4 Cryptocurrency Trading Strategies You Should Know

Cryptocurrency trading strategies are essential if we want to make our capital profitable in the markets.

We are going to see what trading strategies consist of and we will talk about four of the most used ones, which will serve as a basis for you to start developing your own.

Trading Strategies with Cryptocurrencies

A cryptocurrency trading strategy is a plan for buying and selling crypto assets that minimizes risk while improving the chances of profit.

A trading strategy is based on predefined rules and criteria that are used to make decisions . Some examples of things to include are:
  • Assets that we are going to operate
  • time frames
  • Plan to enter and exit the market
  • Irrigation of each operation
  • Stop Loss Placement
  • Way in which we are going to take benefits
On the other hand, a strategy must have a statistical advantage over the market and it must also be replicable : it must be defined and it must be replicable over time.

Next we are going to see four of the best-known strategies when it comes to investing in cryptocurrencies that can be used as a general framework within which to develop your own. Basically the biggest differences between one and the other lie in the duration of the operations.
Dollar cost Averaging (DCA)

The DCA or Dollar Cost Averaging, is a long-term strategy and is the simplest of all. More than a trading strategy, it is an investment strategy, but it is useful to know it for anyone wondering how to invest in cryptocurrencies step by step .

It simply consists of dividing the available capital into smaller amounts and then opening positions at regular time intervals . In this way, over time, we obtain average purchase prices and reduce the impact of volatility on the prices at which we have obtained cryptocurrencies.

Subsequently, and according to our profit-taking plan, we will sell our cryptos to materialize our profits. An example would be doing something quite similar: selling in a staggered manner as the price reaches various upward targets.

Prior to its execution, we have to go through a search process for cryptocurrencies with potential to invest and that meet certain requirements according to the analysis we carry out.

Let's give an example of this strategy. We carried out an analysis of Bitcoin and determined that during the next two years the price expectations are bullish. Our thesis is that Bitcoin adoption will continue to increase along with growing institutional interest. All of this supported by on-chain metrics and models that point to a strong accumulation taking place.

We have $2,500 to invest and we divide it into 5 blocks of $500. We will be making recurring purchases on the 10th of each month regardless of the value of Bitcoin at that time.

Despite its simplicity, its use would have allowed most people to make money investing in cryptocurrencies, obtaining returns that are much higher than any other strategy over time. The key is to form a portfolio with cryptos with potential such as Bitcoin, Ethereum, Cardano or Link.

  • Low stress: there is no need to check charts regularly, accurately calculate entries, or analyze price action over short periods of time.
  • If we stick to the strategy, we avoid FOMO since the moments to make purchases are very defined and leave no room for improvisation.
  • Low cost in commissions
  • It requires little time for its execution.
  • It is important to have knowledge in fundamental analysis of cryptocurrencies.
  • You can incur sustained losses over time if you do not periodically evaluate the market cycles and the state of the fundamentals of your investments.

Positional Trading

Positional trading is a medium-long term strategy in which you keep your positions open for weeks or months . The time frames used will be large, usually daily and weekly.

When looking for candidates in which to open positions, a good idea is to start with candidates with good fundamentals and combine it with technical analysis to determine the most optimal moment to enter the market.

It is a suitable strategy for the initial phases of a bull market. Generally we look to position ourselves in the market in the accumulation phase or at most in the consolidation phase once the new trend starts . The different crypto indicators can be quite helpful for this purpose.

Another way to enter the market occurs in situations of large falls caused by very negative news added to other factors such as excessive leverage or very extended prices. When these types of corrections occur, which are usually very fast and violent, they may be appropriate moments to position ourselves in the long term.

An example is the sharp falls that occurred in all markets in March 2020 and in which Bitcoin fell as low as $3,800. From that moment on, a strong bullish cycle began that took Bitcoin to $64,000 in the course of a year.

  • It is not necessary to have a lot of time as it is a medium-long term strategy.
  • Little stress since price fluctuations in short periods of time are not important.
  • The gains may be higher than performing DCA since we start from a higher potential risk/reward.
  • Require advanced knowledge of fundamental analysis, technical analysis and market cycles
  • The number of trades you take some moments are very small and the variance can be large. Large doses of patience are required.

swing trading

Positional trading is a medium-term strategy in which you keep your positions open for days or weeks.

The time frames used will generally be Daily and 4 hours.

The objective of a swing trader is to capture a single movement in our favor in the market (what is known as a swing).

Some ways to execute this strategy can be:
  • Buy on a stand
  • sell resistance
  • Buy or sell in pullbacks
  • Trade technical patterns such as triangles, pennants or wedges.
The previous ideas are, in turn, different trading strategies or ways of operating, but they all have in common that what is sought is to obtain a benefit from a swing of the cryptocurrency that we operate, either long or short.

  • It is possible to find a greater number of opportunities to operate.
  • It can be combined with other activities or full-time jobs.
  • You will not be able to profit from large bullish moves as you will generally close out the positions early.
  • You are exposed to the market during night hours and weekends

Day Trading

Day trading is a short-term strategy in which you keep your positions open for minutes or hours.

The time frames used will generally be 15 minutes and 1 hour.

Basically, it is a similar strategy to swing trading but at a faster rate.

The objective of day trading is to make a profit by taking advantage of the volatility that occurs intraday.

As we saw in the previous example, we can execute the strategy in several ways:
  • Buy on a stand
  • sell resistance
  • Buy or Sell on pullbacks
  • Trading technical patterns like pengnats, etc etc
The difference is that in this case we will use smaller timeframes. For example, if we are going to operate a bull flag, in the case of day trading we would locate the pattern in 15 minutes and in swing trading it could be a formation in a 4 hour time frame.

Another important difference is that a day trader will not be concerned with the fundamentals of the cryptocurrency or the token. The long-term trend will not be relevant either, since it will have practically no impact on our operations.

Instead, it will be necessary to identify your bias for the day you are going to trade (the dominant trend on that day) to determine whether to go long or short during the session.

  • A day trader can get more returns on his capital because he can make more trades.
  • There is no risk overnight as positions will generally be closed
  • Higher stress trading style
  • Expenses in commissions higher than the rest of the strategies
  • It is not compatible with other work activities for the time necessary to operate

What is the best cryptocurrency trading strategy?

Like most questions in trading, there is no concrete answer . The best strategy is the one that suits you in every way.

It depends on the time you have available to trade, your knowledge and if you position yourself closer to the long-term investor side or the short-term trader.

As I say, everything depends on each one, but in general in the world of cryptocurrencies, and taking into account the volatility of the market, I advise starting initially at an intermediate point such as positional trading or even swing trading.

We have to think that the DCA is very focused on long-term investment (in fact it can be compatible with other trading styles). And at the other extreme we would find scalping, which I have not even named. It operates in very small time frames of 1 and 5 minutes and I honestly see it as totally inadvisable to trade cryptocurrencies taking into account the characteristics of the cryptocurrency market.

Therefore, choosing a trading strategy that falls somewhere in between seems like a good idea to start with.


I hope that the article has been useful to you and allows you to get an idea about the most popular cryptocurrency trading styles. This is just the beginning since before starting to trade it is necessary to make a complete trading plan and do a backtesting of our strategy.

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