Beginners often have an unsavory experience with crypto trading which they often blame on the nature of the crypto market. But the truth is that they do not stop a minute to prepare to chart out a strategy for trading that comes to bite them at a later stage.
What is a Crypto Trading Strategy?
A Crypto trading strategy is a roadmap a trader follows to plan all their trading activities. So, if you need a coherent approach towards consistent profits in crypto trading, making a trading strategy is a good start.
Having a crypto strategy helps in more ways than one –
- No unnecessary decisions
- Strategy-driven decisions are better than emotion-driven ones.
- Nothing catches you off-guard if you prepare.
Essential Components of a Trading Strategy
While making a trading plan, you need to ensure that it is comprehensive enough to cover at least the most basic elements of a trading strategy. It must include-
- The assets you will be trading
- The goal of your holding, i.e. short-term profit or long-term wealth generation
- Primacy to Technical Analysis or Fundamental Analysis
- Monitoring tools to be used
- What triggers entry & exit in a trade
- KPIs to monitor your portfolio performance
If planning all this sounds a lot, you can go for a reputable crypto signals provider as well.
Simple Crypto Trading Strategies for Beginners
The trading world is too complex, with some expert traders having their proprietary trading strategies. But everyone starts as a beginner who turns into a pro only after mastering the fundamentals.
Active Trading Strategies
Active trading strategies require you to be more actively involved in trading. You need to constantly monitor the market to manage your trades. This approach is more suitable for individuals who are full-time traders. Even professional crypto signals services are more inclined towards this method.
In crypto, day trading means that you change trading positions within a day or less. It is meant for advanced traders with good knowledge of the market & technical analysis and who don’t get swayed in emotions.
Swing trading is a longer-term strategy than day trading. It plays out sooner than a few weeks but later than a day. It is suitable for beginners as they need more time to make a decision. Both technical and fundamental analysis is helpful for swing traders.
Traders try to take advantage of directional trends and involve holding positions for at least a few months. Fundamental analysis is an essential determinant of trend trading strategies. However, trend reversals and thus moving averages, trend lines, and other technical indicators play an informative role as well.
Passive Trading Strategies
Passive trading strategies are those that do not need you to pay a lot of time to your trades. It’s a more hand’s off approach.
Buy and Hold
The strategy involves building long-term portfolios. It doesn’t concern itself much with the technical indicators as given long enough time, the portfolio would profit the trader. Fundamental analysis drives the decisions in a Buy and Hold strategy.
Just like the traditional investment markets, there are baskets of crypto coins in which traders invest. It has benefits similar to that of investing in traditional stock baskets like ETFs.
Implementing trading strategies always requires some level of market understanding that total beginners often lack. If you are just starting and do not know much, it is better to go for a crypto signals provider.