Top 5 Strategies for Trading Crypto

Welcome to the wild world of crypto trading, where volatility reigns supreme and every day brings new opportunities. With so many options and variables to consider, it can be overwhelming to know where to begin. But fear not, dear trader!

We’ve compiled a list of the top five strategies that will help you navigate the crypto market with ease. From identifying market trends to mastering risk management, these strategies offer the tools you need to succeed in the fast-paced world of crypto trading.

Top 5 Strategies for Trading Crypto
Top 5 Strategies for Trading Crypto, Image by GarryKillian on Freepik

Day Trading

Day trading refers to opening and closing positions within a day to capitalize on the small changes in the market. So, instead of purchasing a crypto asset and waiting for its price to go up over a long period, you wait for a price increase and sell it immediately. Repeat this process multiple times every time you see a new opportunity and voila, profit!

If done poorly, day trading can sink your capital rather quickly. From our experience, the key to succeed at crypto day trading is to get past the market volatility with the technical analysis of price action, volumes, chart patterns, and other indicators. As long as you don’t treat day trading like gambling and do your homework on which asset to invest in, day trading can make you a consistent profit on a regular basis. Have a look at this free crypto trading course that can teach you all about technical analysis and how to make profitable trades.

Scalping

Scalping is one of the fastest turnaround crypto trading strategies you can try. It involves capitalizing on the tiny short-term price movement by buying and selling crypto assets quickly (usually in under five minutes). Instead of waiting for big price changes, scalping is all about buying after small dips and selling as soon as the candlestick goes green again.

Since you are making the trades so quickly, the risk is quite low. However, this also means that the gain from each trade would likely be quite low as well. Here’s what we suggest doing to maximize your profits with scalping:

  • If possible, start with a large amount of capital (or margin trade) so even small gains of <1% add up to decent profits;
  • Look for a trading platform with low fees and high liquidity, such as MEXC;
  • Understand and implement well-known scalping strategies such as Exponential Moving Average, Stochastic oscillator, or William fractals;
  • Utilize trading bots that automatically open and close trades based on preset indicators and trends.

Range Trading

Range trading is all about identifying & understanding market trends and utilizing them for your profit. While the decision-making of a random individual trader can be influenced by countless variables, the market as a whole tends to follow certain patterns. 

Here’s what helped us understand this strategy in the beginning. Let’s consider a hypothetical crypto asset A. When the price of A reaches around $40, traders start closing their position which causes the price of A to go back down. But, once its price is below the $35 mark, traders begin buying it again — returning to a price increase. 

If you utilize the trading tools at your disposal to spot these patterns, you can buy a crypto asset when it’s at its lowest. You can then sell it for profit when its price is about to reach its peak.

HFT (High-Frequency Trading)

Think of High-Frequency trading as an even faster version of scalping. It utilizes powerful algorithms and automation tools to trade crypto assets in fractions of a second. 

These trading algorithms are designed to capitalize on minuscule market movements that are typically too fast for a human trader. HFT has the smallest per-trade profits, but the extremely high trade volume makes it quite profitable in the long run.

As you can imagine, crypto trading at this speed and accuracy requires expensive equipment and software. These are unfortunately outside the reach of the average individual trader. That said, we have reports that crypto exchanges are bringing HFT to their platforms in the near future. 

Dollar-Cost Averaging

Dollar-cost averaging (DCA) is the final crypto trading strategy on our list and works on a similar concept to traditional assets like gold or real estate. It involves investing a fixed amount into a crypto asset after a set interval and then holding it in the hopes of selling it at a higher price in the future. For example, buying $100 worth of ETH every Saturday. 

Unlike the other four crypto trading methods on our list that rely on quick trades, DCA is a long-term asset-gathering strategy with a good chance of paying off in the future. Just make sure to consider which cryptocurrency you are going to buy, how much you’ll invest, and how often. In our experience, your best option is to buy major coins like BTC or ETH on a monthly basis.

Common Mistakes to Avoid

Cryptocurrency trading can be a profitable venture, but it also comes with its own set of risks. There is a lot that can go wrong when investing in a market as volatile as crypto, especially if you’re new to the scene. 

Here are some common mistakes we see traders make on a regular basis that you should avoid at all costs:

  1. Choosing a crypto trading exchange without considering factors like fees, trading UI, available assets, etc;
  2. Failing to do proper research and due diligence on a coin or token before investing;
  3. Not diversifying your portfolio and investing too much money in a single coin or token;
  4. Not following a proper trading strategy or having a clear exit plan;
  5. Being swayed by social media gossip or influencer marketing to make impulsive trades;
  6. Not keeping track of important market trends and news;
  7. Getting caught in altcoin scams or fraudulent schemes.

Conclusion

If implemented correctly, each of the five strategies in our list is top-tier with a proven track record of high profits and minimum loss. However, not all of these are suitable for every trader. 

For instance, scalping and high-frequency trading are for traders who want quick turnarounds while day trading and range trading suit methodical traders who like to use analysis tools to predict market movement. If none of this fast-paced trading fancies your taste, you can rely on the dollar-cost average strategy to make a long-term investment.

Whichever strategy you choose, just make sure you understand and implement it properly.

Personal Note From MEXC Team

Check out our MEXC trading page and find out what we have to offer! You can learn more about crypto industry news. There are also a ton of interesting articles to get you up to speed with the crypto world. Lastly, join our MEXC Creators project and share your opinion about everything crypto! Happy trading!

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Daniel Chan

Daniel Chan is the CTO of Marketplace Fairness, and has been investing in crypto since 2017. With a background in tech, he has a passion for blockchain and can't wait to see what the future brings.

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Daniel Chan
Daniel Chan is the CTO of Marketplace Fairness, and has been investing in crypto since 2017. With a background in tech, he has a passion for blockchain and can't wait to see what the future brings.