Trading cryptocurrencies may be one of the most challenging things you ever do. It's not for the faint-hearted, and very few traders succeed long-term. Crypto traders need nerves of steel to cope with the volatile market. A random statement from a significant investor, such as Elon Musk, can plummet prices by 10% overnight.
You may wonder if it's possible to make a profit from trading cryptocurrencies, and yes, it is. But it's not a game for beginners. Trading cryptos takes patience and skill. You need to understand and appreciate that the crypto market doesn't react as other financial markets do.
Most cryptocurrency traders fail because they are in too much of a rush to make money. They do not do the foundational work to prepare for the unpredictability of trading cryptocurrency. They get caught up in the hype, listen to too many people foretelling prices and panic when it all goes pear-shaped.
Having a good strategy for trading cryptos is a start, but it isn't enough to make you successful. From the offset, maintain a steady, conservative and determined approach to learning how to trade cryptos, and you stand a better chance of becoming a professional crypto trader.
There are multiple crypto strategies for all levels of cryptocurrency trading. The trick is to choose a simple strategy. Even though this article discusses advanced strategies for trading cryptos, none are difficult to understand and implement.
There are two fundamental elements to help you get started trading cryptocurrency.
- Strategies that work for cryptos
- A trading plan - rules for trading cryptos
Create a Trading Plan for Cryptocurrency Trading
You are likely to fail no matter your strategy if you do not create a trading plan.
Because the crypto market moves so fast, it can be a challenge to think on your feet and make the right trading decisions
A crypto trading plan gives you a foundation to establish when to enter and exit the market. Your crypto trading plan can be flexible because, as you gain experience, you may need to tweak it now and then.
- Choose the cryptos to trade – select cryptocurrencies with liquidity and volume. Get to know the cryptos you want to trade. Find out what the crypto does by checking the website and establish if it has any public personalities that support the crypto. A random tweet can make crypto prices plummet or soar.
- Choose a strategy for the market – for example, you cannot swing trade in a static market. Learn how to use each strategy to suit the current market
- Risk Management – when trading cryptos, you may need a bit more room with your stop loss. But it's still best to stick to a 1% risk per trade if you can. With the increased volatility, you could face significant losses if the market goes against your trade if you risk more. It's also less stressful, and you are less likely to interfere with the trade.
- Emotional Management – when real money is involved, emotions may become heightened. Fear of loss and fear of missing out (FOMO) are two emotional factors that drive crypto market sentiment.
You may think you won't be affected by an emotional response. But, you will likely experience what all crypto traders go through initially until you learn to manage your emotional reactions to unexpected price spikes and other volatile market activity
- Know when to quit – teach yourself to get up and walk away from your trading station. Set a reminder for every two hours or less. Go for a walk, grab a coffee, sit quietly and allow your mind to detach from trading cryptocurrency.
When you return to your trading station, you have a clear mind ready for trading. Also, decide when to finish for the day if you have consecutive losses. And the same for wins. After a series of winning trades, you may become overconfident. You start overtrading, quickly losing all the earlier gains.
OK, now you have a trading plan in place. Let's look at the five advanced crypto trading strategies for 2022.
Don't Miss: What Is Cryptocurrency Trading?
Top 5 Advanced Crypto Strategies for 2022:
1. Range Trading Crypto Strategy
Range trading can work well for cryptocurrencies because historically, the crypto market ranges after a long bull or bear run. The price consolidates until it breaks out again and gains momentum to the upside or downside.
If you choose cryptos with good liquidity and reasonable volatility, you can trade within a range for many trades. For example, Bitcoin ranged between $8.5k and $10.2k for thirty days.
Crypto prices can change when a big mover enters the market, manipulating the price to suit their trading needs. It can create price spikes, which confuses retail crypto traders into following a false trail.
Range traders may use technical indicators like the Relative Strength Index (RSI) or the Stochastic Oscillator that displays overbought and oversold zones, typically at 70 and 30. When a price is oversold, the price may reverse and the same if the price is overbought. You'll find oscillator indicators on most trading platforms, but they aren't 100% reliable.
Oscillators work well if you can identify divergence with the price movement on the chart. At the least, look for one other confirmation for range trading, rather than relying on the indicator.
Check Out: Top Tools for Crypto Trading
2. Scalping Cryptocurrencies Strategy
Scalping is the white water rafting strategy of trading cryptocurrencies and is not recommended for beginners. The crypto scalper can maintain calm in the face of adversity, jump into the market for a few pips and exit for a profit. Not an easy task with crypto trading.
Crypto prices can change rapidly, so scalpers have to watch for an increase in trading volume and be prepared, knowing exact exit points before entering the trade.
Scalping is a short-term day trading strategy. Your lot size may be larger than with other strategies. The returns for scalping cryptos can be high, but, equally, it's easy to get caught on the wrong side of the trade. Top crypto scalpers may take up to 20 trades in a few minutes. It takes a lot of concentration, and you're unlikely to be able to do this for long periods. Burnout and exhaustion are common issues for crypto scalping traders.
To succeed with crypto scalping, you must have a trading platform with fast execution times so your trade doesn't lag, missing opportunities and increasing the chances of losses.
3. Swing Trading Crypto Strategy
If you have some experience trading cryptocurrencies, you might consider swing trading. It takes patience and a level of skill, but if you wait for the right moment, crypto swing trading can produce excellent returns.
Cryptocurrencies are unpredictable, to a degree. But, there are patterns in the randomness. For instance, cryptos tend to move fast for a period, months sometimes. And then, the prices consolidate, typically pulling back to the previous high or low and moving in a range.
If you wait for the pullback and watch for a breakout of the range, you can catch a significant move, and it can be fast. After a bull run, crypto prices will always pull back, so it's a question of watching and waiting.
It can be challenging to swing trade crypto because you may take one or two trades a week. Trading can be addictive, so crypto traders have to develop the discipline to stay out of the market until the right set-up presents on the charts. The profits from swing trading cryptocurrencies can be significant, but you may need a larger stop loss than day trading cryptos.
Look for cryptos with good liquidity and volatility. Map out the charts where you anticipate the price may pull back, and plan your exact exit point for the trade. Depending on market conditions, you may hold a crypto trade for a few days or weeks.
4. Moving Average Crossover Crypto Strategy
Sometimes called the golden cross or death cross, this crypto strategy uses two moving averages. Ideally, EMAs (exponential moving averages) are better than SMAs (simple moving averages). Moving averages show the mean average of price over a time period. So a 50 EMA on an hourly chart is 50 hours. On a daily chart, it would be 50 days
For this strategy, add a 50 EMA and a 200 EMA to your charts. You are waiting for a crossover of the moving averages. The golden cross is when the 50 EMA crosses above the 200 EMA, and divergence is the opposite. The 50 EMA crosses below the 200 EMA.
You can use the crossover strategy on shorter timeframes, but it is more effective on higher timeframes. You can start tracking a possible crossover on the 4-hour chart and then wait for the price to cross over on the daily chart. When these crossovers occur, price momentum is trending in the direction of the crossover.
Most times, the price will pullback for a retest of the 50 EMA or 200 EMA before it continues in the new direction.
You can combine this strategy with the swing trading crypto strategy. It works best in a highly volatile market when price momentum is significant. Ignore flatline crossovers where the EMAs appear to move sideways and still crossover. Wait until the crossover confirms direction.
The above image is the ETH/USD daily chart
The crossover happened at $716 and continued up to $4,500 before the price crashed below the 50 EMA.
5. Day Trading Cryptocurrencies Strategy
Day trading cryptocurrencies can be a good strategy for a volatile trending market. The crypto day trader takes advantage of market volatility and trades a mid-range timeframe such as the one-hour or four-hour chart. You trade with market sentiment, tracking the trend until the price meets support or resistance or meets your profit target.
Day trading cryptos takes focus and discipline, and a flexible approach. Some days, in a ranging market, there may be no trades. Unlike other financial markets, the crypto market has no set sessions, so it is essential to pace your trading activity to avoid burnout.
Become familiar with a handful of cryptos with good liquidity and map out zones on the charts where the price may reverse or take off with momentum.
Trading cryptocurrencies takes a great deal of discipline and is best suited to intermediate and professional crypto traders. The fast-paced crypto market can be overwhelming for beginners.
If you have a background in trading other financial instruments, don't assume that trading cryptocurrency is the same. Spend a few weeks or more watching the crypto markets and practising in a demo account or with micro-lots on a live crypto account.
Create a crypto trading plan and stick with it, only adapting it as you gain experience in the fast-moving crypto market.
- Choose the cryptos to trade
- Choose a strategy for the market
- Risk Management
- Emotional Management
- Know when to quit
Choose an advanced crypto trading strategy that suits your trading style and personality and the amount of trading capital you have.
- Range trading
- Swing trading
- Moving average crossover
- Day trading
Practice trading all five strategies and note that you can use the moving average crossover as a stand-alone strategy or as a confirmation for another crypto strategy
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments such as cryptocurrencies may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from trading cryptos, and it's advisable only to risk what you can comfortably afford to lose.
eToro – The Best Platform to Trade Cryptocurrencies
eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
Which crypto coins are the best for day trading?
Choose the cryptos with the most liquidity and volatility, such as micro coins or those with relatively small market caps. Fusion (FSN) and Basic Attention Token (BAT), for instance. If there is zero or low volatility, it's pointless trading cryptos because the price will not move.
How much can I make day trading cryptocurrencies?
It's a difficult question to answer because it depends on how much trading capital you have to trade cryptos, and it's reliant on your skills as a crypto trader. Trading cryptocurrencies is a high risk, and most traders lose. So focus less on the money and more on improving your crypto trading skills.
Can I day trade cryptocurrencies with $250?
Most cryptocurrency exchanges allow you to open an account and start trading with $200. But, consider your risk management because if you risk 1% on each trade, that's $2, which doesn't give you much scope for growing your cryptocurrency account.
Can you make a living trading cryptocurrency?
Some crypto traders make a good living trading crypto. But it takes a lot of dedication to reach a level of making consistent income. In some cases, it could take years, depending on your ability to learn from mistakes.
What's the best platform for trading crypto?
Many online crypto exchanges provide trading options, and it is best to trade with a reputable company.
A few examples are:
- Binance – the largest cryptocurrency exchange
- eToro – the leading popular social trading platform
- Kraken – an established crypto exchange
Remember that there are no financial governing bodies for cryptocurrencies, so it is highly recommended you trade with a reputable company, such as the above.