Trading cryptocurrency is by far one of the most lucrative things you can do in the crypto space right now. This young and volatile market is perfect for traders looking to profit from the wild price swings of crypto. However, being a successful trader in this market can be tough, which is why it’s important to have a plan. In this article, we are going to explore some of the strategies that traders are using in the market to gain an edge.
Arbitrage trading is a particularly well-suited strategy to the crypto space because of how the space works. When you buy and sell crypto, this can usually be done on numerous exchanges such as Coinbase or Binance. Because of this however, the price of crypto will usually vary across exchanges due to the differing levels of supply and demand on these exchanges. As a result, it is possible to buy, for example, Bitcoin on Coinbase for $10,000 and then sell it at a higher price point on Binance, where the price of Bitcoin might be $10,200. Arbitrage trading is all about capitalising off these price differences that can exist across crypto exchanges.
2. Swing Trading
As mentioned in the introduction to this article, a key feature of the crypto market is its volatility. The price of Bitcoin can swing upwards and downwards by over $100s dollars in the span of a few hours. This type of price action is great for the swing trading strategy, because you can profit from both upward and downward price swings. The key to being successful with this strategy is being able to time when the market will enter an upward or downward swing. Traders often use an automated set-up to help with this. Tools such as crypto trading bots and signal groups (e.g. Binance signals) work great with this strategy.
3. Fundamental Analysis
The fundamental analysis trading strategy is quite different to the above trading strategies because it is less focused on price action and more focused on finding the true value of the asset in question. In traditional markets, this strategy has been used for stocks and bonds to great effect. Usually, metrics such as the Price to Earnings Ratio and Earnings Per Share Ratio are used with this strategy. But, this doesn’t work for crypto, as we are dealing with digital assets, not companies. Thus, new metrics must be used to try and determine the intrinsic value of cryptocurrencies such as Bitcoin, for example: the quality of the development team or the value proposition of the idea itself. It’s important to note that this strategy generally works better with a longer-term timeframe.
To conclude, there are numerous ways to approach trading in the crypto market, what’s important is finding a strategy that works with your style of trading. With the right strategy, you will be on the right path to successfully trading the crypto market.