3 Crypto Trading Techniques Everyone Should Know

When trading in crypto, you need a strategy to help guide you on when to buy and sell. Here’s 3 popular crypto trading techniques to consider when choosing yours. 

Using an Automated Bot for Crypto Trading Techniques

Using an automated trading bot for your crypto trading, regardless of strategy, is a great way to make your trading easier. The bot will follow technical indicators, market conditions, and specific rules you set. Bots can handle complex trading strategies with multiple technical indicators and parameters, which are often challenging for manual traders to execute consistently. They can trade 24/7, and without emotion to distort your decision-making process. They also allow for a faster reaction to market changes and considerable time savings, making them a smart choice for most traders.

3 Crypto Trading Techniques to Consider

Here’s a few popular crypto trading strategies to consider. 

1) Copy Trading

Copy trading in the crypto market means replicating the trading activities of experienced traders (‘signal providers’) for your own trades. It is an incredibly simple strategy that’s easy to use and can be easily automated with bots for added convenience.

• You match with a skilled and experienced signal provider on a copy trading platform with a track record of successful crypto trades.
• Your bot also allows you to follow the selected trader’s trades automatically, copy their parameters, and trade like them.
• When your signal provider executes a trade, the bot allows you to mirror their actions in real-time. They will do this within the budget you set.

This strategy leverages the expertise of seasoned traders to potentially achieve similar returns to them. It offers less-experienced investors insights into market trends and risk management techniques in the hands of experts. It also allows those with little time to spend in learning the markets a way to invest in cryptocurrencies without the steep learning curve or needing to spend a great deal of time manually performing trades.

2) Dollar-Cost Averaging (DCA)

Crypto dollar-cost averaging (DCA) is an investment strategy where an individual consistently purchases a fixed amount of cryptocurrency at regular intervals, regardless of market price fluctuations. This approach aims to mitigate the impact of market volatility by averaging out the purchase price over time.

DCA bots allow you to use dollar-cost averaging to protect your stake and reduce some volatility while keeping your investment habit fully automated and working for you 24/7.

• You set a fixed amount of money you are comfortable investing in cryptocurrencies regularly (say weekly or monthly).
• This buys your chosen currencies, regardless of current price.
• By investing consistently over time, you benefit from the average price of the cryptocurrency, reducing the impact of market volatility.
• Your DCA bot enacts these chosen parameters for you without the need for constant active monitoring, buying and selling at your chosen points.

With the help of the DCA bot, you can fully customize your trading preferences to match your risk appetite and interests, and potentially mimic the strategy of a signal provider when combined with copy trading. DCA helps mitigate the risk of investing large sums in unfavorable market conditions, making it a great strategy for most investors. It also helps foster disciplined, long-term investing. It is especially popular in the cryptocurrency market, helping investors manage risk and potentially benefit from price appreciation while avoiding the stress of trying to time the market.

3) Moving Averages

The Moving Average (MA) Crossovers strategy is a popular and simple trading approach widely used in the cryptocurrency market. A moving average is a technical indicator used in crypto trading that helps identify trends, potential reversal points, and the market direction by calculating the average price of a coin over a specific period of time, ‘smoothing’ fluctuations and providing a clearer picture of underlying trends. 

• Simple Moving Average (SMA): calculated by adding the closing prices of an asset over a chosen timeframe and averaging it
• Exponential Moving Average (EMA): EMAs give higher priority to recent prices then a standard average, making it more responsive to recent market movements. .

The basic moving average crypto trading strategy involves using two moving averages from different periods, typically a 50-day and 200-day SMA.

• Golden Cross: When the short-term moving average (your coins’ 50-day SMA) crosses above the long-term moving average (the 200-day SMA), it’s known as a “Golden Cross.” This is considered a bullish signal and suggests a potential upward trend or a buying opportunity.
• Death Cross: When the short-term moving average crosses below the long-term moving average, it’s called a “Death Cross.” This is a bearish signal and may indicate a potential downward trend or a selling opportunity.

The short-term average is more sensitive to recent movement, making them fantastic for shorter-term traders. The longer-term average gives a broad idea of market trends. You can experiment with different combinations of moving averages, of course.

As cryptocurrency markets are known for their volatility, and sudden price swings can lead to inaccurate signals, traders might consider using shorter moving averages or combining moving averages with other volatility indicators to adjust to the unique characteristics of the crypto market.

There is no one right way to trade crypto. Instead, you need to find a strategy that works for your risk appetite and trading timeline, and stick to it consistently.