Crypto Trading Strategies for Beginners

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DeHive

6 min readFeb 8, 2022

It’s always scary and difficult to start something new, especially when money is involved. And crypto trading might be even scarier than other types of investments because it depends on a volatile and rather unpredictable market. Yet, there is always a way to benefit from crypto even at times of a market recession by building a profitable strategy.

In this article, we’ll share the most popular strategies for trading in the crypto market. Hopefully, this will help you build a strong crypto portfolio and get stable profit on cryptocurrencies.

Main approaches in trading

Trading on financial markets had become popular a long time before cryptocurrencies emerged, but the major principles have remained pretty similar. In both cases, trading strategies are built on some sort of analysis that helps investors understand market movements and notice patterns of potentially profitable deals.

There are two main approaches you should learn to get the full picture of the game of crypto trading and build your own strategies — Technical analysis and Fundamental analysis.

Technical analysis is a kind of approach that helps you predict the future market movements based on the data in the past, such as volume data and price action. Traders broadly use this method to identify opportunities in various markets, including the market of cryptocurrencies.

Fundamental analysis is another approach that aims to assess the real value of an asset by considering a set of economic factors including the current state of the industry, the way the company is managed, market capitalization, and others. The goal of fundamental analysis is to understand the real price of an asset according to objective factors.

What is a trading strategy?

A trading strategy is a complex of trading activities, a plan that you follow to get stable profit and benefit the most. It also helps you mitigate risks and get ready for unexpected market situations.

To shape your personal trading strategy, you should answer a few questions:

What trading tools do you use?
What price patterns do you choose?
What assets do you trade?
How do you track your deals and document your trading results?
Based on what factors do you enter and close a deal?
How do you choose the size of a particular deal?

Essentially, we can divide all trading strategies into active and passive ones. Active strategies require quite a significant amount of time and attention to manage all the operations. Passive strategies are more about investments, and they are not so time- and energy-consuming.

Active trading strategies

First, let’s take a look at several popular types of active strategies.

Trend trading or position trading

Trend trading it’s an active strategy that implies that traders strive to make a profit following long-term directional market trends. It means that they buy and hold their positions for at least several months, regardless of whether they make deals in an uptrend or a downtrend.

This type of trader uses both fundamental and technical analysis, assuming that the asset they’ve chosen will move in the direction of a trend. There are many tools they might use, like indicators, moving averages, and trend lines.

Swing trading

Swing trading is a trading strategy that implies that a trader holds their positions for a while from one day to one month. Traders who use this strategy try to make their profits on market volatility that lasts for a few days or weeks.

Within this strategy, the fundamental analysis can come in handy to estimate all the market’s factors. Also, some tools of technical analysis like technical indicators and chart patterns can be very useful. Swing trading is a good choice for beginners because it gives enough time to estimate the market situation and make a well-informed decision.

Day trading

Day trading is a bit more active strategy that implies that you enter and exit your position within one day. Using this method, people strive to benefit from intraday price volatility that happens in a 24 hours or less time frame. Technical analysis is broadly applicable in day trading, especially such part of it as price action that shows price movements and gives signals to enter or to exit a deal. In some cases, day trading can be very profitable, but in general, it is not recommended to beginners because it brings a lack of time to think, high risks, and additional stress.

Scalping

Scalping is one of the quickest strategies. It is built around exploiting little price movements many times in a row during a short period. It often means that a trader enters and exits his deal in one minute or even less. This strategy can be notably profitable if a trader notices some inefficiency that occurs in the market repeatedly and takes advantage of it many times. Scalping requires a deep knowledge of market mechanisms and solid stress resistance. These factors make this strategy a powerful instrument for experienced traders but unsuitable for people who make the first steps in trading.

Besides, there are more complicated strategies, such as the Golden cross/Death cross strategy that is most effective during volatile movements of the market or the RSI Divergence strategy that works when the overall trend changes. However, these trading methods are not really suitable for beginners, so we’d better move on to passive trading.

Passive trading strategies

There is no strict distinction between active trading strategies and passive investment strategies, but in general, passive strategies are expected to take much less time and effort to manage a portfolio. So let’s take a look at some of the most common passive investment strategies and evaluate their benefits as well.

Buy and Hold

Traders leverage this strategy when they are planning to keep an asset for a long time, which means they don’t plan to sell it for at least a few years. People who prefer the good old Buy and Hold, are not concerned about some temporary market movements and assume that the asset that has a real value will anyway grow in the long-term perspective.

Essentially, the basis for the Buy and Hold strategy is fundamental analysis, and the undeniable advantage of this strategy is that investors don’t need to spend much time monitoring their portfolios.

Dollar Cost Averaging (DCA)

This strategy is a proven method of long-term investments and can be considered as an alternative to the usual Buy and Hold. The Dollar Cost Averaging means dividing an amount of money you’re willing to invest into small parts, choosing a certain day and time, and only investing these shares at those times.

Leveraging this strategy and purchasing some assets at regular intervals during a long period, investors have a chance to lower the effect of sharp market movements. Potentially, it’s more likely to get more crypto for your money than if you have invested all the amount you had in one shot. Moreover, DCA can be automated, and the whole process of regular investments can be arranged with the help of various trading bot services, which makes it a perfect method for beginners.

Index investing

The idea of investments in indexes came from traditional financial markets. In the DeFi world, it means investing in a set of cryptocurrencies through a special token that is tracking the total performance of these currencies. Such a crypto basket may contain very different sets of coins and bring different profit depending on the underlying assets. This method helps mitigate the risks of investing in one single cryptocurrency, helps traders diversify portfolio, and provides more flexibility.

At the moment, there are very few DeFi projects that offer crypto indexes, and DeHive is one of them. With DeHive, users get access to yield-generating crypto indexes that will bring maximum profit with minimum effort.

Here’s what you get with DeHive crypto indexes:

a well-balanced and reliable DeFi portfolio in one purchase;
lower investment risks due to diversification;
high security and data protection;
stable passive income opportunity;
additional profit from yield-farming protocols.

Bring your crypto trading game to the next level and benefit the most with highly secure crypto indexes from DeHive!

Conclusion

We hope the information on the most common trading strategies will help you benefit from the DeFi market and all its investment potential. Use these fundamentals and shape a strategy that suits you best!

And if you don’t want to dedicate too much time to trading and learning the best ways to do it, choose DeHive crypto indexes. This way, you will get a stable passive income with no stress and minimum effort.

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