Crypto Investing
9 Aug 2021

Crypto Trading Strategies; All You Need to Know

Farheen Shaikh

Congratulations! You deserve a pat on the back for moving a step ahead in your journey to make money by trading cryptocurrencies. If you are an experienced trader, you may find bonus tips here. If you aren’t one, this article could be your guide and gateway into the enticing world of cryptocurrency trading. So, let’s get started.

Beginners Crypto Trading Strategies

There are many ways through which you can invest or trade in cryptocurrencies. Some of the popular crypto trading strategies are- crypto arbitrage, day trading and buy and HODL. We know these terms sound super complicated. This is why we will be breaking down some of the best crypto trading strategies for beginners and how you should start in this guide. 

6 Best crypto trading strategies for beginners are:

  • Buy and HODL
  • Rupee Cost Averaging
  • Day Trading
  • Crypto Arbitrage
  • Swing Trading
  • Position Trading

Before going into details of these trading strategies, first, you need to understand the difference between active and passive investment styles. 

Active investing is more like a hands-on approach. It refers to buying and selling of cryptocurrencies based on the emerging trends of the market. The trades are usually held for a short duration to profit from short-term market movements. 

For active investing, it requires more of your time and attention due to constant market monitoring.

On the other hand, a passive investing style is a hands-off approach, where you need to devote less time and effort. The process involves investing in crypto-assets and holding them for a very long period, preferably for 5-10 years or even higher, regardless of the market volatility. 

This is a highly rewarding investment strategy for beginners and is also used by many seasoned investors. 

Buy and HODL

As the name suggests, the Buy and HODL indicate holding the crypto-asset for a long time. It is one of the safest ways to invest in cryptocurrencies.

Using this strategy, you can easily keep yourself away from all the noise in the market, which can be very misleading sometimes. 

For example, in 2018, when the crypto bubble burst, almost all leading cryptocurrencies experienced a price drop of up to 90%. And, many sceptics then had written it off as an asset class. If you notice, not only has the crypto market recovered but also outperformed every traditional asset class. 

Rupee Cost Averaging

I bet you know about this strategy. It is a very popular investment strategy in India and is used widely in the stock market. Confused?

Let me simplify. It is also known as Systematic Investment Plan or SIP, which has revolutionised the Indian mutual fund industry. The same strategy can be applied while investing in cryptocurrencies. 

In this investment strategy, you need to invest a fixed sum of money in a particular cryptocurrency at regular intervals rather than investing all your money at once. For example, investing ​​₹ 1,000 in Bitcoin at the start of every month for the next ten years. 

It is a cost-effective way of investing in cryptocurrencies and is suitable for every type of investor. One of the most significant benefits is that it reduces the impact of volatility in investment, resulting in outsized returns. 

Day Trading 

Also known as intraday trading, it is a well known active investment strategy. 

Day trading involves buying and selling cryptocurrencies within a day to make profits. If there are opportunities in the market, you can enter into multiple trades within a day. But, at the same time, the risk of loss is also higher in day trading. 

This makes it suitable for investors familiar with the nature of volatility in cryptocurrencies and those with prior trading experience. Yes, there is a potential for stellar returns, but you should not downplay the risks either. 

You can follow two approaches in day trading to make profits from small market movements within a day. 

  • Scalping: This approach involves profiting from small price movements by making high volume trades and quickly reselling. Here, you need to follow the trade exit strategy strictly. 
  • Range Trading: This approach requires you to identify the trading range (the highest and lowest price points) of the crypto asset and trade within that range.

Crypto Arbitrage 

Want a risk-free way of making money in cryptocurrencies? Then, go for crypto arbitrage. 

It involves profiting from the price inefficiency of any cryptocurrency that exists in the market. So, how does it work?

In the cryptocurrency market, there is no uniformity in the prices of assets between exchanges. The same cryptocurrency is priced differently on different exchanges. This difference opens up the opportunity for traders to perform arbitrage trading.

It involves buying a cryptocurrency at a lower price in one exchange and selling it on another exchange at a higher price. Sounds easy, right?

But, it is not. When you are doing crypto arbitrage trading, you compete with bots used by institutions to pocket profits from such inefficiencies in the market. As per a survey conducted by leading Cryptonomist Adam Cochran, bots accounted for 86% of the total money moved in Crypto trades amongst those surveyed.

To be successful, you need to be extremely fast to spot the price inefficiencies in cryptocurrencies and run the trades through different exchanges. 

Swing Trading 

Swing trading is like riding the waves. Confused?

In swing trading, you attempt to capture the expected short to medium-term gains of a cryptocurrency. The trades are based on swings in the price of crypto assets that happen over days and weeks.

To spot such cryptocurrency, you have to depend on technical analysis as well as fundamental analysis. 

It may look similar to day trading, but it is not. Your trades are based on technical analysis in day trading, and you can even go short on cryptocurrencies. In swing trading, you cannot go short, and the trades happen for a longer duration to take advantage of the price swings.

Position Trading 

In position trading, you can make a fortune only if you have correctly analysed and predicted the market. 

It is a popular long term investment strategy. Based on precise fundamental and technical analysis of a cryptocurrency, you get into a trade position to hold it for a more extended period, ranging from months to years. 

In position trading, you ignore the short term fluctuations in the cryptocurrency’s price and aim for the bigger picture or profits in the form of long-term upward movement in the prices.

To Sum Up…

As you have read the best crypto trading strategies for beginners, your task begins now.

According to your risk profile and financial status, you have to figure out the best trading strategy for cryptocurrency for yourself. Please do note, never copy trading strategies followed by others, as it can ruin your trading experience and chances of failure are high.

If you are unsure, start with the passive investment strategies, Buy and HODL and Rupee Cost Averaging. It will help you to learn the market dynamics, and at the same time, you gain confidence to start active trading. 

Common FAQs

What is the Best Strategy for Crypto Trading? 

There are many ways through which you can make money in crypto trading. And, the choice of trading strategy should depend on your risk tolerance level and financial status.

As a beginner trader, you can use the Rupee Cost Averaging, Buy and HODL strategies to start investing in cryptocurrencies and understand the market closely.

How do you Trade in Cryptocurrency for Beginners?

For beginners, to start trading in cryptocurrencies, follow the below steps:

  • Learn about the cryptocurrency market
  • Open an account with a cryptocurrency exchange
  • Deposit Funds
  • Invest in cryptocurrency as per your trading strategy
  • Monitor the market regularly and follow safe crypto trading practices

Can I Day trade Crypto with Rs100/-?

Yes, you can start day trading in crypto with Rs 100/-. CoinSwitch Kuber allows you to buy crypto with a sum as low as Rs 100/-.

In crypto, there is no minimum defined amount to start trading and investing. Check with the respective exchanges with the minimum trading amount. 

Is Trading Crypto Profitable?

Yes, if done rightly, crypto trading is profitable. To start trading in cryptos, you need to choose a trading strategy that is suitable for you and while trading, you need to follow all the risk management strategies.

Download the app right away and get your crypto journey started immediately.

P.S: KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. 

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Farheen Shaikh

Content Writer

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