How cryptocurrency trading strategies work
To understand how trading strategies work on the cryptocurrency market, you need to thoroughly understand and understand the cryptocurrency market itself, as well as determine its main differences from the traditional market.
The fact is that the traditional market has been forming for several hundred years. During this time, numerous laws and rules were developed and adopted to counteract various schemes of manipulation, deception and fraud. For hundreds of years, fraudsters and criminals of various types and classes have tested exchanges for strength.
During this time, there were a lot of crashes and falls in the financial market, a huge number of financial pyramids and various frauds were revealed and exposed. Based on bitter experience and concrete examples of market manipulation, the financial world has learned to resist the actions of criminals.
Laws, business rules, and ethics were created. The traditional market is one of the most state-controlled areas. Despite this, abuses in the financial sector still lead to global financial crises, when the economies of many countries of the world collapse.
Another financial crisis leads to a new revision of laws. The control and regulation of the classic stock market is further strengthened with each crisis. The market is gaining experience.
The first exchange in the world in the classical sense appeared in 1409. The first cryptocurrency in the world appeared.
Thus, between the classical market and the cryptocurrency there is a time gap of 600 years. Imagine how much experience can be gained over 600 years of work.
The cryptocurrency market is young and the classical laws that have been formed over 600 years do not work on it. The cryptocurrency market is like a young volcano. You never know when it will explode and what power will be the next push, what destructive power will be an earthquake and what consequences it will cause not only for the cryptocurrency sector, but for the entire world economy as a whole.
At the moment, the world is saved only by the fact that the share of cryptocurrencies in the global economy so far does not exceed 1%. TILL…
Imagine that 1% of the earth’s surface is occupied by active volcanoes that can explode at any time.
This is exactly the situation that is happening in cryptoeconomics. World governments are trying to extinguish or neutralize these volcanoes to the extent possible. Only they do not know how to do this.
After all, the classical market has 609 years of history and experience, and financial crises are still taking place that destroy the economy. The cryptocurrency market is only 9 years old. There is no story. No experience. Governments do not know what to do.
At the same time, everyone understands that regulation is necessary. AS long, the share of the cryptocurrency market in the global economy does not exceed 1%, but this will not last long, since the cryptocurrency market is growing.
Already now, according to https://coinmarketcap.com/, there are more than 1900 cryptocurrencies and 13 700 exchanges for trading these cryptocurrencies.
On the one hand, these are huge opportunities, since there is a large selection of cryptocurrencies and everything is just beginning.
On the other hand, these are big problems, since this huge market has not yet been settled by anyone. The laws of the Wild West operate on it, fraud and deception flourish.
And the authorities do not know what to do with this, how to resolve it. Even if attempts are made to resolve, they cannot cover the entire market, as new exchanges and new cryptocurrencies constantly appear.
Existing exchanges regularly change their jurisdictions to evade regulation. Or, decentralized exchanges are created that do not have their own jurisdiction and, therefore, are not subject to any law. States have not yet decided what to do with decentralized exchanges, and their number is growing exponentially.
Another thing is that while the share of liquidity of decentralized exchanges is very small. The most well-known decentralized exchange EtherDelta (ForkDelta) currently occupies 128th place by capitalization, without even entering the first hundred.
Given the foregoing, we note the following features of the cryptocurrency market:
- Not formed business experience and practice
- No laws and regulations
- There is no regulation. Even where cryptocurrencies are regulated, exchanges specifically change jurisdiction to circumvent government regulation
- Extreme cryptocurrency volatility
- A huge number of cryptocurrencies and tokens that are not provided with anything
- Weak cryptocurrency infrastructure
- A huge number of exchanges with low liquidity. There are no more than 250 active stock exchanges and 13,700 cryptocurrency exchanges in the world. It is much easier for states to control stock exchanges, because there are several of them in the country than so many cryptocurrency exchanges. Most cryptocurrency exchanges do not even have jurisdictions and no registration.
- A large number of frauds, abuses on cryptocurrency exchanges
- Cryptocurrency exchanges often hack
- Cryptocurrency exchanges often freeze their clients’ money themselves
Principles of trade
Despite the fact that the cryptocurrency market is very young, the basic principles and elements of trading came from the classic stock market.
In order to skillfully trade in the cryptocurrency market, you need to know the basic rules and features of the classic market, but only with the features of the cryptocurrency.
- The classic stock market is regulated and regulated, cryptocurrency, for the most part, is not. This means that even if the rules of cryptocurrency exchanges exist on paper, in reality they are far from always applied and the truth rarely happens on the side of the trader
- The shares of classical exchanges are secured by real assets, cryptocurrencies and tokens are not secured by anything. Before entering the stock exchange, stocks of companies undergo a thorough examination and selection. Anyone can create a cryptocurrency or token and place them on the exchange
- Cryptocurrencies are young and unstable. Due to the fact that they are not provided with anything, they are more influenced by the news than classic assets.
- Cryptocurrencies are extremely unpredictable. Most experts make mistakes in their forecasts.
- The lack of regulation of cryptocurrencies leads to the fact that various fraudulent technologies thrive on exchanges
Nevertheless, it is precisely legal uncertainty, the absence of laws and regulations that attract most traders to exchanges. Indeed, according to the laws of the Wild West, you can do anything you like, but you won’t be anything for it. Only these laws flourish for everyone, including exchange owners. Therefore, do not be surprised if, after the next successful transaction, your account is frozen.
When trading, a trader must adhere to the following principles
- Do not store large sums on the accounts of exchanges
- Adhere to the tactics of “Hit and Run”. After a successful transaction, it is better to withdraw money from the account and maybe even forget about the exchange for some time. Exchanges often block accounts of successful traders. Therefore, you should always “insure” and withdraw money
- Constantly record your profits and withdraw part of the funds
- Use different exchanges. Choose an exchange for yourself
- Constantly change exchanges, do not stay long on one. At least do not store large amounts on it
- Carry out a double diversification of funds: store money not only in different cryptocurrencies, but also on different exchanges
As you can see, the principles of working with cryptocurrency exchanges and cryptocurrency trading are much closer to the principles of working with HYIPs than to the principles of classic traders in the stock market.
Therefore, many HYIP investors quite successfully try themselves as cryptocurrency traders.
However, in the cryptocurrency trade, there is a lot from the classical trade. To successfully trade cryptocurrencies, you need to understand them, understand their nature.
You need to know what economic value cryptocurrency is, to study its infrastructure, carefully monitor the news of this cryptocurrency. You need to have a good understanding of exchanges and their capabilities. Keep track of new exchanges. And exchanges appear more daily than cryptocurrencies.
It is necessary to monitor trading volumes on major exchanges. If the exchange or cryptocurrency on it is of interest, it is necessary to monitor the glasses, track large orders and amounts. This will help predict the cryptocurrency movement in the near future.
In any case, professional cryptocurrency trading is a rather complicated process, which is based on the laws of the classical market, but these laws are often not respected and you have to act in a state of complete uncertainty.
Actually, a trader can track and predict the dynamics of the course only in the short term. The only way out of this situation is to constantly take profits and withdraw them. It is impossible to keep large amounts on exchanges, which significantly reduces the ability of traders, since it takes time to replenish accounts due to the features of cryptocurrencies. In the meantime, all the opportunities come missed.
To this end, in order not to miss the opportunity and not lose a favorable moment, it is necessary to keep money on different exchanges. Thus, traders have double diversification: in cryptocurrencies and in exchanges.
Common cryptocurrency trading strategies
Since the cryptocurrency market is extremely volatile and even during the day the cryptocurrency exchange rate can change by 20% or higher, there are no common trading strategies.
Nevertheless, there are uniform principles and rules that help to earn precisely on volatility, that is, on constant fluctuation of rates.
The basic rule is to constantly fix the course.
For this purpose, there is a cryptocurrency that has become super popular on all exchanges. This cryptocurrency is called Tether or USDT. Tether is provided with US dollars and its rate is unchanged. Always 1 USDT \u003d 1 USD.
Usually, after a sharp rise in the cryptocurrency rate, a recession occurs and often quite long. That’s to fix the profit and there is USDT.
At the peak of popularity, the trader exchanges a popular crypto asset for USDT and thereby fixes his funds, without even withdrawing them to fiat. After all, the conclusion to fiat always costs money. Typically, traders withdraw money to fiat only if they really need to withdraw funds.
To fix your profit, you need USDT.
If you look at the history of trading, it turns out that USDT is the most popular asset. Traders always record all their profits in any cryptocurrency in USDT.
Analysis of glasses on popular exchanges
This is the most popular and simple tactic for predicting the movement of cryptocurrency in the near future. The fact is that the price of cryptocurrency is set by large traders on leading exchanges, and by observing their orders, you can predict the nearest direction of the cryptocurrency rate.
Another thing is that on large exchanges in a glass only orders are visible that are as close as possible to the average price of the exchange. But even this makes it possible to predict the direction of the nearest course, focusing on orders for large purchases or sales of cryptocurrencies.
Therefore, the trader needs to carefully monitor the glasses on large exchanges and track large orders for all cryptocurrencies, if he is interested in short-term trading.
Trading Strategy Principles
- The basic principle of any strategy is to make less money than lose more. Not sure do not invest large sums
- Use double diversification: on cryptocurrencies and on exchanges. At the moment, the total number of cryptocurrencies is 10 times less than the total number of exchanges. If the cryptocurrency has its own infrastructure, it will not be able to depreciate to zero, but all the money on the exchange is easy to lose. The hackers may crack the exchange, the exchange administration may freeze the trader’s account
- The most secure cryptocurrencies from the top ten cryptocurrencies by capitalization. If you do not want risky trading, then it is better to trade with these cryptocurrencies.
- Work with different exchanges. Keep money on different exchanges. This will allow you to earn on OTC arbitrage.
- Buy cryptocurrency on the decline, sell on the rise.
- After any rise, there is a decline. Take profit in cryptocurrency by changing it to USDT.
- Always withdraw money from the exchange, take your profit.
- During a recession, in order not to lose money, store them on the exchange in USDT. Do not forget that the decline in cryptocurrencies can last long enough.
- If you prefer short-term trading, then carefully analyze the glasses on large exchanges and monitor large orders. After all, large traders shape the course.
- Do not forget that the Bitcoin exchange rate determines the rates of other cryptocurrencies. Watch for Bitcoin, the rest of the cryptocurrencies will behave in a similar way.
Rules for safe trading on cryptocurrency exchange
Safe trading does not exist even in the stock market. There are hundreds of cases where people trading in the stock market went broke and lost all their fortunes.
The cryptocurrency market, due to its youth and lack of regulation, is much more dangerous and risky than the stock market.
Therefore, it is not necessary to talk about some kind of security of cryptocurrency trading.
Another thing is that you can significantly reduce the risk of losses, if you follow a number of rules:
- Keep track of major traders. See how large traders behave on leading exchanges, what assets they buy. So you can predict the behavior of an asset in the near future.
- Watch for unusual behavior on exchanges. Any unusual behavior and excessive excitement around a crypto asset is of interest to traders. This is a great way to make money. It’s also a way to lose money if you don’t know the rules of the game. Any obscure crypto asset needs to be disposed of as soon as you make a profit. There are many fraudulent activities on exchanges and incomprehensible excessive interest is most likely associated with fraud. Therefore, if you risked using this situation, the main thing is to get out of it in time.
- Remember that cryptocurrency trading requires constant monitoring. If you do not have free time, it is better to temporarily exchange all your cryptocurrencies for UDST. So you, at least, will not lose money if in your absence the cryptocurrency rate drops.
- Do not forget that the recession follows the recession, and if you were unable to sell your cryptocurrencies in time, then you should wait and wait for the next rise. This applies only to cryptocurrencies from the TOP 10.
- Almost always, the remaining cryptocurrencies follow the Bitcoin exchange rate. Therefore, first of all, you should study the movement of the Bitcoin exchange rate and the news of this cryptocurrency.
Which strategy is better to choose
The cryptocurrency market is extremely unstable and the situation with cryptocurrencies is changing every day. Therefore, there is no single strategy. The strategies applied at the end of 2017 with a growing market do not work in 2018 with a constantly falling cryptocurrency market.
Now cryptocurrencies are extremely volatile. Over the day, the fluctuation of the rates can reach 20% – 50%, and there are even assets in which the rate rises by 400% per day. At the same time, the creators themselves abandoned their cryptocurrency. Someone decided to make money on cryptocurrency, which no one needs.
When trading cryptocurrencies, traders should take into account the fact that cryptocurrencies are not stable. The rise will be followed by a recession. Therefore, the maximum rate must be fixed. The best way is to exchange assets at the peak of the exchange rate for USDT and wait for another recession to buy at the lowest price.
The basic rule of trade: to buy at the lowest price and sell at the highest, has not been canceled yet.
Cryptocurrency courses are heavily influenced by news. Moreover, this is not always true news. Even fake news can significantly bring down the course of all cryptocurrencies.
Last example. News regarding Goldman Sachs. Someone launched the news that Goldman Sachs plans to stop work on developing a Bitcoin trading platform. The media disseminated this news, which brought down the Bitcoin exchange rate by more than $ 1,000 in a couple of days. Other cryptocurrencies have fallen even further. A few days later, Goldman Sachs representatives said the news was fake. Just someone needed to bring down cryptocurrencies.
Similar examples in cryptocurrencies occur constantly.
The huge danger is that large cryptocurrency reserves are in the hands of a small number of traders. They are monopolists of the market and act on their own.
When choosing to trade on the cryptocurrency market, it should be remembered that there are no game rules, just as there are no common strategies.
Is it worth using trading strategies in the cryptocurrency market
Theoretically, the laws of the classical market apply in the cryptocurrency market. At least they are trying to introduce them there.
But the stock market is 609 years old and there are no more than 250 stock exchanges. The cryptocurrency market is 9 years old and there are 13,700 cryptocurrency exchanges. You cannot implement all the laws of the stock market and control them at 13,700 exchanges. In addition, the number of cryptocurrency exchanges is constantly growing.
The laws of the hype industry should be applied to the cryptocurrency market more than the laws of the stock market. At least in this case, you will better understand the rules of the game and you will have less frustration.
There is a double risk of scam in the cryptocurrency market. First of all, the asset itself or the cryptocurrency may come off. Secondly, a cryptocurrency exchange can come down. Moreover, the risk of exchange scam is no less than cryptocurrency scam. After all, the exchange may not come in contact with you, they may just block your account.
Given all these factors, using all existing classic strategies is extremely difficult. You always need to make adjustments to the features of the cryptocurrency market.