid making decisions based on hype and emotion, and diversify your portfolio to create a blend of risk and stability. 

Choosing a Trading Platform

Once you have your trading strategy down, the natural step is to choose a trading platform that takes care of all your trading needs. Once again this is a step based on your goals and preferences. However, there is a set of features that help with the selection of a trading platform.

• Security Features: The crypto market is vastly unregulated. While the tech itself is secure, there have been instances where wallets were hacked through phishing attempts resulting in client funds being stolen. For the best trading platforms, you’d want to look for robust security measures like two-factor authentication, encryption, and cold storage. 

• User Interface: The biggest hurdle in crypto adoption has been the user experience of crypto platforms. However, platforms have now transformed themselves to compete with global financial markets. In a trading platform, we’d ideally look for a clean, intuitive interface that suits both beginners and experienced traders.

• Fee Structure: Short-term traders often fail to break even due to small profit margins. So,  transaction fees, withdrawal fees, and all hidden charges should be taken into account before selecting a platform. 

• Supported Cryptocurrencies: As a trader and investor, you want a variety of cryptocurrencies available for trading. The higher the number of currencies supported, the bigger the field you have to play. 

• Charting capabilities: Gone are the days when you had to move to third-party platforms to chart and carry out technical analysis. Platforms now support in-platform charting features. The better the charting features coupled with a healthy number of technical indicators, the better the platform would be for active trading in the long run.  

• Customer Support: As a trader, you use the trading platform intensively. This means that there’s a high chance that you’ll have to contact the platform’s support often. To avoid any frustrations, always look for a platform with high-quality service, multiple support channels, and responsiveness. 

Vantage has successfully been operating across financial markets for decades and now boasts its testimonials in the crypto space. What’s more? Vantage also offers CFDs which not only have security benefits but also leverage opportunities. Vantage’s other key feature is the ability to create demo accounts to familiarise newbies with the crypto space via CFDs as well as the platform itself. 

The Bottom Line

Crypto is an exciting space and probably the only market that can move multiple times in a matter of a few years, and even months at times. The recent wave of adoption has brought the market cap of the space to around $2.5 trillion. Considering that the stock market has companies bigger than the whole crypto space, we can assume that the currencies have a long way to go. 

The market’s volatility makes it a conducive space for profit-making through short-term trading strategies. To get more hands-on with these strategies and the crypto market in general, Vantage offers free demo accounts where users can trade and get the gist of the market with initial seed monopoly money.