Impressive differences in trade strategies and their need on the stock exchange of crypto in 2020

Jeremy Stone Arbitrage basics Read 5min

The sale of cryptocurrencies becomes the most profitable when suitable strategies are used. Some of them can become fortunate in trading certain crypto currencies, others in trading at certain times. Often aspiring traders trade using the first strategy they have studied and do not pay due attention to differences between strategies. The success of such tactics is extremely rare. What are the differences in trade strategies in the market of cryptocurrencies and how do they work? Let ‘s reveal these questions in this article!

How do strategies of trading function in the market of crypto?

Trading strategy-  the trader’s guide by which he can make a profit in the market. It represents the series of rules, norms, situations under which the trader makes in advance provided actions.

Often, a trading strategy defines: Points of entry. Points of exit. Indicative timing among points of entry and exit. Indicative time frame among one sequential points of entry and the next. The percent of the trading capital that opens the position under certain terms.

 These parameters can yield different result at trade in different cryptocurrencies. For example, if we consider the frequency of trade in the market of worldwide and more volatile crypto, it may be higher, while in markets of currencies that are little known and slowly growing transactions may be less frequent because waiting for the right moment (jump or fall) on them is more difficult.

Trading strategies stand on statistical differences of crypto. In other words, patterns that distinguish their market behavior.

 Let’s assume that if the crypto picks up at specific times of day, the strategy is developed on the basis of this difference. Other crypto has the property to respond to a certain situation at the market by increasing volatility – the strategy considers this. And so on.

 In order to form a trading strategy, the trader needs to analyse the behavior of specific currencies in the market. The strategy is based on the most important patterns, and the rest of the parameters of the strategy being developed help to make the most of them.

Trade strategies are used to maximize the benefits of the market behavior of crypto. Effectiveness depends on the accuracy of the trader’s determination of patterns and the correct response tactics.

In order to develop a trade strategy, it is necessary to understand how other market participants can behave, as well as to know the methods of technical analysis and to apply some methods of basic analysis.

There are common and narrow (individual) strategies because the behavior of each asset in the market is unique in small things, but template in general.

 The differences between them are that general strategies work according to the movement pattern of the course of crypto, and narrow strategies are repelled by the peculiarities of the movement of a particular crypto. General strategies are taken as the basis of narrow, as all crypto currencies have a template in the basis.

The most applicable template strategies have long been defined by crypto traders, and most individual crypto strategies are developed on the basis of them.

Frequent trade strategies in the crypto market

Classification of well-known strategies in crypto trading:

  • Time frame trading.

Impressive differences in trade strategies and their need on the stock exchange of crypto in 2020 3Impressive differences in trade strategies and their need on the stock exchange of crypto in 2020 4

  • Emerging from market situations

 Strategies that differ in the time period of trading are divided into the following:

Intraday trading

Positions are opened and closed during the trading day or day by the trader, who leaves no open position before his departure. During the night or in 24 hours the price of an asset can move at an unpredictable speed in a little predictable direction, so on the crypto market intraday trade is very common. Closing items before leaving reduces exposure as a consequence.

Position trading

Trade takes place under certain circumstances no matter what frequency they occur. If the trader decides to trade only at the moment of a trend reversal, he waits for the reversal and makes a deal and does not matter at all how often it happens.

A trader does not need to respond to every change in the market, he can only work with the required number of tools, so he is easier to track circumstances and less likely to be wrong than traders responding to everything at once.

Swing trade

Represents cycle trading. The cycle may be a prolonged asset rise or decline, or a flat, or a temporary increase in volatility, or another situation developing over a comparatively long time span. The cycle rarely lasts less than ten hours, often taking several days. The trader tracks the start of the cycle, determines its specifics, responds according to it, waits for the end of the cycle, makes another transaction and records income.

The correct definition of the specifics of the cycle allows predicting quite accurately the development of the situation and the time of the end of the cycle. The trader does not have to work on short segments within the cycle – he simply waits for its end and receives predicted income.

 Scalping High-frequency trading is about making a profit at every rate fluctuation, including minimal. Deals are concluded several times per hour, sometimes several tens of times per hour.

The benefit of the strategy: the trader does not need to wait for the development of certain situations, analyse the market in more sophisticated treatment. It does surface analysis (or does not do at all) and trades regardless of what happens on the market, because minimal fluctuations are always observed.

Among trade strategies differing in market situations, the following are commonly used:

Rollback trading

 It consists in the use of periods of correction of crypto within the trend. At some point, the price of the crypto asset begins to appear to the rest of the market participants to be overvalued (on the upward trend) or undervalued (on the downward trend). Then there is a small correction, after which the trend continues.

 The strategy of trading on a rollback involves buying an asset when it decreases as much as possible (on an upward trend) as part of the correction or selling when it increases as much as possible (on a downward trend) as part of the correction. When the trend continues, a second transaction is made, as a result of which the trader profits.

 This strategy allows for significant gains on the crypto market, as the correction and subsequent continuation of the trend due to its volatility are quite significant.

Reversal trading In a downtrend, a trader waits for a mark from which the price is highly likely to start rising again, buys a cryptocurrency at that point, and then sells after the price rises above average. The mark that a trader waits for is most often either a psychologically important or a predicted figure through technical analysis.

This strategy often allows you to buy an asset at the lowest possible price.

 Impulse trading

 A trader sells in accordance with the trend when he sees signs of an impulse. The pulse is called confident movements of the course up or down, practically without corrections.

A trader buys cryptocurrency when he sees the beginning of a “pulse” uptrend, sells when he sees the beginning of a pulse fall. At the same time, transactions are not necessarily completed at a minimum and at a maximum. The strength of impulse trends allows you to make good money even when the price just approaches the extremes.

High-profitable strategy. Impulse trends on the crypto market occur quite often due to currency volatility, so it is relatively easy to track them.

Breakout trading The trader tries to open positions at the very beginning of trends, based on the breakthrough of a certain price.

If, for example, the downtrend has broken the correctly predicted price level, then it will turn and go up. Accordingly, a trader who correctly predicted this level can buy crypto at the lowest possible price at the very beginning of the upward trend. The system works in the opposite direction, on upward trends.

The strategy allows using the most profitable entry points to the market and earn money without doing anything in the process of climbing or falling the trend.

There are many other strategies: some involve trading at different time intervals, others are oriented towards a certain market situation. The listed ones are used on the crypto market more often than others, because they are most convenient when trading in volatile and difficult-to-predict assets, as most cryptocurrencies are.

Should trade strategies be used in the market of crypto? Crypto trading without strategy tends to show the worst result. Trading using custom strategies is better than trading based on template strategies. Why?

 Strategy orders trading. Trading in cryptocurrencies on the stock exchange involves the use of a huge amount of specific but poorly captured mathematical data. Chaotic actions that do not take this data into account at all are naturally more unprofitable.

Actions that take data into account are more effective. Actions that take all mathematical data into account will be as effective as possible.

One trader cannot account for all data because of their excessive number and complexity of mathematical relationships between them. Therefore, strategies are formed using only a small part of the data, the mathematical relationship between which is relatively clear to the trader.

Theoretically, the more data a trader understands, the more strategies he can make up, and the more effective they will be. But practice shows that 3-5 well-applied strategies are enough for successful trading on the crypto market, when the trader knows under what conditions, in the market of which crypto it is better to apply a strategy and why.

In the market of some crypto, it is possible to do 1-2 strategies. Moreover, some experienced traders, after numerous experiments, choose one strategy, study it thoroughly and work only with it.

The efficiency of such a method is quite high, as a thorough study of the strategy significantly reduces the number of errors (and, as a result, losses) and the vast majority of trader transactions prove profitable.

Beginners too often start with long-term use of one strategy. In their case, this is less justified, as other strategies may suit the aspiring trader no less, but even more. Therefore, beginners are usually encouraged to try different strategies in turn.

Beginners are not encouraged to try to use all strategies at the same time when working with the same crypto, as this prevents the detailed study of each strategy, confuses the beginner and creates chaos in his market picture. The use of strategies allows studying their applicability in a specific market, which is important for future successful trading. In addition, strategies save trader time because they involve trading only under certain circumstances. Also, the application of trading strategies helps to respond less emotionally to the movement of the market. All this makes trade more efficient, so trade strategies in the market of crypto are common and relevant for both beginners and experienced players.

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