Cryptocurrency trading can be a stressful affair, especially for new traders. The market is highly volatile and it’s easy to get caught up in the fear of losing money.
While learning how to ride out the waves of uncertainty can help you stay on top of your finances, it’s important to find ways to make crypto trading less stressful.
What is Crypto Trading
Crypto trading is the process of buying and selling cryptocurrency. It’s a high-risk, high reward game that involves calculating the value of different currencies and predicting when to buy or sell them. The process can be complicated, but luckily there are plenty of resources out there that can help you get started.
Crypto trading is a 24-hour global market where currencies are bought and sold using real money (or other cryptocurrencies). This means that no matter what time zone you’re in, there will always be someone awake online who wants to buy or sell their currency.
This global nature makes crypto trading highly volatile because prices fluctuate wildly depending on how much demand there is for a particular coin at any given moment. Let’s say lots of people want Stellar crypto at once then its XLM price may increase significantly within minutes or hours.
Crypto Trading Strategies
Stop Loss Orders
A stop loss order is an important tool for any investor, but it’s particularly essential for those in the cryptocurrency market. Unlike stocks or other financial assets, cryptocurrencies can experience huge price swings. In fact, some of the most famous stories in cryptocurrency history include massive price increases followed by equally massive drops.
A stop loss order lets you set a price for your investment that will automatically sell it if your investment reaches a certain price. This can allow you to avoid losses from volatility and still take advantage of some potential upsides.
Moving Average Crossovers
Moving averages are used by traders to determine the trend of the market. A moving average is an average calculated from a set of numbers from the past. The advantage of using moving averages is that it smooths out fluctuations in prices and gives a clearer picture of what’s going on with the trend of the market. It also helps identify trends, find support and resistance levels, and make better decisions when buying or selling crypto assets.
Moving averages are usually used for intra-day analysis, but can also be applied for higher periods like weekly and monthly charts. They are easy to apply on any charting software, even if you don’t have any experience in technical analysis yet. The most popular period used by traders is 20 days, as it gives more insight into current price direction than shorter periods such as 10 days or 30 days.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum indicator that measures the speed and change of price movements. RSI is calculated by comparing the magnitude of recent gains and losses over a specified time period. A security is considered overbought when the RSI rises above 70, and considered oversold when the RSI falls below 30. The ideal range for an asset’s RSI to be in is between 30-70.
When using this strategy, you would wait until your chosen currency crosses into its respective “overbought” or “oversold” territory before buying or selling respectively because it usually means that another move in either direction will be coming soon after that happens. It can also be used as one piece of evidence alongside other technical indicators to confirm whether you want to enter into a long or short position on any given coin/token/crypto market cap listing page.
In arbitrage trading, you’re buying and selling an asset at the same time on separate exchanges to make a profit when the two prices don’t match up. This is an extremely difficult strategy to carry out successfully, but it is a great way to get started in crypto trading because if you’re able to pull it off, you’ll have a much easier time profiting from crypto.
Even if you can’t buy and sell at exactly the same time—say one exchange goes down temporarily—you can still make money by putting in a limit order that executes as soon as both exchanges are back online.
Scalping is a low-risk, high-reward trading strategy that involves making a series of small profits on an intraday basis. There are several ways to scalp, but the most common way is through price action. Traders who use this strategy are looking to make small profits on a regular basis and often work with tight profit targets.
The key to successful scalping is understanding price action and being able to read market conditions quickly.
Scalping essentially means trying to catch small gains on multiple trades over a period of 24 hours or so. These trades often occur within the same trading pair, though you can also trade across pairs (such as USDC USDT). It’s important to note that when you’re scalping, you should have your eye on the market as a whole and not just on a single cryptocurrency like Bitcoin.
DCA (Dollar Cost Averaging)
The easiest way to explain dollar cost averaging is that it’s exactly what it sounds like: investing a fixed amount of money at regular intervals over time. If you invest $100 each month for one year starting in January, for example, that’s a form of dollar cost averaging. The name comes from the fact that when you average all those purchases together, they total out to be $1,000—which is your intended investment amount.
As a strategy for investing in stocks or other securities, it’s used to smooth out the volatility that comes with buying an asset at any one price point—if you invest at lower prices and then suddenly the asset takes off in value, you’ll be able to buy more shares later on because the value will have gone up.