Trade strategies for cryptocurrency market

On the cryptocurrency market, as well as on any other traditional market, a great amount of opportunities exist for earning and trade strategies, with the help of which one can try to ‘beat the market’. Trade strategy presents a set of rules, norms, terms, according to which trader does the predetermined actions.

• Arbitration

Arbitration trading – this is a simultaneous purchase and sale of asset for getting the profit in connection with difference in price. Arbitration trader acquires an asset on one market, and then sells it on the other – at higher price.

Example

Let us suppose, Bitcoin is traded on Coinbase at $5000, but on Binance – at $5100. In this case arbitrageur can buy cryptocurrency on Coinbase and simultaneously sell his Bitcoins on Binance, and in so doing get the profit. Arbitration can be sufficiently profitable trade strategy, if to do everything correctly. For automation and increasing of the time for accomplishing the operation various trade tools can be used, for example trade bots, but as the cryptocurrency market evolves, earning on price difference is getting more and more difficult.

• Fundamental analysis

Fundamental analysis of cryptocurrency – this is forecasting of its price within a long term, based on the elaboration of all the available information about it starting from economical one to the technical one. This analysis does not apply to short-term perspective and is used only when the investor wants to get the provision of value for precise currency in the distant future – minimum in several months, or in a year if at all. But the attempts of more detailed forecasting, say, for three years, are also meaningless, because cryptomarket is quickly changing and very often new unaccounted, but essential factors appear, which can drastically turn around any fundamental forecast.

Several theses underlie in fundamental analysis:

1. The price of any asset doesn’t change in itself, but owing to particular reasons.
2. The reasons of price dynamics can be found out while the detailed investigation of facts, relative to a concrete asset.
3. Every fact leads to the certain consequences, which will reflect on the asset price.
4. If to know all the facts and reach to the correct and logical inferences, one can predict, what happens with the asset in future.

• Swing Trading

The price of Bitcoin or any other cryptocurrency can grow by 20% in several hours – and fall back easily too. Some traders use this volatility to get the profit, and one of used for this strategies is Swing Trading. Swing Trading involves that trader keeps the cryptocurrency during certain period of time, usually several days or weeks. Then he tries to determine the general trend, upward or downward one. The success of swing trading depends much on human’s capacity to guess the market motion, which, if taking into account the speed of cryptocurrency turn, is very tough.

• Scalping

The essence of this trade strategy of cryptocurrency is in following: trader makes a great amount of deals for a short term, and then closes them in a few minutes (in some cases in few seconds). The strategy is very easy, but it is not recommended to invest in scalping too large amount of money for trading, because cryptocurrency can collapse and therefore the trader will be at loss.

Example

You get 10 Ripple at price of 180 RUB (1800 RUB). In some minutes the cryptocurrency rate changes up to 185 RUB, and you sell it at once. The income amounted only to 50 RUB, but only a few minutes of time has passed!

• Crypto bag forming

The essence of this trade strategy on cryptocurrency exchange is as follows: trader forms a bag of several currencies, having available overheated and underrated coins. Ideally, to form a pack of cryptocurrencies, in shareholder value of which there wouldn’t be excessive rises and falls. In case any cryptocurrency decreases too much, the reduction of its price will be compensated by other cryptocurrencies.

Example

The vast majority of crypto traders prefer to keep in their bags gold and silver of the virtual world – Bitcions and Litecoins. These cryptocurrencies differ from each other hard enough and frequently happens, that when one currency goes up, the another one falls in price. Such a balance is perfect, because it allows to balance between the rates, selling one currency at the moment of it’s rise and buying the other one at the moment of its fall. Dogecoin, Monero, Ripple look good in bags.

Conclusion

A great amount of trade strategies exist in the world of cryptocurrencies, but any of them bears the risk. Volatility of cryptocurrency market can become a rise for ones and the fall for others. Thus it is important not to invest more, then you can allow yourself to lose, and also forestall any move by thorough investigation of all the circumstances.

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