6 Strategies for Trading Crypto Assets

A Beginner’s Guide to the Fundamentals of Trading

ShapeShift
Nov 11 · 4 min read

To a large part of the world, trading assets (crypto or otherwise) is understandably intimidating. It involves buying and selling something with the hope of creating more wealth for yourself, and the fear of losing some of the limited resources you have available.

As a result of its perceived complexity, we’ve decided to set about demystifying trading as it relates to crypto. What you learn here will be taught with crypto in mind, but it can be applied to traditional trading as well. Here are 6 trading strategies to get you started in the crypto space.

Receive 100 FOX tokens when you create a ShapeShift account. Trade crypto for free in the ShapeShift Platform. ShapeShift.com
Receive 100 FOX tokens when you create a ShapeShift account. Trade crypto for free in the ShapeShift Platform. ShapeShift.com

Passive Investment Strategies

Passive investment strategies are perfect for beginners, as they’re simple and easy to implement. Passive strategies can be applied not only to crypto, but to other asset classes as well.

One such effective passive strategy is dollar-cost averaging, which can be implemented in three ways: purchasing by time, price, or a combination of the two.

Purchasing by Time: Purchasing by time is just as it sounds — it’s the repetitive purchase of an asset at regular intervals, regardless of the price. For example, you might buy $250 of Bitcoin every two weeks. Purchasing by time means purchasing fixed amounts at regular, consistent intervals.

Purchasing by Price: Purchasing by price means that your incentive to buy is when the asset hits a certain price, regardless of time. An example would be leaving staggered orders to buy a set amount of bitcoin when the bitcoin price hits $10,000, $8,000, $6,000, and $4,000. Your purchases are dictated based on the price of the asset, regardless of the time.

Combination: Purchasing by price and time can be combined to create a custom investment strategy. One thing to keep in mind is that the less systematic your investment strategy is, the more variable your performance will be.

Simple Algorithmic Strategies

Simple algorithmic strategies are meant to minimize market impact during the execution of your trade. The difference between the price when you decide to trade and the price at which you actually execute is known as implementation shortfall (slippage).

So what are some good simple algorithmic strategies to implement?

SOR is an automated order process. It looks at a variety of trading venues to find the best possible rates for your order. For most, building a bot would be time-consuming and complex. Fortunately, there are companies that provide SOR as a service.

TWAP splits its trades into set time intervals throughout the day in order to reduce the trader’s impact on the markets. See more on TWAP from Trading Tuitions here.

VWAP finds the daily price average of an asset by looking at price and volume. It’s calculated by adding the dollars traded per transaction and dividing by the total shares traded. Want to learn more? Check out Investopedia’s detailed explanation here.

Source: Investopedia

Get Started Trading

Now that you’ve reviewed these strategies, are you ready to choose a method to fit your crypto trader plans? We hope these beginner’s strategies can help you dip your toes in the vast world of crypto trading.

These blog posts will serve as a general factual overview of crypto trading. No content in these blog posts or on the ShapeShift website constitutes purchase or investment advice. Digital assets are experimental, volatile and risky, and we therefore recommend that you seek professional advice from a qualified advisor before making any financial decision.

The information is provided “as is” without warranty of any kind, express or implied, and in no event will ShapeShift be liable for damages of any nature resulting from reliance upon the information. The blog posts may contain links to third-party materials that are not owned or controlled by ShapeShift. ShapeShift does not endorse or assume any responsibility for any such third-party sites, information, materials, products, or services.


Thanks for reading ShapeShift Stories

Join our new Telegram channel. Follow us on Twitter. Subscribe to our YouTube Channel. Join our Discord Server. Want to guest blog for us or feature our content? Contact us.

If you enjoyed this story, give us a 👏 and share our content!

ShapeShift Stories

ShapeShift Stories: Sharing cryptocurrency education, news, and inspiration.

ShapeShift

Written by

Explore the new frontier in crypto management: shapeshift.com

ShapeShift Stories

ShapeShift Stories: Sharing cryptocurrency education, news, and inspiration.

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade