Simply owning bitcoin or other cryptocurrencies has shown to be a beneficial approach over time. The gains have outperformed those of other asset types by a wide margin. So, if you are thinking about how to invest in Bitcoin, one method may be to just purchase and hold. This is especially true in crypto bull markets, where declines are usually brief. Investors should keep in mind, however, that Bitcoin and other cryptocurrencies are extremely speculative investments. Just because an investment has performed well in the past does not guarantee that it will continue to do so in the future. One thing is certain: short-term traders must use some sort of rule-based trading approach such as crypto trading strategies. Nevertheless, here are some of the best and most compatible strategies that are only for cryptocurrency trading:
- Bot Trading
Bot trading, often known as high-frequency trading (HFT), is the practise of using algorithms and trading bots to perform a large number of deals in a short period of time. This strategy necessitates a thorough understanding of complex trading tactics and programming. While cryptocurrency trading bots do the actual trading, high-frequency traders do not just sit back and let a computer programme handle everything. Trading bots entail devising a specific strategy, creating the right programme to carry out that plan, and continuously monitoring, backtesting, and upgrading the algorithms to keep up with changing market circumstances.
The goal of this technique is to profit from relatively modest price movements over short periods of time. These are frequently market inefficiencies; such as bid-ask spread gaps or liquidity gaps. Scalpers typically employ leverage, such as margin or futures contracts, to increase their earnings since they are looking to profit from small price swings. However, because this method magnifies possible losses, risk management is very crucial. To select entry and exit positions for their trades, scalpers may use tactics such as volume heatmaps, order book analysis, or a variety of technical indicators.
- Range trading
Range trading is based on the assumption that prices tend to move in a specific range. Candlestick charts, as well as support and resistance levels, are used in this method. When prices hit a support level, traders may purchase, and when prices reach a resistance level, they may sell. Alternatively, they may go short when prices hit resistance and then close the position when prices fall back to support. Range-bound trading is exemplified by pivot points. Calculating pivot points offers investors an indication of where momentum reversals are most likely to occur.
- News and Sentiment Analysis
Looking at headlines and general market mood may also be employed in Bitcoin day-trading, albeit it’s less common among short-term traders. Big news events may move crypto prices swiftly at times. There are other websites that use Twitter buzz to try to follow the mood of the most popular cryptocurrencies. More optimistic sentiment means more positive tweets about a coin, whereas more bearish emotion equals more negative tweets.