Cryptocurrency trading strategies and tips

Day trading is where you open and close trades within a single day, with the aim of making quick profits from intraday price movements. Because positions aren’t kept open after the markets are closed, you avoid the costs and risks associated with holding positions overnight.

However, it does require focused attention so it’s really only suitable if you are able to set aside dedicated time for your trading. Learn more about day trading.

Scalping

Scalping is a form of high-frequency day trading, where your aim is to take small profits from a large number of trades. It involves opening positions in line with a trend, often entering and exiting the market multiple times as it develops. Individual trades are held for just a few seconds – minutes at the most – so it is one of the most short-term strategies.

Scalping can be an effective way to trade volatile assets such as cryptocurrencies, because you take profits early if the market moves favourably and minimise losses by closing positions quickly if the market turns. Find out more about scalping.

Trend trading

Like scalping, this form of trading involves opening a position in line with a trend. But your aim as a trend trader is to maximise profits by holding the position open for as much of the price movement as possible, rather than opening and closing multiple positions in quick succession. It can be a short, medium or long-term strategy because trends can develop over any time period.

Using this strategy requires an understanding of the technical indicators that can be used to identify emerging trends, as well as the likely impact of news and economic events on the markets. Discover some tools for trend trading.

Swing trading

Swing trading focuses on the price oscillations within a trend, aiming to make the most of market volatility by trading moves in both directions as a trend develops. While this opens up more opportunities for profit, you’re unlikely to trade at the exact highs and lows of the price movement, as it often takes a partial reversal to identify that a new swing is underway. 

Like trend trading, this strategy requires an understanding of technical indicators and the factors that move markets. Learn more about swing trading.

Position trading

Position trading involves holding a position for longer than a day – possibly for weeks, months or even years. For this reason, you would generally place far fewer trades as a position trader than you would with most other strategies.

If you are looking to take out a long-term position on a cryptocurrency, assess the market carefully – for example, by taking its technology, rate of adoption and competitors into account.

Automated trading

Automated trading involves using a computer program to execute trade orders automatically. These systems can be as simple or as complex as you like, are fully customisable, and can be ‘backtested’ using historical data before going live.

Automated trading systems can monitor markets throughout the day, opening and closing trades at opportune moments, even when you are unable to monitor what’s happening yourself. But of course, you’ll still need to monitor your system carefully, as any flaw in its design could prove costly. Find out more about automated trading.