Crypto Trading Strategies
Cryptocurrency investing can be confusing and overwhelming. With a plethora of options and constant market fluctuations, it can be difficult to know where to start. However, by understanding and applying some basic investment strategies, knowing the terminology and doing your research, you can make more informed decisions.
Unlike other markets like a traditional stock exchange, cryptocurrency can be traded 24 hours a day 7 days a week. Before starting to invest, its very important to understand more about the industry and how to be safe and protect your assets with things like seed phrases, smart contracts and the difference between custodial and non-custodial wallets. For more information on these, please visit our blog on Crypto Safety.
Once you’re ready to get started one strategy that can easily be applied is diversification. There are literally thousands of different tokens and coins available. By holding a mixture of these in your wallet helps you spread out your risk. Most investors agree to have a mixture of major coins such as Bitcoin (BTC), Ethereum (ETH) and Altcoins. The definition of Altcoins can vary but basically refers to everything other than Bitcoin and Ethereum. This strategy is no different than diversifying your entire portfolio with things like stocks, real estate, mutual funds and, of course now, cryptocurrencies.
Just like other types of trading, day traders invest in the cryptocurrency industry making trades on short time windows looking for small gains. However, many crypto investors HODL – or hold their coins for long term value because they believe in the future of the project and anticipate growth.
One popular strategy is to have a target price at which you plan to sell your asset and then stick to it, regardless of whether the price goes up or down. By sticking to this plan can help you to avoid the temptation of holding on to an asset for too long and having FOMO (Fear of Missing Out) for not Taking Profits.
Buying The Dip is another term adopted by the cryptocurrency community. Its not a new term, but the volatility of crypto makes it widely relevant. The idea of this strategy is that by buying assets when they are at a lower price, investors can potentially realize a greater return when the prices eventually rebound. Its important to have a clear understanding of the asset and its underlying fundamentals. This is especially popular with Major Coins like Bitcoin.
It is also important to be aware of the potential risks involved in cryptocurrency investing. The market is highly volatile and prices can fluctuate rapidly. Additionally, there is the potential for Rug Pulls – or fraud and scams. Because of this risk, it is crucial to Do Your Own Research (DYOR).
Please remember that before investing in any financial asset it is important to consult with a financial advisor, research the asset and market thoroughly and to understand the risks involved and invest only what they can afford to lose.
