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In the turbulent world of crypto, you will need courage of steel, a winning game plan and an intuitive trading platform if you want to win. You will discover nerves of steel and an intuitive trading platform through research, research and further research. Let's take a look at the X factor in this gumbo, which is the trading strategy you will use.
There are many trading strategies out there and some of the platforms some of the most popular day trading strategies are distance trading, scalping, and arbitrage.
Trading Range
In many cases, cryptocurrencies will trade for a long time within a certain range. Bitcoin, for example, trades between $8,601.40 and $10,210 for a 30-day period. This ±9.5% range seems unstable until you realize that Bitcoin can realize a ±43% change in 24 hours.
The Cryptomarket cap is small enough that it can be manipulated by one big mover. In some cases, those big movers will systematically manipulate the coin price up and down to profit from the range. If you pay attention to these patterns, you can also take advantage of them.
If you are trading ranges, you want to pay attention to the overbought and oversold zones. Overbought means that buyers have satisfied their needs, and the stock can be sold; oversold means the opposite. Chart indicators, included in leading stock chart programs, can help you find these zones. Common indicators used for this purpose include the Stochastic Oscillator and the relative strength index, or term (RSI).
Scalping
Scalpers take advantage of increased trading volume to generate profits. Scalpers can exit trades seconds after entering, and many use automated bots to increase the frequency of their trading cycles. Ideally, scalpers would like to exit the trade before news items or short-term fluctuations have a chance to change market sentiment on the coin.
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Playing Bitcoin Volatility
The Chicago Mercantile Exchange (CME) offers options on Bitcoin futures, opening up many volatility strategies for traders. Crypto has 5X the volatility of traditional asset classes. Volatility trading is ideally directionless, meaning that there is a possibility of making a profit whether Bitcoin goes up or down.
The long straddle is one of the directionless volatility strategies using Bitcoin options. To start, you buy CALL and PUT options at the same time for the same strike price and expiration date. Bitcoin straddles are profitable when Bitcoin drops or rises from the strike price more than your premium. To exit a trade, you sell the call and place at the same time.
In plain language, a large upward or downward movement in your favor.
Arbitration
Arbitrage involves buying cryptocurrency in 1 market and selling it in another market at a higher price. The difference between the buying and selling price of an asset is known as the “spread”. As a generally unregulated market, crypto allows anyone to create an exchange. This can lead to large differences in spreads due to differences in asset liquidity and trading volume.
In the crypto market, traders usually hold portfolios on the exchanges they trade on. To start an arbitrage opportunity, open an account on an exchange that you believe will show very different prices for the same asset.
At one point, Bitcoin was trading at a price 40% higher in South Korea than in the US. This is known as “premium kimchi,” and appears more than once. Traders make a profit simply by buying Bitcoins on US exchanges and immediately selling them on South Korean exchanges. While the differences are usually not this large, the low barriers to entry for new exchanges bring in new arbitrage opportunities more often than in traditional asset markets.
Traders should also take trading costs into account when attempting arbitrage. The fee for trading on the exchange can wipe out profits from the trading spread.
Crypto Trading Doesn't Have To Be Cryptic
Regardless of the strategy you choose, you must be willing to accept losses in a volatile market like cryptocurrency. Prepare your exit plan before you enter any trade. Don't follow the hot tip crowd; invest only in coins you truly believe in — even just for the day.
Also, keep in mind that the market provides endless opportunities. So don't bite your head if you play carefully and miss one, and don't chase the deer that has run away from the farm. Trading is more than anything else an emotional journey — you have to keep a clear head and stick to your chosen strategy through ups and downs.
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