Every day, the number of cryptocurrency users continues to grow locally and internationally. This means a direct increase in the demand, purchase, and sale of various crypto coins or tokens and further creates room for more crypto exchanges with unique offerings and missions like Buhsa to exist.
Many users have begun adopting cryptocurrency as the money of the future like everyday cash, while a handful has ventured further into learning how they can create a stable stream of income through the buying and selling of these digital assets.
By the end of this article, you would have a clear understanding of;
- What crypto trading is
- Beginner strategies to help you trade better
- Pros and Cons of Crypto trading
Using everyday lingo, Cryptocurrency trading can be explained as the buying and selling of digital currencies via an exchange, brokerage, or digital marketplace. For a trade to take place, buyers must be willing to purchase a particular asset with the value from a seller offering another store of value.
Popularly known as Digital Commodity Exchange (DCX) market, similar to Foreign Exchange (FX) market where physical currencies(fiats) are traded, the DCX market is home to many commodities that can be bought and sold over the internet. Cryptocurrencies happen to be one of them as BTC can be traded for items like gold, ETH can be exchanged for US dollars, and many other commodities of market value.
The key elements of a trade include; a buyer, a seller, asset(s) to be bought, asset(s) to be sold, price, and a marketplace.
With these elements all present, exchanging crypto-assets for one another or even other market commodities is possible.
Basic Strategies for Trading Cryptocurrencies
When all elements of trade are available, the next question every crypto enthusiast carries in their subconscious is “When do I get in?” and “when do I exist?”. Crypto markets are well known for their volatility, pump and dump pattern, and finally their short /long-term rewards.
For starters and even veterans here are 4 smart techniques to better your crypto trading journey.
- Hodling: This is a long-term trading strategy that requires crypto traders to hold onto certain amounts on a crypto asset(s) until such a time when either its price or demand increases. The lingo HODL which means “Hold On for Dear Life” has been used to refer to a community of crypto enthusiasts and traders who would seek the long-term rewards for holding certain coins or tokens until a time their value becomes much greater or utility expands.
For instance, Bitcoin owners between 2013 to 2015 before the big boom are a great example of what the hodling technique looks like. The value of the asset skyrocketed and since then led the race as the world’s leading and most liquid cryptocurrency
- Hedging: Our second strategy is another long-term technique that involves the use of one investment/asset to cancel out some or all of the risk of losses with another. As a crypto trader, hedging is a strategy used to hold certain coins but not be over-exposed to volatile movements. It also involves betting for or against the future price prediction of a crypto asset to mitigate risks and losses. Before using hedging as a trading strategy is important for a buyer or seller to carry out quality research to back up their trade.
- Day Trading: Day trading is a short-term technique that requires fast-paced decision-making. It can further be explained as a form of cryptocurrency trading where individuals buy and sell cryptocurrencies within a day to try to take advantage of short-term price movements. Due to its short-term nature, day trading moves the market and often leads to increased market volatility as different bargain prices between buyers and sellers favor one party or the other. Trades can be carried out in as short as 1min or take as long as 24hours.
- Trend Trading: Almost similar to day trading as it is another short-term trading strategy used by crypto traders who have a huge appetite for risks and rewards and take time to spot trends within the crypto market.
As the title implies, trend trading leverages the basic theory where traders buy into a market that is on the rise and sell when it is going to fall. The strategy is a hot button used by buyers and sellers to create the popular “pump and dump” practice. Using trend trading often leads to outrageous gains for some and heavy losses for others. It all depends on when you get in on the trend and when you get out. Staying too long or too late before entering or exiting a trade means profit or loss.