If you’ve been following the news recently then, you’ll no doubt of heard of people making millions from Bitcoin because it’s based on revolutionary blockchain technology. Is it a worthwhile strategy? Will it really make you rich?
In fact, crypto investments are risky investments, and trading without a plan can often result in a loss. Although most analysts would agree that there is no perfect trading strategy, there are three well-known methods for beginners.
Here’s everything you need to know about crypto trading.
Dollar-Cost Averaging
Dollar-cost averaging is a popular and well-tried trade strategy that works best when it is implemented over a long period of time.
To invest money in a specific cryptocurrency, sign up for a crypto long or short trading account, choose specific times of day or week, buy or sell, and split your money into small amounts.
Periodic purchases over a long period of time mean Bob is likely to get more Bitcoins for his money on average than if he spent it all at once.
This reduces the risk of spending the full amount in one go, especially if the price rises or falls sharply.
Best Crypto Method For Beginners
One of the reasons the average dollar price is the best crypto-trading method for beginners is that it automates the entire process. This means that you deposit your money. Tell the Trading Bot what you want to exchange and when you want to exchange it.
If you decide to buy crypto at a set time, as you would on an exchange, you can improve your overall results by adding the option to “buy” crypto-assets at set intervals, for example, when the price is in the red.
This method uses a moving average, a graph with indicator lines that show the price change of an asset over a defined period of time, such as 24 hours.
This means that asset prices are lower than they were 24 hours ago, which means you need to review your strategy. For more information on the average dollar price and other crypto-trading methods, visit the CoinDesk website.
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Long Term Strategy
A key thing to note about cryptocurrencies is that it goes up and down like every other currency, just more dramatically.
A long-term trading strategy is key. The long-term strategies that work best over 18 months is broad monitoring of price activity, which is a good indicator of the long-term trend in the price of an asset.
Convergence
Convergence is when short-term dynamics outweigh longer-term dynamics, and it is a buy signal. This happens when a buyer returns to the market and pushes the price up or down or vice versa.
Divergence occurs when a large number of traders decide to leave the market and sell their assets. This is a sell-off, and the difference is that short-term momentum is waning compared to long-term momentum.
It is worth noting that crypto-trading methods are most effective when prices rise or fall sharply, and average profits tend to outweigh losses in periods of low volatility.
When the market moves sideways, and the two moving averages converge or diverge more frequently, this can trigger multiple buys and sell signals.
The only problem with this trading strategy is that it is somewhat more complicated than the traditional exchange trading method. There is usually a lot of uncertainty in the markets, which is the only reason why there are not as many strong, beefy traders on the trading floor.
Comparing Results
Again, this is a long-term strategy that works and can be combined with other indicators to achieve better results.
This means that if you had used this strategy last year, you would have received a buy signal at $8,000 and held on to the Bitcoin chart until the last gold cross, which is about $6,500.
Bitcoin is currently trading at $495 as of April 2021, but it has risen more than 50 percent since the start of the year and about 20 percent in the past month.
Using RSI
The RSI divergence strategy is more of a technical strategy and can be used very effectively to plan a trend reversal before it occurs.
The price then starts to move in the opposite direction to the previous trend line (the red line) and then returns to its previous level.
The RSI stands for Relative Strength Index, a chart indicator that measures dynamics by calculating the difference between the current price and its historical trend line.
Indicator Line
The indicator line varies from 0 to 100 and can highlight when an asset is overbought or oversold.
Channels between 30 and 70 are most commonly used to show this, and if the indicator line breaks through the 70% channel, it is considered overbought. If the value breaks through the bottom of the canal at 30, the price is considered oversold, meaning it is likely to fall again.
However, if it falls above 30%, a sign that prices are likely to rise, the RSI rises to 100.0, which means that they are exaggerated and the cost of trade increases.
While this system can be used as a simple crypto-trading strategy on its own, it can produce false results.
Over bought Assets
For example, there are times when the RSI shows that an asset is overbought, which is typically a buy signal, and then the price goes up even further.
RSI divergence strategies are more advanced and can use a different method to determine when a price trend changes in the direction in which it is happening.
This works by looking at the difference between the price and the RSI indicator and what happens when there is a subtle shift in the volume of buying or selling.
However, there are times when prices fall, but not as fast as the RSI rises. This indicates that the dynamic is in an early stage of reversal and can happen at any time, even if it is for a short period of time.
The best time frame to search for deviations is usually a four-hour daily time window, but this time frame tends to show a much higher deviation from the RSI than the average of the last four hours.
The best time to look for variety is when the price is in an oversold or overbought area.
Crypto Trading Can Be Great
It goes without saying that trading on the financial markets involves risks and could lead to the loss of your funds.
Before investing your money, you should always do thorough research and seek professional advice. However, any professional will tell you that you only stand to lose a lot of money if you take big risks. There are strategies to avoid this and make a tidy profit.
If you want to know more about crypto trading or how to buy cryptocurrency, be sure to check out the rest of our site.
