Strategy is a useful tool for decision making, but on its own it won’t get you very far. To strengthen your success as an investor, many other factors are combined, including your experience, discipline and use of risk management tools.
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Train for cryptocurrency trading
Learn about the market
Allocate the necessary time to learn about cryptocurrencies, blockchain technology and financial markets, the goal is to understand in detail how markets work together and individual cryptocurrencies. This is an ongoing process, as the market continues to evolve and move in response to developments in technical development, hard forks or forks and regulations, among other factors.
Make a trading plan
A trading plan is a comprehensive plan for your trading. You can specify the details of your attitude to risk, objectives, trading strategies, risk management rules and more. You can also specify the market you want to trade, for example, bitcoin, ether and litecoin.
Practice your trading
Investors who are not experienced in cryptocurrency trading can start with a demo account to learn how to operate in a risk-free environment. You can use your simulator to thoroughly test your trading plan and review it as many times as needed before switching to a real account. You can also access IG Academy’s free resources to hone your trading skills. Use risk management strategies and tools
Calculate the risk-benefit ratio
Before making any trade, decide whether the risk associated with the potential benefit, known as the risk-to-benefit ratio, is worth taking. For example, if your maximum potential loss on a trade is €100 and your maximum potential profit is €300, the risk-to-profit ratio is 1:3. The ratio you choose will depend on your risk appetite, personal circumstances and strategy.
Get key insights into risk management
Use stop and limit
Stop automatically closes a position if the price moves against you from a certain amount.
A basic stop, which is free, but can close at a price worse than requested if the market moves quickly or if there is a “gap”.
Guaranteed stop, which will always close the trade at the exact level you have set. You will pay a small premium if a guaranteed stop is triggered.
Dynamic stops, which follow positive price movements to secure profits. Again, these stops are not guaranteed, so they can fail if the market moves quickly.
You can also consider using a limit, which will close the trade automatically once you make a certain amount of profit.
Learn more about stops and limits
Operate with discipline
Try to maintain discipline when trading cryptocurrencies, only trades that fit your trading plan. This will help you avoid common pitfalls that arise when emotions influence decision making, such as delaying to cut losses (hoping for a market recovery) or relying too much (“letting run”) on winning trades.5 steps to trading cryptocurrencies.
Log in or open your live account
Select market
Choose whether you go long or short
Confirm size and risk to your position
Open your trade
Top 5 Cryptocurrency Trading Strategies
A cryptocurrency trading strategy is essential for taking advantage of market possibilities as it helps identify opportunities and the right time to enter and exit trades. Cryptocurrency trading allows you to go long or short to take advantage of price movements in any direction, offering a whole world of possibilities.
Here are some popular strategies and top tips for trading cryptocurrencies
Intraday trading consists of opening and closing trades within a day, with the aim of making quick profits from intraday price movements. Because positions do not remain open after the market closes, the costs and risks associated with holding them overnight are avoided. However, this strategy requires special attention, so it is only suitable if you can set aside the necessary time for your trades.
Scalping is a form of high-frequency intraday trading, where the goal is to make small profits from a large number of trades. This involves opening positions according to the trend, often entering and exiting the market several times as it develops. Individual trades are carried out for a few seconds – a few minutes at most – making it one of the short-term strategies.
Scalping can be an effective way to trade volatile assets such as cryptocurrencies, as you can make a profit if the market moves well and minimize losses by closing positions quickly if the market changes direction.
Like scalping, this form of trading involves opening positions online with a trend. But the goal for trend investors is to maximize profits by keeping positions open for as many price movements as possible, rather than opening and closing multiple positions in a row. It can be a short, medium or long term strategy as trends can develop over a period of time.
Using this strategy requires an understanding of the technical indicators that can be used to identify emerging trends, as well as the possible impact of news and economic events on the market.
Swing trading focuses on price changes in a trend. The goal is to take advantage of market volatility by moving in both directions as the trend develops. While this opens up more profit opportunities, you are unlikely to trade on the exact highs and lows of the price movement, as it often takes a partial trend change to identify that a new shift or “swing” is taking place.
Like trend trading, this strategy requires an understanding of technical indicators and the factors that move the market.
Automated trading involves using a computer program to execute trading orders automatically. These systems can be as simple or as complex as inverters using them, they are fully customizable and can be verified using historical data prior to commissioning.
Automated trading systems come with advantages such as being able to monitor the market throughout the day, opening and closing trades at the right time, even without constant attention to what is happening. But, of course, it’s important to properly monitor the system, as any flaw in the design can prove costly.
