Trading strategies: the essence and importance in the market

Agenda

Every experienced trader knows, that using rational strategies can make Crypto Trading more effective. Some of them are successful by trading with specific cryptocurrencies, while others can bring benefits by the trading at a special time. Beginners often don’t pay attention to the variations in trading strategies, so they use the first reviewed one. And this is an earnest mistake. In fact, crypto trading has several strategies. Furthermore, each of them has individual features, advantages, and nuances. So, how to understand what strategy will be proper? And how to take it for trading? Read on in this article, we will tell you everything about this.

Crypto Trading Strategies: Functions and Importance

Let’s determine the concept of trading strategy. Essentially, it is a method of trading under certain circumstances in the market. Also, it is a set of rules, norms, conditions under which a trader performs pre-specified actions. Trading strategies are based on the statistical differences of cryptocurrencies. In other words, the strategies are based on the laws that distinguish market behavior. Traders use them to get the maximum benefit from the peculiarities of the market behavior of the cryptocurrency.

How do trading strategies work in the cryptocurrency market?

Trading strategies can play a crucial role in the trading process. Often, the trading strategy determines a few items of the market:

  • The entry point to the market.
  • The exit point from the market.
  • Approximate time intervals between entry and exit points.
  • Approximate time intervals between two consecutive entry points.

The percentage of the trading capital with which a position is opened under certain conditions.

These parameters can bring you different results, depending on actual cryptocurrency for trading. Somebody can ask: what does it mean? For example, the trading frequency is higher in the market of popular and volatile cryptocurrencies. While in the markets of little-known and slow-growing currencies, transactions can be concluded more rarely.

That’s because catching the right moment (a jump or a fall) is more difficult for such cryptocurrencies. The trader makes the strategy to consider the behavior of cryptocurrency and make relevant decisions. For this, the trader takes into account the analyze of currencies’ behavior in the market. The most significant market regularities always taken as a basis.

Why do traders develop strategies?

Some newcomers can wonder about the obligatoriness of the strategies.  So, is using trading strategies in the cryptocurrency is required for the market at all? The answer is yes, unquestionably.

In fact, crypto trading is resultless without a strategy. And at the same time, trading with developed strategies shows much better results. Why?

One of the main reasons is that the strategy organizes the trading process. The thing is, the trader has to use a huge amount of specific and pretty unpredictable mathematical data to trade cryptocurrencies on the stock exchange. Thus, chaotic decisions that aren’t based on these data are unprofitable.

Decisions that based with considering of several data are more effective.

In addition, decisions based on all the mathematical data will be the most efficient.All data cannot be taken into account by one trader due to their excessive number and complexity of mathematical correlations between them. Therefore, strategies have formed that use only a small part of this data, the mathematical relationships between which are more or less clear to the trader.

Theoretically, the more data a trader understands, the more strategies he will be able to create and the more effective they will be.

But experience shows that for successful trading on the stock market rather 3-5 correctly applied strategies.

General and Narrow Strategies

Developing of trading strategy requires a professional approach. Traders must demonstrate their knowledge of technical analysis methods, as well as a good understanding of the behavior of market participants in a given situation. Don’t forget also about the fundamental analysis methods.

The effectiveness of the strategy depends on the trader’s determination of the patterns and the right choice of the tactics to respond to them. 

The market behavior of each asset is unique in the details but common as a whole. 

For this reason, traders formed general and narrow (individual) strategies. What is the difference between them?

  • General strategies are based on the patterns of movement of the cryptocurrency rate.
  • Narrow strategies, in turn, are based on the nuances of a particular cryptocurrency: for example, behavior, features, etc.

As the origin of any cryptocurrency has a patterned character, strategies also evolve according to laws and patterns. It could be even said that a narrow strategy originates from the general one.

Crypto traders have found out, which general strategies are most relevant in the crypto-currency market. It is based on them built most of the individual strategies.

The most common strategies review

The most popular strategies in crypto trading can be classified in two ways:

Differing in the time period of trade.

Differing in market situations.

Strategies that differ in the time period of trade are divided into the following points:

  • Intraday trading
  • Positional trading
  • Swing trading
  • Scalping

Among the trading strategies that differ in market situations, the following are usually used:

  • Pullback trading
  • Rebound trading
  • Impulse trading
  • Breakout trading

As volatile and hard-to-predict assets are the majority of cryptocurrencies, these strategies are the most demanded due to their convenience. Let’s look at each of them in detail.

Intraday trading

It is that the trader opens and closes positions during the trading day or day. Before leaving, he does not leave any open position.

In the crypto market, intraday trading is very common, since the price of an asset can move at an unpredictable rate to less predictable side overnight or for a day. As a result, closing positions before leaving reduces the risk of losses.

Positional trading

The trader trades under certain circumstances regardless of the frequency with which these circumstances occur.

For example, if he decides to trade only at the moment of a trend reversal, he waits for this and makes a deal. It doesn’t matter whether, how often it happens: once an hour, once a day or every few days.

The advantage of the strategy is that the trader does not have to react to every change in the market. He works with a small number of instruments, tracks the required circumstances relatively easily and makes mistakes less often than traders who try to react to everything at once.

Swing trading

It is trading within the cycle.

A cycle can be a long rise in an asset, or a decline, or a flat, or a temporary increase in volatility, or another situation that develops over an approximately long time period. The cycle rarely lasts less than ten hours. Often it takes some days.

The trader tracks the beginning of the cycle, determines its specifics, reacts in accordance with it, waits for the end of the cycle. Then he makes another transaction and fixes the income.

The correct determination of the specifics of the cycle allows you to predict the development of the situation accurately. As well as to prognosticate the end of the cycle. The trader does not have to work on short segments within the period. He just waits for its end and gets the predicted income.

Scalping

High-frequency trading, which involves making a profit on each fluctuation of the rate, including the minimum.

Transactions are several times per hour, sometimes dozens of times per hour. It should be said that scalping has its individual requirements:

  • as much time as possible
  • low exchange commission (otherwise the profit from the transaction will go to pay for it)
  • high liquidity cryptocurrency
  • high volatility
  • small spread (the difference between buying and sell orders).

The more often the rate will change, the more transactions you can make in short. Accordingly, it will be possible to earn more.

The advantage of the strategy is that the trader does not need to wait for the development of certain situations, to analyze the market in detail and deeply.He conducts a superficial analysis and trades regardless of what is happening in the market because the minimum fluctuations are always observed. Or he can to don’t do it.

Pullback Trading

Invented to use the periods of correction of the cryptocurrency as part of a trend. At some point, the price of the crypto asset begins to seem to the rest of the market participants overstated, that is an uptrend, or understated, which is on a downtrend.

Then there is a small correction, after which the trend continues. Strategy trade on a pullback suggests buying the asset when it is as in the correction decreases, i.e. in an uptrend. Or it can be sell, when it is as in the correction increases. When the trend continues, a second trade is made, as a result of which the trader makes a profit. 

This strategy allows you to make significant profits in the crypto market, since the correction and subsequent continuation of the trend due to its volatility are quite significant.

Rebound trading

The fact is that in a downtrend, the trader waits for the mark, from which the price will begin to rise again with a high probability, buys the cryptocurrency at this point and then sells after the price rises above the average.

The mark, which is waiting for the trader, most often is either psychologically important or predicted by means of technical analysis figure. This strategy often allows you to buy an asset at the lowest possible price.

Impulse trading

The trader trades according to the trend when he sees signs of momentum. Pulse is steady movement up or down virtually without any corrections. The trader buys a cryptocurrency when he sees the beginning of the impulse uptrend, and sells when he sees the beginning of the impulse fall. In this case, transactions are not necessarily made at the minimum and maximum.

The strength of impulse trends allows you to make good money when the price is just approaching extremes. It recognized as a highly profitable strategy. Impulse trends in the crypto market are quite common due to the volatility of currencies, so it is relatively easy to track them.

Breakout trading

The trader tries to open positions at the very beginning of trends, based on the breakthrough of a certain price.

If, for example, a downtrend has broken through the correctly predicted price level, then it will turn around and go up.

Accordingly, the trader who correctly predicted this level can buy the cryptocurrency at the lowest possible price at the very beginning of the uptrend.

The system also works in the opposite direction, on upward trends. The strategy allows you to use the most profitable entry points to the market and earn money without taking any action in the process of ascent or downtrend.

There are many other strategies, as assuming trade at different time intervals, so focused on a specific market situation. Given the volatility of the market, cryptocurrency trading strategies are also constantly evolving. Now we will tell you about popular strategies that are used by both experienced traders and beginners.

Strategies are constantly changing, along with the cryptocurrency market. Today, traders are actively discussing the most profitable and efficient ones. After reading the reviews from different types of strategic options for working with currency, we identified several of the most discussed ones. You can take note of them and use them for successful trading.

Trend following

Trend following development is based on the analysis of price values amount of crypto coins for periods on the basis of diverse indicators technologist.The exchange operation follows as a response to the appearance of the corresponding signals. The time period is practically unlimited – from the minimum possible to several months.

But when stretched over time forecasts are ineffective, speculation is often unprofitable.Therefore, for the most part, this kind of exchange game is aimed at instant liquidity of Bitcoin and analogs.

Pairs trading

It is acceptable to take Bitcoin and Etherium as a basis. Pair trading is based on the analysis of the ratio of their prices.

The algorithm determines when and how profitable it is to buy Bitcoin and sell the same amount of Etherium at the same time.The rules of the reverse process are prescribed for the regulation of trading. Often the strategy is chosen in the presence of a solid volume of working capital, thus signals can be rare and very accurate.

Basket trading

Popular among exchange players is basket trading.

It copies the essence of the previous one, but uses two “cryptocurrency baskets”.

Calculating the cost of each of them is not difficult. This is done by summing the price of each unit from several different cryptocurrencies.

If you calculate your actions, understand the sequence of further steps, you will only have to wait for the recognition of your financial genius – to get a solid income.

Market making

The General principles of market trading involve buying and selling without a time gap and catches random changes in statistics in the market range.

In a favorable period, the optimal combination of speculative operations, as cheap, buying an expensive selling brings income. The calculation takes into account all important factors:

  • the liquidity of cryptocurrencies
  • the amount of finance involved
  • the length of time and others.

This strategy will be successful if the real needs of the cryptocurrency exchange are taken into account.

Requirements for a successful strategy is prompt receipt of important information and competent response.

Failure to comply with the basic conditions of the strategy unprofitable.

Arbitrage

The arbitrage strategy is usually considered in conjunction with the paired methods.

Scoreline script active are included to the pair.

Of course, it is difficult to guarantee profit using this strategy, but it is necessary to increase the level of financial literacy and, accordingly, the chances of success.

Depending on the assets used for trading, there are:

  • Spatial arbitrage: is activated is identical to the cryptocurrency. One of the classic developments in the financial world.
  • Equivalent: being used for work-related cryptomelane, the price for one is linearly dependent on the prices of the other. The strategy should be studied in detail, it often gives a good income with proper application.
  • Index: the index of the crypto basket.
  • Special attention should be paid to the methods of calculation.
  • Option arbitrage: uses the principle of cryptocurrency value parity.

For a beginner to master the intricacies of this strategy will be quite difficult. Arbitrage algorithms professional traders often adopt, as they are the most high-tech and effective in the end.

The effectiveness of the work depends on the ability to quickly obtain market data, correctly interpret them and take timely response actions to adjust applications.

News trading

The bottom line: predict prices for cryptocurrency news. Strategy based on fundamental analysis.

News strategy can complement your trading algorithm. The study of news about cryptocurrency allows you to predict the general trend: the rate will rise or fall.

What you need to have for this strategy:

  • interest and the ability to constantly read the news;
  • fast internet for instant inclusion in the game;
  • tracking the volume of trades.

What you need to have for this strategy:

Often, the approval of cryptocurrency at the state level or the investment of large market players in it leads to an increase in prices. On the contrary, the prohibition of cryptocurrency or a large sale to falling.

Fork is a new cryptocurrency, based on the base of the branch. When a new fork is formed, it is difficult to predict a further change in the rate of the original currency. Experienced traders create buy and sell orders at the same time. Unprofitable transactions immediately close. Profit on successful overlaps losses.

Daily

The bottom line is the cryptocurrency at the lowest average price, and the sell at the average highest price per day.

Volatility trading

It is based on the dependence of the asset price on the expected volatility of the main cryptocurrency during a certain period.

Strategies are constantly evolving and improving. Trading without a strategy leads to failure and loss. Therefore, it is important to use well-known strategies and develop your knowledge. At a minimum, this concerns relevant skills and abilities, analytical thinking, technical capabilities, and free access to the necessary information.

Buy & Hold strategy as one of the most popular

Buy and Hold strategy is one of the most common ones for crypto investors. It is simple, convenient and quite profitable in the conditions, that established on the crypto-market. It is curious that many novice crypto investors use it without even pieces of knowledge about it. Someone can use it productively, while someone does not fully understand how it works and what is needed for its successful implementation. And such a trader loses money or at least receive less than they could. What is Buy and Hold on a crypto market, how to work with it and what are its advantages and disadvantages?

What is important to know

Buy and hold is a classic long-term strategy when a position is opened for a period of one month to one year.In this case, first of all, the fundamental factors are analyzed. Over a long distance, the growth potential of the cryptocurrency depends on the demand among investors and users, so information about the technical capabilities, the roadmap, the project team can help in predicting how the course will behave.

At the same time, it is important to remember that a sharp increase in the coin by hundreds of percent will inevitably lead to the fact that investors will begin to fix profits, because of which the rate will turn down.

The Buy and Hold strategy consists of two stages:

  • Buy: buy or, more precisely, the choice of an asset. It is a rather laborious task, requiring the investor to evaluate the entire market. As a rule, when choosing investment assets for Buy and Hold, fundamental analysis methods are applied.
  • Hold: the holding of an asset. Inevitable fluctuations in the rate often cause investors, especially beginners, doubts about the wrong choice of an asset. As a result, the cryptocurrency is sold as soon as the market declines again.

The main risk when working with this strategy is a sharp collapse or a long fall in the value of the asset.

The Buy&Hold strategy is rarely used for a single asset.

As a rule, traders make up a full investment portfolio.

Advantages of Buy & Hold strategy:

  • the most relaxed trading style
  • does not require permanent storage of currency on the exchange
  • brings high income on a long distance

Minuses:

  • high-risk level
  • lack of stable income

The use of Smart Trade bots and partly reduces these risks:

algorithms sell coins for Stop Loss, which will follow the price to maximize profit in a lot of ways.

For long-term storage of funds, it is better not to use cryptocurrency exchanges:  as history knows a non-zero number of hacks and other fraudulent activities with the withdrawal of money. 

About a reliable crypto trading platform: is Maxitrade a scammer?

Regarding fraud, often traders, unfortunately, do not come across cheaters.

However, it also happens that the trader is deceiving himself in view of inexperience. He can make a mistake, miscalculate with strategy. And in view of his inexperience to think that the platform is to blame. As a result, frustrated traders write angry reviews.

As a rule, traders lose their money because of unsuccessfully selected strategies or incorrect trading. Proven and legal platform will never leave your client in trouble and will always respond to his request. In the end, Maxi Trade has all the necessary communication tools to solve the problem. Customer support is present both on the site and on the trader’s mobile application, which can be easily downloaded from Google Play. 

In addition, a proven trader will always provide all the information about himself and provide an opportunity to learn more.

That is why those who approached and read about the company know that Maxi Trade is legal. (See the screenshot below)

What strategy is better to choose?

The behavior of beginners crypto trading characterized by two extremes.

We wrote above that in the market of some cryptocurrencies you can use a few strategies at once, as so often do professional traders.

And the first category of newcomers also often starts with long use of one strategy, in every case and always.

And of course, this is less justified, since other strategies may be suitable for a novice trader not less, but even more than current.

For this reason, beginners are usually advised to try different strategies in turn.

The other extreme is to try to use all the strategies at the same time, especially when working with one cryptocurrency. This is also a mistake as it interferes with the detailed study of each strategy, knocks down the trader and creates chaos in his understanding of the market.

The fact is that the strategies do not work by themselves. All depend on the adequacy of the trader’s and how his logic works. The more adequately you understand the market and a particular coin, then more effective as a consequence will be your strategy. The strategy is a matter of technology and experience. And the execution of which is better to delegate.

On the way of your becoming a trader, you need to study the strategies of successful players or standard strategies that are used throughout the world, regardless of the exchange and the cryptocurrency pair. Therefore, to stop being a hamster, study the field in which you play:

  • popular strategies
  • activities of the best traders
  • reliable platforms
  • theoretical base
  • and of course, the basic terms of the crypto market.

Remember that to develop an ideal strategy you will need to go through many barriers. Do not doubt that you will make many mistakes. But it is unnecessary because of this to despair and give up. Analyze and correct them. And then you will succeed.

Memo to the trader: how to use strategies effectively and not to burn

Trading cryptocurrencies, as well as mining cryptocurrencies, have become very popular and really fashionable.

New cryptocurrency trading strategies and new approaches to market analysis are emerging. And if, before 2015, this was done only to professionals, but now cryptomeria more than enough fans who vaguely know what happens, but to actively spend money buying the coins.

And if you are a novice trader or simply want to buy a cryptocurrency for investment purposes, then this memo will be very useful. So, the best cryptocurrency trading strategy has been chosen. Now pay attention to the valuable tips that would not allow you to go into minus. Following it, you can avoid obvious mistakes and fatal losses.

7 Rules for successful strategies

Rule 1. Don’t go against the market.

If the main traders on the exchange have taken a course for a fall or there are persistent rumors that one or another cryptocurrency is on the decline, then you should not go against all.

No need to buy when everyone is selling or buying when the cryptocurrency rate is clearly at its peak. Thus, You will achieve nothing and only lose all the money.

Rule 2. Buy cheaper, sell more.

It would seem that this is obvious advice, but many novice traders on cryptocurrency exchanges do not even understand this and trade incorrectly.Naturally, it would be unwise to purchase Bitcoins at a price of $ 20,000 per coin. But buying them at a price of $ 13 000 will be a very good investment. 

If you put it quite simply, you should buy only the coin that is in the “red” zone, and sell the one that is in the “green” zone.

Such a simple strategy of cryptocurrency trading on the stock exchange can get rid of losses with a guarantee of 99%.

Rule 3. Do not trade with the last money.

If You have modest savings, you should not drive all the amount on Deposit. Trading on the stock exchange is always a risk and there is a possibility of losing savings in whole or in part.In addition, working with the latest money cannot be calm and deliberate, and nervousness on the crypto-exchange always leads to negative consequences.

Take it as the main strategy in the market – trading with a cold mind.Professionals are advised to put up for auction the amount that does not exceed three days of earnings.The loss of this money will not cause shock and will not cause life changes.

Rule 4. Forget about scalping if currency assets are small.

Scalping is a very popular strategy used by both beginners and seasoned professionals. But do not trade on it if the cryptocurrency exchange is very low volatility of the coin or there are no sell orders.

Your bet simply does not play, and you will remain loss everything having bought the crypt.

Rule 5. Do not use the entire Deposit amount at once.

Decided to buy the use all deposit for someone crypt?

It is not a brilliant idea. After spending the entire deposit you will not be able to respond to the market and will only follow one tactic Buy and hold.It is best to divide the existing Deposit into five parts: 50%, 15%, 15%, 10%, and 10%.

Most of the amount will be correct to invest in the crypt of the top five rankings. And the rest to buy cryptocurrency, which is adjusted in price, but has a positive trend. You can buy the third-tier coin for 10%, as in a successful scenario it can give a 100% profit in the short term.

Rule 6. Record all your transactions.

Do not rely on your memory when trading on the cryptocurrency exchange. Some strategies (such as scalping) involve hundreds of trades per day. It is impossible to remember them physically, so you need to record all operations.

There are many programs that help to trade cryptocurrencies on the stock exchange. By the way, there you can fix the strategies that you work on. In addition, high-quality crypto-exchanges (for example, Live Coin) offer such services absolutely free of charge.

Rule 7. Do not trust the opinion of chat on the stock exchange.

At each exchange involved in the trade cryptocurrency, there is a chat in which traders communicate.Every minute in the chat there are dozens of new opinions and even a forecast of increases or decreases in exchange rates, motivation to start trading, etc. You should trust these opinions and especially follow them in no case.

It should be clearly understood that the fluctuations in the rates of the coin are determined by large players, turning over millions of money in their states, but not by the crowd signing off in the exchange.

For this reason, you should trade, focusing solely on objective factors and signals, and not on the opinion of unknown persons in the chat.

After all, they can try to enter in banal misinformation. 

All these tips are developed during real trading and respecting them, you can increase your chances of success significantly.

Maxitrade Conclusion Message

And in the end, trading strategies studied, the rules too. What’s next?

Choose the best exchange to trade cryptocurrencies Every day, new portals appear on the Internet, offering trading operations with cryptocurrencies and even learning cryptocurrency trading strategies.

Some of them are frankly fraudulent, some are doomed to failure and only a few offer the best conditions for crypto trading.

It is most reasonable to choose a stock exchange considering what it will be used for. For example, it makes sense for an investor to focus on indicators such as:

  • value of the commission for input-output of funds
  • restrictions on the amount of withdrawal
  • the complexity of verification.

Trader, in turn, is important:

  • trading tools and detailed charts
  • a large number of pairs
  • good protection

Also, pay attention to the reviews about the exchange and how the representatives of this exchange respond to these requests.

With regard to strategies, it takes into account their enormous diversity. It must be said that there are countless options for successful cryptocurrency trading. At the same time, strategies develop every year and become more and more of them. Before you choose the ideal one for yourself, carefully study the theoretical basis, observe the successful market players. It is important in the initial stages not to fall into any of the extremes. Try different options alternately, but not all at once.

Remember that without a strategy, the market will become chaotic, and your trading will suffer only losses. That is why the use of strategy is a sign of a professional. Traders who act at random are called Hamsters. Therefore, much of the success depends not on the platform or strategy, but on you. Therefore, learn, learn, try and do not be afraid of mistakes.

Good luck with trading!