Since the dawn of bitcoin, cryptocurrencies have been one of the most buzz-worthy topics in finance, with prices fluctuating up and down to astronomical levels. However, there are a lot of misconceptions about what it takes to trade in cryptocurrencies and especially how exactly investors should approach trading. This guide aims to clear some confusion by providing an overview on the different kinds of trading strategies that can be used in cryptocurrency markets as well as some key considerations when it comes to crypto portfolio management.
Some Of The General Rules To Follow When Investing :
Always remember that while diversification is important in crypto markets, you should be very careful about the projects you choose. Don’t chase hype! Choose your coins and tokens with care, pay attention to their team and underlying technology. If you don’t have time to research by yourself, consider consulting a professional. Diversification and risk management are key. Before investing, keep in mind that you will be paying crypto taxes under the law of crypto taxation in your region.
Trading Categories In Crypto Trading
Trading strategies in crypto markets generally fall into two main categories:
- Active trading
The first category, which includes day trading, swing trading, and position trading, is a high-risk approach that focuses on short-term price movements. If you choose to trade using these strategies, you need to be fast with your decisions and react quickly to breaking news and technical analysis.
- Latency arbitrage
On the other hand, the second category is for traders who use various forms of automated trading algorithms such as trend following or mean reversion. While you do not have to constantly monitor your trades, the automated approach comes with a lot of extra complexity and risk as well.
Strategies To Impact The Price Of Particular Coin
As in any market, there are also various strategies that can be used to make an impact on the price of a particular coin. These strategies include market manipulation and shorting.
- Market Manipulation
If you have a large amount of money and want to make some quick returns in the short term, consider buying up a few large bags of a particular coin and then dumping it at once. Although this strategy is relatively effective, it is always risky because if the coins you bought have not reached their peak prices by the time you dump them, your profit margins will be significantly less than expected.
- Shorting (Selling Short)
As the name implies, shorting is simply selling off a cryptocurrency on the expectation that the price will fall. This can be a very effective strategy, as it gives you a profit even if the market price rises.
For this strategy, the goal is to make a profit regardless of whether the price has moved in your favour or against you. The way it works is by purchasing a cryptocurrency with a lower price than you want and selling it with a higher price so that you can make back the difference.
All strategies are not created equal, however, and investors need to be careful when choosing which trading strategies to use.
For managing your crypto portfolio you can use online services like Binocs. Binocs is a very useful service when it comes to managing your crypto portfolio. There are a lot of tools like graphs and report options by which you can have a look on your loss and gain.