Cryptocurrency trading is very challenging, especially if you are not aware of its primary strategies. There are several strategies to enhance your crypto trading experience. However, a few will guarantee you some significant profits off your money. Trend trading and buy and hold strategies are two essential strategies that crypto traders use to maximise profits. But how does it work, and how useful it is? We will look at it in the following parts:
Trend trading is a crypto trading method that will increase your chances of success and minimise your risk while increasing your reward. The primary purpose of trend trading is to capture large trends, and a high-profit target will help you take advantage of a large move and bank your profits. You should, however, backtest your filters and learn what works best for you.
Identify a trend
This method involves identifying a trend, identifying low-risk entry points, and holding on to those positions until the trend reverses. Trend trading is a highly profitable strategy, but you need to have substantial risk control and discipline to stick to your system.
Trends occur in all financial instruments, but more significant trends are more likely to be seen in longer time frames. To mitigate these risks, you should make use of trailing stop-loss orders.
Know the different cryptos type
To use this strategy, you, therefore, have to know that different cryptocurrency categories tend to pump and dump at different times. This means that you should study each category to find which ones are pumping and dumps.
Using trend trading as a crypto trading strategy, you can trade whichever cryptocurrency is currently pumping at that time. A good example is the class of DeFi tokens and the class of NFT related coins.
Buy and hold strategy
This is another cryptocurrency trading strategy that many investors prefer. This type of investment is passive and allows you to accumulate a large sum of money without making frequent transactions. The buy and hold method is beneficial for both experienced traders and beginners who want to take advantage of the long-term potential of cryptocurrencies. And because the buy and hold method does not involve the complication of calculating market timing, it is a popular choice among investors.
Although buy and hold strategies are riskier than other types of cryptocurrency trading; they have many benefits.
- First of all, it enables you to accumulate large gains with relatively minimal time expenditure.
- You don’t need to monitor prices daily, and you can focus on fundamental news and review your positions periodically.
- Furthermore, this type of investing is less stressful than the short-term approach and is also more lucrative.
An additional advantage of the buy and hold strategy is that it enables you to capture gains even if the market falls. By holding an asset, you give it time to recover. In addition, it allows you to defer taxes on the gains you make.
You may have heard that gains from cryptocurrency are tax-free, but the IRS claims that they are taxable. Therefore, it’s best to stick to the buy and hold approach if you’re looking to generate a steady stream of income from crypto investments.