What is Cryptocurrency?
Cryptocurrency is a digital currency that has revolutionised the virtual economy. Created based on the ideas of the mysterious Satoshi Nakamoto, a cryptocurrency can be bought, sold, or exchanged directly without any intermediary like banks.
Similar to stock, you can invest in cryptocurrency. However, choosing the right strategy and opportunity is what can make or break your return on investment (ROI).
Here are a few basic strategies to help you start your online cryptocurrency trading :
Easy Strategies for Beginners
Buying and Holding (Holding)
One of the easiest ways you can invest in bitcoin is through the buying and holding method. It is a passive investment strategy where all you have to do is buy a cryptocurrency that you think has the potential to grow and hold on to it for a longer period–months or years.
However, cryptocurrencies often undergo radical fluctuations. So, avoid checking the price frequently as that may spook you into an early sell.
Day Trading Cryptocurrencies
Contrary to buying and holding, day trading is an active investment strategy where traders enter and exit positions within 24 hours. If done the right way, day trading offers you high ROI.
However, the cryptocurrency market is highly volatile, and you may lose a significant amount of money during a crash. Hence, only use an amount you can afford and set an appropriate limit to prevent any losses.
As one of the fastest trading strategies, scalping allows traders to exploit small fluctuations in the market over very small time frames. Although you will earn a healthy profit every day, scalping can be highly risky and needs serious commitment to execute.
Therefore, this strategy is ideal for traders with high liquidity, which makes getting in and out of positions predictable and smooth.
Swing trading is a long-term trading strategy compared to day trading, where traders hold on to investments for a few weeks or a month. While using this strategy, consider both technical and fundamental analysis to predict market change.
If you have small or medium-sized investment capital, swing trading is for you. However, make sure to stay in flow with the trend.
RSI Trading Strategy
The idea behind a Relative Strength Index (RSI) is to create a group of crypto-assets to create a token that tracks the momentum of recent market prices. It helps traders determine if the market is overbought or oversold.
However, even this strategy is not foolproof, so make sure you set a stop value that is closely below your entry price to help you avoid a significant loss.
Avoid Pump and Dump Groups
As a potential cryptocurrency investor, you are bound to encounter pump and dump groups that will offer you profits. However, these profits are based on inaccurate and misleading statements, manipulating the market by driving up the price of an asset.
They then dump the asset onto investors, which leads to a loss for the traders and a significant profit for the pump groups.
Arbitrage is another easy method where all you have to do is purchase a cryptocoin at a low price and then find an exchanger and sell your coin at a higher price to obtain a profit.
Although a commission fee may use up your profit, you will still make a good ROI through this strategy.
Cryptocurrencies are the new way to trade, and investing in them can help you gain massive profits. There are several ways to perform digital currency trading, and choosing the right strategy depends on what kind of returns you wish to obtain. Make sure you consider the risks as well before you start applying your chosen strategy.