💡 Know Cryptocurrency Trading Strategies 💡
Tags: web3, blockchain, tradingbotsautomation, tutorial
Published: 2023-01-25 16:46:55

## **Cryptocurrency Trading strategies**

Cryptocurrency trading strategy is buying and selling cryptocurrency with a framework that minimizes risk while improving chances of making profits. The main goal of trading strategy is to mitigate risks and define exit reactions based  on price volatility situations.

### ** Building a Cryptocurrency-Trading Strategy**

Comprehensive strategy has this aspects 🧮

- **Asset class you trade** - For this post its **Cryptocurrencies**. It includes details like coin-pairs you choose, their trading volumes, volatility and rankings based on cryptocurrency price aggregators.
- **Setups you take** - A setup provide more charts and analysis features for Technical Analysis(TA).
- **Tools and Indicators** - TA require that you draw lines and indicators based on price figures. Pre-build tools like Bollinger Bands and moving averages are important.
- **Entries and Exits **- stop loss and take profit placement.
- **Position sizing** - How much to spend per trade.
- **Documenting trades and measure portfolio performance**.
- **Minor details** like some specifics on best trading times,days or periods. Example - morning, weekdays, weekend or 24 hour trades.
- **Testing and reviewing strategy** - Back-testing and forward testing based on data from past trades.

## Types of Cryptocurrency-trading strategies.

### Active trading strategies 
 Consumes more time and attention. Involve frequent portfolio management and monitoring.

1. Day Trading
   Short term trading that involves entering and exiting positions on the same day - within 24 hrs. You take advantage of price moves that happen within a trading day.
   Day traders use price action and technical analysis to execute trades.

2. Swing Trading
   Long-term trading strategy that involves holding positions for longer than a day but not longer than weeks or months.It may take long to play out profits. Less time consuming. Good for beginners.

3. Trend Trading

- Involve holding positions for long. Trader can long on a down trend or vice versa. Also know as Position trading. It incorporates moving averages, trend-lines, and other technical indicators. History of asset pair plays a big role here.

4. Scalping.
   My favorite 🔥.
   One of the quickest trading strategies. Scalpers focus on small price moves over and over again.
   Scalpers don't hold positions for long time - entries and exits happen in seconds. It is more of High Frequency trading(HFT). Exploitation of bid-ask spreads, gaps in liquidity, and other market inefficiencies.
   Mostly recommended for whales - large traders, due to small percentage of profits, so trading large positions makes reasonable profits.

### Passive Trading strategies.

- These are more of investment strategies. More hands-off approach where portfolio management require less time and attention.

1. Buy and Hold

- Buying and selling assets with the hope of making a profit in the long run. Entry is based on fundamental analysis. Hold On Dear Life (HODL) Phenomenon is the buy and sell strategy. The HODL strategy may not be suitable for other cryptocurrencies especially volatile ones.

2. Index Investing

   Index Investing is buying ETFs and Indices in traditional markets.The idea is to create a basket of cryto-assets and create a token that tracks their combined performance. The basket could be of coins from similar sector or privacy coins or utility tokens with reliable price feeds. Involves buying a privacy coin index instead of picking on individual privacy coin.It's like betting on privacy coin sector instead of individual coin.

### Hybrid Crypto-trading strategies

- Arbitrage, market making, and Mining.

## Closing Thoughts💡

1.  Your trading strategies should constantly evolve as you trade.
2. Track and document your trading strategies.
3. Allocate different parts of your portfolio to different strategies.
4. Exercise proper risk management.
5. Automate! Automate! Automate! Don't fall to Emotions! The best way to profit is **AUTOMATION**. 

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