We are seeing an increasing number of individuals trading crypto in an attempt to generate consistent monthly returns from the market. The first step in being a profitable crypto trader is to have a strategy in place. In this article, we will take a look at some of the popular strategies that traders are using to gain an edge in the market.
Arbitrage
Arbitrage is by far one of the most popular trading strategies to use in the market. An important thing to note about the crypto market is that buying and selling cryptocurrencies can be done on a number of different exchanges. This means that the price of cryptocurrencies such as Bitcoin will often be different depending on the exchange that it is purchased from. For example, Bitcoin could be priced at $11,000 on Coinbase, but be priced at $11,150 on Binance. The idea behind arbitrage trading is to profit from the price differences that can exist between various exchanges.
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Swing Trading
Swing trading is another frequently used strategy. Swing trading is particularly well-suited to the crypto market due to its volatility. Cryptocurrencies such as Bitcoin often swing aggressively upwards and downwards in the span of a few hours. This is great for swing traders because it means that there are frequent trading opportunities to take advantage of. Swing trading requires traders to be able to call when the market will swing into upward or downward price action. Executing the swing trading strategy correctly also often requires an automated setup to achieve better price entry. Automated tools such as crypto bots and signal groups (e.g. Binance signals) are all useful tools in using the swing trading strategy.
Fundamental Analysis
This trading strategy has its origin in the traditional markets of stocks and bonds. The idea behind fundamental analysis is to find assets that are undervalued by the market and then to profit from upside gains as the wider market realises its value and begins to bid the price of the asset upward. In traditional markets, various metrics are used to identify an undervalued asset, such as the Price to Earnings Ratio and Earnings Per Share Ratio. These are metrics that cannot easily be applied to the crypto market as we are dealing with digital assets, not companies. Thus, different metrics have been used to help in this analysis, such as the quality of the team working on the cryptocurrency and its value proposition. The fundamental analysis generally requires that the trader hold on to assets over the long term.
Conclusion
To conclude, the crypto market can be very lucrative, allowing traders to consistently generate returns each month. However, doing so requires that a clear strategy be put in place. These trading strategies are just a few that you could be using. Find a strategy that works well for you, and you should start seeing more success trading cryptocurrency in no time!
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Main image by MichaelWuensch from Pixabay
