Strategies to Trading Your Crypto Like a Pro

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You’ve joined the cryptocurrency community, mined or traded your first coin, and ready to learn how to be an effective crypto trader. Congratulations, you’ve already conquered the scary part; now it’s time to learn the ropes of trading. With crypto having surprising differences from stock market trading and mutual funds, there are a few things you both need to know and unlearn to trade your cryptocurrency successfully.

Day Trading

Most people who get into the stock market understand that stocks take time, sometimes even years to go up consistently in value. This patience in trading is something that is learned, and crucial to Wall Street’s success. The same methodology doesn’t quite carry over to cryptocurrency.

While of course a number of people who bought Bitcoin in 2009 and waited until the last couple of years to sell became wildly wealthy, with the growth of the cryptocurrency market, success requires a more broad, nuanced approach.

“Day trading entails taking positions, and vacating positions within the same day. This may mean seeing that Ethereum has gone down 1.25% in the morning, making a purchase, and then selling it later in the day as it goes up 3%. These types of quick decisions can help you slowly turn $1000 into $1030, into $1080 and so on, gradually increasing your basis with which to trade.” – Lina Miranda, VP of Marketing at AdQuick

Scalping

Scalping as a word may have a negative connotation, but when it comes to crypto-trading it can be an effective way to take advantage of a volatile system. Scalping takes day trading and pushes it to the next level.

BYBIT Learn puts it effectively: “Scalp trading or scalping is a short-term trading strategy that a trader adopts to make frequent small profits from small price movements each day. With small profits from each trade adds up, it can generate a substantial amount over time.” -Scalping: 5 Best Profitable Crypto Scalp Trading Strategies. Bybit.com.

Crypto scalpers tend to open positions with a diverse catalog of currencies every few minutes, selling them throughout both the short and long term. With this strategy, scalpers are able to slowly increase profits through microtransactions. This same strategy—if you have the time and commitment—can help you see surprising profits over weeks and months.

Don’t Sell it All!

“When you sell or trade your crypto, you don’t have to use your whole position. One of the best strategies is using a percentage of whatever coin you are trading and maintaining another. This allows you to use quick growth strategies, while also maintaining an investment in long term value.” – Russell Lieberman, Founder and CEO of Altan Insights

Second Responder

Let’s look at an example of this. Say you own $1000 worth of Bitcoin, and you notice that Bitcoin is up 3% and Ethereum is down 2%. Rather than trade all $1000 of your Bitcoin for Ethereum in hopes that you can make a margin more, you trade $500. Now you have split to a possible day trade profit while retaining your position in Bitcoin.

This is, of course, an oversimplification of how to use this process, but is a good way to understand how it works.

Diversification

Diversification is a term anyone familiar with trading has heard, and it is increasingly important when trading cryptocurrency.

Currently, there are over 1500 different cryptocurrencies being mined and put into circulation. Each one has different levels of volatility, different utilities and areas of trade, and different numbers of coins in circulation. Due to this volatile aspect of crypto trading, it is important to diversify your portfolio such that ups and downs are not congruous.

“For a good trader, when one coin goes down in value, another goes up. They are able to not only make up for losses, but are able to continue to make a profit.” – Alex Wang, CEO of Ember Fund

Carefully research a number of cryptocurrencies, make a diverse portfolio of positions, and trade amongst them to find the best avenue for consistent profit and low risk.

Don’t Listen to Hype

Crypto trading is one of the most public, and publicly influenced trading economies in history. This means that it is frequently publicized everywhere from Twitter, to professional websites.

“Reports of crypto investment scams surged to 7,118 in the first nine months of 2021. This was up 30% on the whole of 2020, according to Action Fraud, with the average loss per victim at £20,500 [22,315.89 USD].

So when you’re confronted with a lot of information about a cryptocurrency, take a step back from the hype.” -Tom Rogers, Six cryptocurrency tips (and five mistakes to avoid). The Times.

We’ve all seen tweets telling us where to invest, what new currency to buy, that something is selling quickly, or that you are missing your chance to sell. There is more hype around cryptocurrency than any other trading position.

While every once in a while the hype may be correct, carefully research all of your trades and positions. If you make a trade based purely on hype or groupthink, you may find yourself losing a valuable position, or taking a negative one.

Research

“It might seem like a no-brainer, but research every position before you take it. The more you research, the less you’ll have to research moving forward, but you’ll also take fewer risks, and find more opportunities. While crypto is a volatile, rapidly changing market, you won’t lose your opportunity in the 10-30 minutes it takes you to research a position.” – Loic Claveau, CMO of TakeUs!

Be intentional, check a number of mediums and sources, and look at the history of whatever currency you want to add to your portfolio. As you learn to do this well, you will discover a plethora of opportunities, and avoid a high number of possible mistakes.

Develop Your Strategy

With these strategies to become a crypto trading pro, you have more tools in your tool belt to develop your own trading strategy. There are of course near infinite ways to become more effective at trading crypto, but the best way is the one that you find works for you. Create your own combination of strategies and methodologies, experiment with low-risk trial and error, and create a plan based upon what works.