• Over the past few years crypto trading has gained significant popularity which has paved the way for a rise in crypto trading strategies. The financial market has also presented investors with numerous trading opportunities in order to make a profit on digital assets. However, several traders fail because maybe they don’t have access to the right trading platform or do not have a clear crypto trading strategy. In order to effectively navigate through the financial market, it is crucial to have the right crypto trading strategies that align with an individual’s risk tolerance along with investment goals. The following blog provides the top 5 crypto trading strategies that are mainly used in order to increase your profits.  

Day Trading 

• Day trading consists of purchasing and selling financial securities within the same in order to make a profit on short-term price fluctuations. Day investors use price movements that take place during a single day’s trading sessions in order to earn profits. It is a fast-paced form of investment that requires a high degree of self-discipline.  

Main Features 

• Intraday transactions– Day Trading requires that all the trading positions should be liquidated by the end of the day.  

• Fast transactions- Day trades can take place within seconds of each other.  

• Using short-term market inefficiencies– Day trades focus on discovering and using short-term market fluctuations. 

• Technical evaluation- Day trading strategies are usually based on the technical evaluation of securities.  

Pros 

• Profit- Short selling in day trading assists investors in making profits even when the market prices are rapidly declining.  

• No overnight risk- Positions are not impacted by the negative overnight news.  

• No fundamental analysis- Intra-day traders do not have to go through time-consuming fundamental analysis as they mainly depend on technical analysis.  

Cons 

• High risk– Day trading involves high risk as it is done in seconds.  

• Transaction fees- The profit gained from the price changes can be impacted by the transaction fees.  

Scalping 

• Scalping is a trading strategy that mainly focuses on gaining profits from minor price changes in stocks or other financial instruments. Scalpers conduct multiple quick trades throughout the day and hold positions for minutes or just seconds. The main is to gather small gains that add to a major profit over time.  

Main features 

• Technical analysis– Scalpers mainly depend on technical analysis tools like candlestick charts, and real-time data insights in order to make quick decisions.  

• Multiple trades- Scalpers usually place ten to hundreds of orders every day.  

• Liquidity- Scalping needs highly liquid assets in order to ensure rapid entry and exit at the best prices.  

• Short-term focus– Scalping consists of entering and exiting trades very quickly usually within a second to two or three minutes.  

• Rapid execution– Quick decision-making and accurate execution are significant for capitalizing on small price fluctuations. 

• Small profits– The goal is to gain small profits from every trade instead of waiting for larger gains.  

Pros 

• Compounding gains– Small profits from hundreds of trades can accumulate into major gains.  

• Adaptability- Scalping is effective in multiple market conditions, as it does not depend on major market trends.  

• Limited exposure– Short holding times limit the exposure to market volatility and potential losses.  

Cons 

• Expertise- Scalping also demands expertise, quick execution, and an effective understanding of technical evaluation.  

• Risk management– A strict exit strategy is necessary as one major loss can exclude the gains from multiple small profits.  

• High transaction costs- Regular trading can mainly lead to major transaction costs, which can mainly offset the profits.  

Arbitrage 

• Arbitrage crypto trading strategy gains profit on the price fluctuations of the same or similar asset across various markets. By continuously purchasing an asset in one market and selling it in another at a higher price, investors can gain profits from these short-term fluctuations.  

Main features 

• Short-lived opportunities- Arbitrage trading opportunities are usually short and they last only for seconds or sometimes minutes.  

• High volume- Successful arbitrages usually execute a large number of trades to gather major profits from small price fluctuations.  

• Back-to-back transactions– Arbitrage crypto trading consists of simultaneous purchase and sell orders for the same assets in various markets.  

• Low risk– Arbitrage trading is often considered to be a risk-free profit strategy, although sometimes real-time economic conditions may introduce major risks.  

• Market inefficiencies– Arbitrage trading exploits inefficiencies in the financial markets where similar asset classes are priced at different rates.  

Pros 

• Diverse strategies– There are multiple types of arbitrage such as merger, statistical, and spatial enabling traders to adapt their strategies on the basis of market conditions.  

• Rise in liquidity- By facilitating trades across multiple markets, arbitrage trading improves liquidity, which makes it easy for other investors to purchase and sell assets. 

• Rise-free– Arbitrage also offers a way to gain profits without any exposure to market risk if it is executed properly.  

Cons 

• Regulatory challenges– Some types of arbitrage trading also face legal or regulatory challenges based on the jurisdiction.  

• Execution risks- The constant need for quick execution often results in missing opportunities or losses if a trade is not executed consistently.  

• Transaction costs– Regular trading can also lead to high transaction costs, which may also diminish capital gains.  

Swing Trading 

• Swing trading is mainly a speculative crypto trading strategy where investors hold assets for more than one day to gain profit from price changes also known as swings. Unlike day trading in swing trading positions is held overnight or even for weeks to gain the full value of predicted price movement in the market.  

Main features 

• Technical evaluation– Swing traders mainly use technical evaluation to recognize trading opportunities.  

• Strategic decision making– Swing trading enables potentially more favorable trades in a specific timeframe.  

• Short to medium-term gains– Swing trading focuses on capturing gains over a few days to multiple weeks.  

• Overnight positions– In swing trading positions are held for more than one day which differentiates from day trading.  

• Exploiting trends– Swing trading focuses on the exploitation of trends and short-term price fluctuations in financial assets.  

Pros 

• Flexibility- Swing trading lies somewhere between day trading and long-term investing providing a balance between the two.  

• Suitable- Swing trading is suitable for multiple financial instruments.  

• Trend following- Traders in swing trading usually trade in favor of the market trends.  

• Profit- Swing trading focuses on capturing a percentage of a larger market fluctuation.  

Cons 

• Overnight risk- In swing trading positions are opened to unpredictable overnight events.  

• Analysis- Swing trading requires trend analysis and consists of both fundamental and technical evaluations,  

• Timing– In swing trading, it is difficult to enter and exit a trade which has proven to be a primary challenge. 

HODLing  

• HODLing is mainly a long-term investment strategy that consists of purchasing and holding a cryptocurrency for a longer period, and even years, despite the market price movements. The term was originated in the year 2013 forum post where a user misspelled “holding”. It showcases the belief that several crypto assets also have the potential to increase majorly in value over time. The term HODLing showcases the belief that several crypto assets do have the potential to increase majorly in value over a period of time. 

Main features 

• Purchase and Hold– HODLing is a purchase and hold strategy where investors buy a cryptocurrency and then keep it for a long period duration.  

• Long-term– HODLing aims to hold assets for a long-term duration, despite short-term price movements.  

• Long-term prospects– Investors involved in this strategy mainly believe in the long-term growth of the crypto assets.  

Pros 

• Simple investment- HODLing is a simple investment strategy that focuses on long-term profit gains.  

• Hands off– HODLing is a long-term investment strategy that does not require regular monitoring.  

• Less transaction costs– HODLing reduces transaction costs when compared to the costs of active trading strategies.  

Cons 

• Potential for fund- Cryptocurrency trading also involves fraudulent activities because of a lack of monitoring from a regulatory body.  

• Market volatility– Traders may also experience huge market ups and downs in their asset values because of the uncertain nature of the cryptocurrencies.  

• Fraud potential– HODLing also requires investors to have a larger risk appetite when compared to traditional investment instruments.  

Conclusion  

• The cryptocurrency market provides multiple opportunities, but success mainly depends on selecting the right crypto trading strategies. If you prefer high risk, you can opt for day trading but if you are looking for a long-term investment strategy HODLing is best.  

• If you are looking for expert guidance in crypto trading then Thaurus is your go-to option, as the platform offers a comprehensive range of services to investors. From advanced analytics to automated trading solutions, Thaurus assists investors in optimizing their strategies.  

• Contact us and our team of experts will get back to you in 24 hours.