The best strategies, rules and tools for the successful trading with cryptocurrencies

Trading strategies include specifications for trade entries, including money management, rules for trade exits, money management, trade filters and triggers, timeframes, order types, and other important information. It can be very difficult to figure out which cryptocurrencies to add to your portfolio. It is important to do a lot of research and try to identify those currencies which are likely to fit together in an overall ecosystem, rather than trying to pick a single winner. Cryptocurrencies are trending all over the world as the internet payments have been accepted by many companies and cryptocurrencies have become a very popular for investors and traders. The trading strategies can be based on technical analysis (chart analysis) or fundamental analysis. Investing and trading are two very different methods, the goal of investing is to gradually build wealth over an extended period of time. Trading is an active style of participating in the financial markets in which traders seek short-term price moves in order to profit instead of waiting to profit from long-term price movements. Investors are usually more focused on the fundamental basis while traders usually trade according to technical analysis. When doing an analysis for trading a cryptocurrency on a fundamental basis several things should be considered: the characteristics of the coin, how active is development, how active is the community, transaction activity. Traders usually apply technical indicators to charts of various time frames in attempts to accurately forecast future price movements (support and resistance, moving averages, chart patterns, trendlines). While investors may be content with a 10 to 15% annual return, traders might seek a 10% return each month. The bottom line, fundamental trading strategies are focused on fundamental factors while technical trading strategies rely on technical indicators to generate trading signals.

Trading is hard work, and traders should follow these rules to increase their odds of success

  • Always use a trading plan with rules that specify a trader’s entry, exit and money management
  • Trading is a business and incurs expenses, losses, taxes, uncertainty, stress and risk
  • Risk only what you can afford to lose
  • Setting realistic goals is an essential part of keeping trading in perspective
  • Understanding the nature of the cryptocurrency market
  • Always use a “Stop Loss” order (a predetermined amount of risk that a trader is willing to accept with each trade). Ignoring a stop loss, even if it leads to a winning trade, is bad practice
  • Greed has no place in day trading
  • Controlled emotions
  • Learn to patiently wait for the highest probability trades, allow the trades to come to you, instead of chasing trades
  • Traders should always analyze the market from the “big picture” all the way down to the short-term or intra-day
  • An active trading strategy differs from the long-term, buy-and-hold strategy, and active trading strategy is usually made up of trading signals that trigger buy or sell decisions
  • A trader can simulate the trading of a strategy over an appropriate period of time and analyze the results for the levels of profitability and risk
  • Use technology to your advantage
  • Traders need to remain focused on learning more each day
  • Understanding the markets is an ongoing, lifelong process
  • Know when to stop trading, an unsuccessful trading plan is a problem that needs to be solved

Conclusion

Trading is hard work, and traders who have the discipline and patience to follow specific rules can become profitable. It can be very difficult to figure out which cryptocurrencies to add to your portfolio. It is important to do a lot of research and try to identify those currencies which are likely to fit together in an overall ecosystem, rather than trying to pick a single winner. The successful trading is not gambling and I recommend trading a model or a system where the rules are clearly defined. In my opinion, every trader who wants to become profitable should use a combination of technical and fundamental analysis to make trading decisions. Becoming a profitable cryptocurrency trader requires a strategic plan with short and long-term goals, what you will trade, the amount of capital, trading time frames. The trading strategy that suits you best includes a variety of factors like personality, risk tolerance, level of trading experience, account size, timeframes, order types , amount of time that can be dedicated to trading, rules for trade exits, trade filters and triggers. Active cryptocurrency traders can employ one or more strategies but before deciding on engaging in these strategies they should try to become profitable on a demo account and continue to evaluate at regular intervals before funding the account or placing trades. One of the biggest mistakes that new traders often make is to change trading strategies at the first sign of trouble. The profitable trading strategies are difficult to develop but traders should find the strategy that works best for them. My recommendation for all cryptocurrency traders is once you are comfortable with a particular trading strategy, remain faithful to that trading strategy and always use “stop loss” and “take profit” orders.