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December 21, 2021

How to Create Crypto Trading Strategies: Everything You Need to Know

Cryptocurrencies can generate life-changing returns. Bitcoin traded at a few hundred dollars per coin a few years ago. Now, Bitcoin is worth over $30,000.

Crypto trading platforms make it easier to achieve crypto trading profits. You can buy options for cryptocurrencies, use margin, or keep it basic.

We have many choices for profiting off crypto trading. Strategies keep us in place.

Investors must create crypto trading strategies to capitalize on crypto’s dominance. We’ll share some tips to create your crypto trading strategies.

How to Create Crypto Trading Strategies

Not everyone benefits from the same strategies. Some investors want to take on a higher risk. Others want safer exposure to crypto.

A higher risk tolerance gives you more choices. Riskier investors may trade on margin and use options.

You’ll also have to target your favorite cryptocurrencies. Some people only stick with Bitcoin and Ethereum. Other investors prefer alt-coins.

Regardless of your preferences, a diversified portfolio will help. Don’t go all-in on a single cryptocurrency. Allocating proceeds to multiple cryptos lowers your risk.

You should also consider your timeline. Some people can only hold onto crypto for a few weeks. They need to cashout cryptocurrencies to cover expenses.

These variables will help you create crypto trading strategies that work for you. We’ll discuss some popular strategies to provide inspiration.

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Dollar Cost Averaging

Dollar cost averaging lets you capitalize on dips. Investors many multiple purchases into the same asset and buy more on dips.

Buying on dips will lower your cost basis. Cost basis indicates your breakeven point. You can go back to the green sooner by purchasing assets on downturns.

Day Trading

Some traders pay attention to price fluctuations and buy at certain points. They do not care as much about a crypto’s long-term potential. They want to make money now and exit their position.

Day trading takes up more time, but it comes with fewer risks. Some day traders liquidate their positions at the end of the day.

These investors become less vulnerable to overnight fluctuations in crypto prices. They will miss out if a crypto rises 10% in their sleep. However, they also miss out on the crypto corrects overnight.

Day traders look for highly liquid cryptocurrencies. They don’t want to get stuck with a low-volume asset. Low volume delays transactions and heightens a trader’s risk.

Leverage Trading

Leverage trading amplifies your gains and losses. Leverage is risky for any investment, but it’s less risky for day trading.

Quicker exits reduce the damage of leverage trading gone wrong. It also gives you a higher upside.

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Setting a maximum loss for each trade further limits leverage’s risks. A maximum loss of 2% is doable. Losing too much money turns leverage trading into a nightmare.

Explore the Exciting World of Crypto Trading

After you create crypto trading strategies, it’s time to trade. Put your strategy to good use and makes changes along the way.

The best way to learn is through experience. However, gaining some knowledge first helps you avoid mistakes.

Want to learn more about crypto trading? Make sure you explore the other resources on this blog.

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