Since the beginning of cryptocurrency trading and investing in 2008, the cryptocurrency industry has witnessed many cycles of development and barriers, resulting in larger trends and a significant position in the global era today. With the rise, a huge number of investors and traders have started adopting experienced strategies to trade crypto, however somewhere fail to manage consistency, resulting in a downfall. Crucial to understanding, cryptocurrency trading yields results only with firmness and a process one can stick upon.
The Basics: What is Cryptocurrency Trading
The process or act of reckoning on cryptocurrency price movements through a CFD trading account, or purchasing and trading coins via an exchange is termed cryptocurrency trading. CFDs trading are known as derivatives that allow one to assume cryptocurrency price movements, where one does not need to have ownership of the underlying coins. The key here is to go long (to buy) if the coin grows or go short (sell) if the prediction says fail.
Cryptocurrency trading through exchange means buying the coins themselves. An exchange account is needed to put up the asset value in order to open a position and store the tokens in wallets until you want to sell them.
Choosing The Right Cryptocurrency Trading Strategy
Before digging deep into cryptocurrency trading and its consistency management, one needs to plan and choose the right strategy based on the goal, time, efforts, etc. The first and foremost thing to be mindful of is choosing the right trading strategy and processing the next steps accordingly. cryptocurrency trading strategies can be divided into two broad categories, active trading strategies, and passive investment strategies.
Active Trading Strategies
As the name suggests, active trading strategies require consistent monitoring and active portfolio management. Day trading, swing trading, trend trading, and scalping comes under active trading strategies.
- Day trading – A type of trading that involves entering and exiting positions on the same day with an aim to capitalize on intraday price moves happening within one trading day.
- Swing trading – A long-term trading strategy that involves holding a position for more than a day. Here the traders try to take advantage of the market volatility and use technology as well as fundamental factors to cultivate their trading methods.
- Trend trading – Holding the position for a longer period of time (a few months), taking advantage of the directional trends.
- Scalping – focuses on exploiting small trends and moves rather than sticking to drawn-out trends, making trading quick and profitable.
Passive Investment Strategies
Typically requires lesser time and attention, passive investment strategies are more laid-back approaches. The buy and hold method and index investing method are some approaches that come under the category.
- Buy and hold – The method where traders purchase an asset with an intent to hold it for a longer period of time irrespective of the market volatility and fluctuations.
- Index investing – The process of buying ETFs and indices in the conventional market is termed index investing and is available on both centralized exchanges and within Defi movements.
How To Maintain A Consistent Cryptocurrency Trading?
- It is vital to stay active in the market trends, big or small. However, consistency comes with a routine and breaks. Choose hours you feel the most active upon and trade within it. After that, set aside the process and continue to a healthier lifestyle.
- Too much information can be harmful too, especially in the case of market downturns where it becomes easy to get overcome by instincts and fall into badly timed trades. The key is not to fall prey to FOMO (fear of missing out), FUD (fear, uncertainty, and doubt)
- Always set clear goals, diversify and trade within your chosen time and means. Irrespective of the asset and time, never invest more than you can afford to lose.
- Holding on to long-term gain and critical analysis. If your chosen asset’s value has gone down since you bought them – it results in unrealized losses (realized only when they are sold for less than you purchased value).
- To ensure protection and avoid volatility during a market dip, convert some into holdings for stable assets.
- No matter the upgrade or downfall, there is always a new window of opportunity for assets on discount after a cold and dark crypto winter.