Choosing The Ideal Strategy For Crypto Trading

Let’s begin with the following – how many trades do you execute in a single trading day? Or in a one-hour session? Many people don’t know, as they have not even established a basic trading strategy.

Buy and hold investors might make no trades at all, while day traders may take hundreds of positions and close them all within a couple of hours. But by and large, people do not have a specific answer. They trade when they feel like it without any controls in place. The end result is a crash and burn.

If you want to avoid sporadic, illogical, and impulse trading, you must define your own trading model. We can help you to define what this strategy should look like.

The Primary Trading Methodologies

While every trader has his/her own unique strategy and preferences, traders mainly fall into a number of broad camps. These same trading strategies that are so familiar with finance professionals have equal applicability to the new asset class of cryptocurrencies. The primary strategies include:

• Buy and Hold Traders – In crypto ‘lingo’, this is known as HODLing, in reference to BTC holders who ‘hold on for dear life’ during some very turbulent BTC price swings. These traders can hold long-term positions for weeks or even months.
• Trend/Swing Traders – These traders aim to capitalize on technical trends using charting tools. Trades range from minutes to hours.
• Day Traders – This is where all positions are closed at the end of the trading day. Faster than swing traders.
• Scalping – This is a technique that requires the use of high-quality software to open and close orders within seconds. It uses a lot of computing resources.

The Five Most Important Trading Determinants 

The world of trading is fast-paced. Even the best traders can forget to pace themselves properly and experience burnout or go bust. With this in mind, you need to identify the five most important determinants that will help you to choose your trading strategy.

Obviously, there are far more determinants in the complex realm of trading. But we want to emphasize these five key points so that the fundamentals get covered. It’s easy to forget the basics after a string of good luck. But if you hit a bad patch, you won’t even have the opportunity to forget them – it will be game over. 

1. The Time Available

Ask yourself how much free time you actually have to devote to this. Trading is not something you can do after a stressful day’s work. In fact, you need to stay away from the trading panel if you feel fatigued in any way. It’s a quick way to lose your entire portfolio.

If you only have a few hours to spare, then you really need to look into buying and holding for longer periods. To become a subject matter expert, you need to invest thousands of hours of your time. If you really want to make crypto day trading your primary profession, then you could easily consider becoming a day trader, but this is not for people with other serious commitments.

2. Your Personality Traits

This is a much more difficult factor to contemplate than merely calculating your free time. If you love the idea of maths and stats, then a technical approach is best for you. You can use this to day trade. If you like to research the ‘wider’ crypto environment such as the fundamentals of a specific cryptocurrency network, then a long-term approach might be more appropriate

You need to find out what kind of investment strategy interests you the most. While it never hurts to learn lots of different things and to pay attention to all the variables that affect price movements, you always need to play to your strengths. 

3. What is Your Risk Tolerance

Modern Portfolio Theory is all about risk tolerance levels. Depending on the risk tolerance of a given investor, portfolio allocations are suggested. Crypto trading is no different. Only risk what you are prepared to lose. You need to investigate the many risk management strategies on offer to hedge your positions. One wrong swing could wipe you out. It happens all the time to beginner FX traders who go long certain currency pairs, usually involving the US dollar. Don’t let it happen to you in the crypto space. 

4. What Results Do You Expect?

If you are looking to crush it quickly with maximum returns, then you need sharp market insights and a good day trading or scalping crypto strategy. If you have more time on your hands or an alternative source of income, then consider taking some long-term positions in favorable cryptocurrency pairs and doing some fundamental analysis.

5. The Market Access

Governments can shut down exchanges and they are hacked very frequently, though this is on the decline with enhanced crypto exchange security protocols. BTC trading was banned in China and some currency pairs are hard to find in certain jurisdictions. Select your currency pairs and your exchange wisely. If you make a lot of money in crypto, then be prepared to have your financial statements in order.

Automate Your Trading Strategy

If you have looked into these 5 factors, congratulations! You’re ahead of the vast majority of people who start crypto trading without questioning their own fundamental investment ethos. At the very least, you need to tailor your investment model to eliminate fear or greed-based trading, which is more difficult than you might think. Strong emotions can be hard to subdue.

But we’ll do you one better. Superorder, the customized crypto trading platform, can assist you in the automatic execution of your trading regime. We are adding a whole suite of automation tools to keep you up to date on the latest price movements in the world of crypto. Speed and data are everything when trading crypto – its volatile enough without making uninformed decisions. We’ll help you to hit your perfect trading niche.