You need a proven strategy to consistently make money in the cryptocurrency market.

Having a strategy allows you to keep your focus amidst the constant flow of news, economic data, and market events that can interfere with your analysis.

So, what is a crypto trading strategy, and which trading strategy is best for you?

Why Do You Need a Crypto Trading Strategy?

It would be wrong for you to see the happenings in the crypto markets as random and trade based on your intuition alone. Trades executed based on your gut can indeed result in a large profit. However, such an accomplishment is only a result of chance—you can't be sure of replicating such results consistently even if you try so hard.

Expert traders rely on well-thought-out methods for their success. They know that even though crypto prices fluctuate, they tend to follow predictable patterns. As a result, a strategic approach to trading is required. Our goal is to help you understand the different trading strategies you need for consistent results.

There are many trading strategies, but we will go over the most popular ones. Most of the trading strategies we will mention also work in financial markets like forex, stocks, ETFs, etc. However, this article's focus is on cryptocurrency.

What Is a Crypto Trading Strategy?

A crypto trading strategy is an established method of planning and making trades that you follow. Trading strategies typically set out specifications for which trades to make, when to make them, when to exit them, and how much capital you should risk on each position.

Your crypto trading strategy is a fixed plan that you design to achieve profitable returns when buying or selling in the crypto markets. This plan employs various analytical tools to identify predefined market conditions and price levels, including important resistance and support areas.

5 Types of Crypto Trading Strategies

Five of the most popular cryptocurrency trading methods include scalping, day trading, swing trading, buy and hold, and arbitrage. And while we're covering what these crypto trading strategies mean and how they work, we're not offering you specific advice on how to use them. So remember, always complete your own research before buying or trading crypto.

1. Scalping

Scalping is also a popular trading strategy in the cryptocurrency market. This trading strategy allows traders to profit from little price movement at frequent intervals. The goal is to add up small profits each day to generate a substantial amount over time.

Scalpers often use leverage to open more trades and tight stop losses to manage risk. They trade using one-minute, 15-minute, and 30-minute time frames. Their trades usually last for a couple of seconds or minutes but typically less than one hour.

2. Day Trading

Day trading involves entering and exiting positions on the same day. As such, day traders aim to capitalize on intraday price movements, i.e., price moves that happen within one trading day. Day traders trade on timeframes higher than that scalpers but still close their positions within a day. The point of day trading cryptocurrency is to profit from tiny market movements and volatile bear and bull market activities.

Day trading strategies are devised using technical analysis. However, like scalping, day trading is a time-consuming and risky strategy more suitable for advanced traders.

3. Swing Trading

Trades executed using this strategy usually span more than a day, but usually not longer than a few weeks or months. As a result, some people refer to this strategy as a medium-term trading strategy because it sits between the day trading and position trading strategies, giving traders more time to consider their decisions.

You won't get to make spontaneous decisions as you would in a shorter-term strategy—you can make trading decisions with less emotion or rationality, which is why this trading style is usually recommended for beginner traders.

4. Buy and Hold (Position Trading)

Position trading allows traders to hold trading positions for a long time. It could be months or even years. Traders using this strategy usually ignore short-term price movement and focus more on long-term trends. To make this type of trade, traders usually focus on the daily, weekly, and monthly timeframes. Position traders also use fundamental analysis to evaluate potential market price trends and consider other factors such as market trends and historical patterns.

5. Arbitrage Trading

The practice of buying cryptocurrencies from one market and selling them in another market to profit from price differences is known as arbitrage trading. The trader makes money by taking advantage of the low price correlation among crypto assets offered on two or more exchanges.

For instance, if the price of Bitcoin on Binance is $43,000 but $43,400 on Coinbase, you can choose to buy Bitcoin on Binance and transfer the BTC that you purchased to Coinbase to sell it at a higher rate.

Cryptocurrency arbitrage opportunities are practically limitless because there are hundreds of spot market exchanges. As a result, traders look for more efficient ways to identify and capitalize on price differentials across multiple exchanges, and this trend is expected to continue.

Choosing the Best Crypto Trading Strategy for Yourself

Your personality and the time frame you choose to trade on will determine your trading style.

Scalping may be a good option if you are comfortable spending the entire day seated in front of your trading chart and entering and exiting multiple trades at regular intervals. On the other hand, you may find that a longer trading strategy, such as swing trading, is better suited to your needs if you intend to trade part-time while also carrying out other activities.

When developing a trading strategy, the amount of time you plan to devote to trading is a very important consideration to take into account. Scalpers seek profits from only a few pip increments on each trade. They trade in high volumes each day, repeatedly entering and exiting the market. On the other hand, swing traders will leave their trades open for a period that can range from a few days to several weeks or even months.

There is no "best" trading strategy that can be generalized to work for everyone because this is something that relies heavily on the individual trader. Rather, the "best" trading style is the one that works for you.

Take Your Time and Develop a Crypto Trading Strategy

It is not an easy undertaking to develop a crypto trading strategy suitable for both your financial goals and personality type. After going over some of the most popular crypto trading techniques, we hope you will be able to determine which one will work best for you.

Keep a journal where you record the results of your trades to easily determine which ones are truly successful and which ones are not. Follow and keep track of each trading technique you employ. Be careful not to deviate from the predefined rules you establish for yourself to determine which approaches are producing the desired results and which are not.