Cryptocurrency Trading Strategy For Beginners – CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs with this investment provider. You can lose your money quickly because of leverage. Make sure you understand how this product works and whether you can afford the risk of losing money. CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs with this investment provider. You can lose your money quickly because of leverage. Make sure you understand how this product works and whether you can afford the risk of losing money.
With a number of cryptocurrencies still entering the market today, interest in trading the asset is as high as ever. Find the rht cryptocurrency trading strategy for you by browsing our list of strategies below.
Cryptocurrency Trading Strategy For Beginners
Cryptocurrencies are traded on decentralized markets, meaning they are not issued or backed by a central authority like the government – they run on a network of computers (called a blockchain). Due to the decentralized nature of cryptocurrencies, they are free from many of the political and economic concerns that affect traditional currencies.
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However, this does not mean that cryptocurrencies are free from external factors. In contrast, cryptocurrencies are unpredictable and are affected by factors such as supply and demand, media presence, integration of e-commerce payment systems, and major events.
These factors make it important that your cryptocurrency trading strategies don’t just focus on one way to navigate volatility, but focus on diversifying your portfolio. Trading a wide variety of asset classes – including cryptocurrencies – allows you to diversify your portfolio.
By diversifying the types of trades you place, you can hedge the risk of a market moving against you as well as reap the benefits of positive moves.
Due to the volatile and unpredictable nature of cryptocurrencies, it is important to have a cryptocurrency trading strategy in place before attempting to trade the market.
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When we talk about cryptocurrency trading, we are referring to the act of speculating on cryptocurrency price movements through a CFD trading account. These are leveraged derivatives that allow you to speculate on price movements without having to own the underlying asset.
Alternatively, you can buy cryptocurrencies through an exchange – meaning you will buy the coins yourself. You will need to create an exchange account, fund the full value of the position and store the cryptocurrency tokens in your wallet until you are ready to sell. Buying cryptocurrencies directly can be complicated and is not recommended for novice traders.
Trading moving average (MA) crossovers requires an understanding of MAs and trading crossover strategies. Let’s start at the beginning: a moving average is a lagging technical indicator that combines the price points of a financial instrument over a specific time frame, dividing by the number of data points to give you a single trend line.
This single trend line allows you to determine the direction of the current trend, reducing the impact of random price spikes. It also enables you to examine support and resistance levels by analyzing past price movements.
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So how do you incorporate this indicator into your cryptocurrency strategy? One of the main methods of using the moving average is called “crossover”. A price crossover, or crossover, is when the asset’s price crosses above or below an MA to record a potential change in trend.
To trade a moving average crossover in the cryptocurrency markets, you will need to wait for the price crossover before going long or short the cryptocurrency in question – using a financial instrument such as CFDs.
Another viable strategy is to apply two moving averages to a chart: one short-term and one long-term. When the smaller MA crosses above the larger MA, it means the trend is moving up – and is known as a golden cross, which can be considered a buy signal. When the smaller MA crosses below the larger MA, it means the trend is moving down – and is known as a death cross.
The Relative Strength Index (RSI) is a technical indicator, which is used to identify current, overbought and oversold market conditions. It can also be used to control divergence and hidden divergence in financial markets. This type of trading is also known as trend trading.
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RSI is a calculation of profitable price closes relative to unprofitable price closes – reflected as a percentage.
The indicator is described as a percentage out of 100, with a lower percentage usually indicating an oversold position and a percentage reflecting an overbought position as well.
So what is the best crypto strategy for RSI trading? Well, it depends on your risk appetite and trading style. RSI can be used to trade short-term and long-term swings when price is also range-bound in nature.
However, as markets regularly move in trends, using an RSI indicator to identify entry and exit trends will give you an idea of when to commit.
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A strong presence of a particular coin or cryptocurrency exchange can affect cryptocurrency markets. This cryptocurrency trading strategy only focuses on profiting from these “events”. It is a popular trading strategy for those new to trading.
News coverage of current events can affect the prices of many things, including currency pairs, stock indices and commodities – not just cryptocurrencies. This influence is not just speculation – many experienced traders will benefit from it.
Normally you would wait until the market shows a consolidation pattern before an expected news announcement (such as an earnings report) and then act as soon as a market breakout occurs. However, due to the volatile and unpredictable nature of cryptocurrencies, you may need to wait until such news is released before engaging in trading.
Simply put, you will be buying your chosen cryptocurrency when positive news is announced and shorting it when negative news is released.
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Scalping is the practice of opening positions according to a trend, often entering and exiting the market multiple times in a short period of time as it develops. Individual trades are only held for a few seconds – minutes at most – so it is one of the short-term strategies.
This trading strategy works very well for active investors. Scalping focuses on minute-to-minute price changes, which are determined by volume. Once the trade becomes profitable, you will exit the trade.
There is no “waiting for the market to trend” as you have to be quick and close losing trades immediately. The more volatile the market, the better to use scalping.
You may want to use rip tickets when scalping. With these, you can place a position in the opposite direction so that you are ready to exit, either taking your profits or limiting your losses.
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Keep in mind that scalping can be dangerous if you make multiple trades on a very short basis. It is necessary to carefully manage the risk.
If you are looking for a crypto trading strategy that does not involve indicators, then Dollar Cost Averaging (DCA) mh is for you. DCA is a popular strategy for both beginners and expert traders.
Instead of investing all your money in one particular asset at once, you divide your investments into smaller amounts. These amounts are then distributed over a predetermined time frame and regularly invested at a specific time and day of the week – and only on that day and time.
What does this look like at runtime? Let’s say you’ve decided you want to invest in bitcoin. You have set aside $15,000 for this purpose and have decided that the DCA strategy is the best way to proceed. So you will then divide your initial amount by the number of weeks you want the strategy to run for.
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For the purposes of this example, let’s say you want to invest your $15,000 for six months. You would then divide the original amount by 24 (the number of weeks in six months), giving you $625 per week. For the next six months, every Tuesday at 14:00 invest $625 in bitcoins – until your initial amount is used up.
Why invest this way? Buying an asset at regular intervals helps soften the impact of market volatility, meaning you’ll usually get more currency out of your final investment than if you invested all your money at once.
It’s important to note that to fully utilize this strategy, you’ll need to trade the specific currency through an exchange – and with us, you can only trade derivatives through CFDs.
Now you know the basics of cryptocurrency trading strategies, how do you get started? Well, you can follow our simple guide to make your first cryptocurrency trade:
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Originally posted 2023-05-25 12:48:37.