5 Best Strategies for Trading with Large Cap Cryptos
Cryptocurrencies have been around for some time now, which has brought forth a wide array of cryptos. According to Statista, Bitcoin is the crown jewel for large cryptos in the market, where it reached an all-time high in January 2021 and grew by over 400 billion U.S. dollars. A lot of people dived into the crypto craze to invest and trade and have found outstanding opportunities. That’s why everybody now wants a piece of the pie.
Well, if you haven’t, but are planning to join the many traders in the world, don’t bite your head off yet! Trading this digital asset class, more so large-cap cryptos, requires you to incorporate a trading strategy that will generate phenomenal profits. Some strategies mentioned below are simple and straightforward, as the arbitrage trading strategy. In contrast, some are complex and require combining a few techniques to strengthen your strategy, like swing trading strategy. Here are some of the best trading strategies to consider when trading with large-cap cryptos to unpack this further.
Scalping kicks off our list because it can be presumably the best and quickest trading strategy you can adopt in your lifetime. It includes increasing trading volume to make small trades within a short period while minting small profits. It focuses on scalpers exploiting small moves over and over again, which, when executed perfectly, can generate quantum profits. The short-time trade execution period of scalpers is often related to High-Frequency Trading (HFT), where traders who are quick to execute trades are more profitable than those who are slow to execute trades.
Also, since scalpers trade-in merely seconds, some leverage automated bots to increase their efficiency and the frequency of their trading cycles. Due to the small investment periods, scalpers never aim for big profits or wait for the market to reverse to minimize losses; however, they aim for several trades because profits are more than the profit of one transaction.
More, this strategy can bring bona fide results if you exploit market inefficiencies, more so markets with higher liquidity – with smooth and predictable entry and exit positions – to gain small profits that rack up over time.
Arbitrage trading is a very simple and straightforward strategy that anyone, even crypto novices, can incorporate as their chief trading strategy. It involves buying cryptos in one market and selling it in another market at a higher price. Since the cryptocurrency market is highly unregulated, some assets differ in their buy and sell prices in different exchanges. Also known as “spread,” crypto traders can utilize this difference in large-cap cryptos’ buy and sell price to gain some profits.
To utilize the arbitrage trading strategy, you can open accounts in different exchanges you believe will show significantly different prices for the same asset. For example, there are points where the colossal cryptocurrency, Bitcoin, trades at a higher price in South Korean exchanges than other global exchanges like in the United States. Also known as the “Kimchi Premium,” traders can harness this opportunity by simply purchasing Bitcoin on U.S. exchanges and selling on South Korean exchanges to gain profits.
On the other hand, you should first consider trading fees before engaging this trading strategy because your profits may get substituted by the costs required to make a trade on an exchange, thus leaving you with zero gains.
Probably, the most well-known active trading strategy, day trading, comprises entering and exiting the market on the same day. Day trading is similar to trading in traditional markets where trading opens only during certain hours of the day. The goal of day trading is to exploit cryptos prices within one trading day (intraday price movements).
Unlike traditional markets, crypto markets are open 24 hours a day, 365 days a year, so traders can enter and exit positions within 24 hours or less. Due to the high volatility nature of large-cap cryptos, executing small trades at this time results in big profits.
Day trading can take advantage of technical analysis to compute an efficient strategy. Nevertheless, day trading does not encompass predicting the direction of the market when volatility settles down. So, it may be highly profitable for some, and for others, it’s pretty demanding and may involve high risk.
Swing trading is dissimilar from day trading since it involves holding positions for more than a day but not more than a few weeks or a month. Here, traders try and seize waves of volatility that may take more than a day or so. You can incorporate some technical and fundamental factors to design a profitable swing trading strategy. Since fundamental factors cover a longer period to play out, you can use chart patterns together with fundamental analysis to strengthen your strategy.
Swing trading takes longer than day trading; that’s why it’s more beneficial because you have ample time to react to how the trade is unfolding. Here, traders face minimum risks because you compute your decisions with less haste and more rationality.
Buy Dips and Hold
The high volatility of cryptos, mainly large-cap cryptos, comes with outstanding opportunities. In a nutshell, when the price of Bitcoin and other cryptocurrencies goes down, this is the best time to enter the market. The price of Bitcoin has, on numerous occasions, fallen and recovered after a specific time over the years. Traders should capitalize instances like these to rip huge profits once the price recovers; nonetheless, it requires patience since it involves unstipulated time.
With the growing cryptocurrency market, led by Bitcoin, you can make the best of this market and capitalize using a well-distinguished trading strategy. You can use the five trading strategies I have revealed to you to devise your strategy that suits your financial goals and personality style. Most of all, when it comes to trading cryptocurrencies, only invest money that you can afford to lose. The strategies mentioned above will help you in trading cryptocurrencies while making Bitcoin your priority. You will need a winning game plan, a trading strategy of your choice, and it will take gusto, moxie, and perseverance to attain pristine results.