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Hackernoon logoTrading strategies: choosing the right one by@maria-lobanova

Trading strategies: choosing the right one

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@maria-lobanovaMaria Lobanova

Journalist, crypto enthusiast

Cryptocurrency is a subject of interest to many people nowadays. If you approach it sensibly, you can get a substantial additional money, if not the primary income to your monthly budget. However, beginners make mistakes and trade incorrectly, which leads to a “drain” of capital in the first days of trading. n this article, I consider and define the use of effective global strategies for earnings as well as outline the main mistakes made by the newcomers and even professionals of the market.

The briefing points

The main advantage of all the strategies described below is high profitability and minimal risks. It is essential to understand the impossibility of trading in cryptocurrency environment without any risk since there is always a chance of a sudden collapse of the virtual money rate.

The market strategies:


This particular strategy can be called a classic. For the first time, it was applied to the Forex exchange, and both amateurs and professionals gladly adopted it.

Hence, the essence of this cryptocurrency trading strategy is as follows: a trader concludes a large number of trades during a short time and then closes them in a few minutes (in some cases, seconds).

Fact is, the overall strategy is straightforward, but it is not recommended to invest in a scalping significant amount for trading, since the crypto assets may collapse and make a trader broke. It is best to perform scalping on currencies of the second or even third tier since they can grow by a few percents in a few minutes, thereby bringing outstanding profits in the short term.

How to use it? This strategy could be used on any exchange you prefer. The tactic is simple. For example, you buy a 5–10 Litecoins for, simply put, $50. That would be $500 max at a certain point. You continue to monitor the rate during the day and the latest trends. When the price reaches $55, you immediately sell it, having acquired $50 profit! It’s simple and can take even a few minutes or an hour a day.

Making a crypto portfolio

This complex cryptocurrency trading strategy is entirely based on an assessment of the state of the cryptocurrency market. To use it efficiently, it is necessary not only to monitor the situation on the crypt market, the total capitalization of currencies and the announcements of new ICOs. Moreover, the one chooses it needs to watch the macroeconomic situation in the world and track news related to virtual money.

For the ones thinking that the whole task is simple — it is worth noting that with the wrong strategy or incorrect assessment of changes in cryptocurrency rates, you can go into a significant minus.

How does it work? A trader forms a portfolio of several digital currencies, having both overpriced and overhyped as well as undervalued coins. The perfect situation would be the creation of a special cryptocurrency package, which exchange value will not be excessive ups and downs. In case some particular currency asset is performing better than other, other currencies will compensate its cost reduction.

Speaking of example — perhaps it’s not a secret that the vast majority of crypto traders prefer to keep the so-called “gold and silver of the virtual world” — The Bitcoins and Ethereum. These assets are quite different from each other, and it often happens that one currency goes up, while the other falls in price. Such a difference is convenient for a traders because it allows to balance between the rates and make the profit, selling one currency at the moment of its rise and buying another at the moment of falling.

Buy & hold

Despite the fact that other strategies may be applied in the short term the latest is better suited for the long run — a month even.

The essence of this strategy is extremely simple. The trader buys merely the selected crypto assets, and keep it in his wallet until it increases indecently.

There are a lot of examples present — as the cryptomarket reached it’s heights back at the end of 2017, many crypto assets value rocketed. The trend continued for some time, giving an opportunity for smart players to get substantial gains.

However, to comply with this strategy, it is necessary to study the currency market and have nerves of steel carefully. The fact is that any cryptocurrency in the long term gives an adjustment to the price, and this leads to a drawdown of the course, and this time there is an intense craving to get rid of the crypto assets and get your fiat money back.

You need to maintain a particular price milestone — and after the rate of the currency reaches this value, it needs to be sold.

When we go back to history — to the end of the year 2017, one can remember that the habanero-hot market has seen many crypto assets rocketing. During the two weeks, some currencies went up to 2–3 or more times in price. Simple math — if in the middle of December 2017 one could buy 1 ETH for $670, a month later they could be sold twice more expensive! Having acquired 100 ETH and used this strategy, the trader could earn $6,700! Moreover, it is worth mentioning, that you should be utmost sure when selecting the wallet for your future savings. The best ones are usually so-called the cold storage wallets, for example — Ledger Nano or Trezor are among the most popular nowadays. Using these you can be sure that your funds won’t be hacked or lured out by the fraudster.


Going on next — this trading scheme for cryptocurrency exchanges is even more straightforward.

How does it work? You buy a cryptocurrency on one exchange at a low price and sell it on another crypto-exchange for the highest bidder.

It’s a straightforward and profitable cryptocurrency trading strategy on the exchange, which requires only regular monitoring of exchange rates. However, counting on possible earnings, you need to take into account the commission that some exchange charges. If the difference in the exchange rates of one currency on exchanges is 2–3% or more, the selling can be profitable. In case the exchange difference is less than 2%, then the profit will be minimal, or it will not be at all because of the commission.

Moreover, arbitrage traders can benefit as there are quite low trader numbers and competition — when you compare it to the traditional markets.

Let’s say you’ve bought 10 ETH’s for $210 at some exchange, transferred it to your wallet and have sell it immediately on another exchange for $225. Simple math again — $250 is you gain.

This one is followed by the similar

Static Arbitration

Another type of cryptocurrency trading on a stock exchange similar to the previous strategy. However, it has a slightly more complicated scheme but is also designed for the short term.

Speaking about the scheme — technically, the strategy is as follows. Initially, one cryptocurrency (x) is exchanged for a cryptocurrency (y) and is withdrawn from the exchange. Then, on another exchange, virtual money (y) is exchanged for coins (x) and sold for fiat currency.

The scheme of trade is complex and in order to better understand it, we will give a simple example.

What’s the catch? This cryptocurrency trading strategy can bring tangible profits. The downfall here is there are a number of limitations and issues.

First of all, it is necessary to track the price difference on the stock exchanges, and, if the value of currencies differs, it is possible to conduct trading very quickly (literally, in a few minutes).

Secondly, you need to have a solid deposit (not less than $ 1,000 or more); otherwise, the profit from such trading will be just scanty.

Also, thirdly, statistical arbitration will be effective only when the difference of two currency pairs is 2% or more.

With this strategy, the trader should carefully monitor the prices on different exchanges. For example, Ethereum costs $225 on a certain A-exchange and Ripple — $0,54. At the same time on another exchange — B — the price correction had not been applied yet and reselling those trading pairs one can gain 5–10% of profit.

The automated trading

However, the technically advanced robot trading can make all the difference.

The technically-wise traders can create robots with a selection of programming environments and tools for creating trading robots.

Nowadays, there are a lot of convenient & powerful options available — such as TradeScript (SmartX), CQG Integrated Client, Wealth-lab, TSLab, LiveTrade (CoFiTe), TradeMatic, Smartcom, MetaStock, StockSharp, Quik, TRANSAQ.

What else creates obstacles for a trader besides the market volatility? The growing world uncertainty regarding the exchanges registration and verification, crypto markets regulations and shifts, high commissions and more.

Moreover, there are 217 crypto exchanges on Coinmarketcap today and to get registered on most of them you just need a login and a postal address.

However, the trader needs a convenient tool to minimize the risks and to improve convenience. It can be done with, for instance, which utilizes the automated trading algorithms to engage users in crypto investment process and earning profits with reduced risks. It also saves one’s time due to robotic nature of trades and increases the chance to gain profit significantly — as the human fails are excluded from an equation in this case.

Meanwhile, like any other system, trading has its own hints and features. In case you are a novice in this game, you’ve probably learnt or will learn the basic principles the hard way. However, main ideas to keep in mind are the following: forget about the perfectionism, take losses with a keen mind, plan your actions carefully and — minimize the risks.


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