The growth of the crypto market often results in alternative coins worth 50-70 times their original value. If you had found suitable alternative cryptocurrencies, you could have quickly grown your holdings by 100 or even 1000 times. But how do you find such profitable opportunities? Also, what is the best way to trade altcoins after their discovery? This guide will cover popular altcoin trading strategies and how to find good coins.
Top 5 Altcoin Trading Strategies
There are many other ways to trade cryptocurrency, and this guide can’t cover them all. So, we’ll focus on some of the most common strategies. In particular, we will go into more detail about the following five:
- Technical Analysis
- Day Trading
- Dollar-Cost Averaging
- Arbitrage Trading
Let’s move quickly and start with our first strategy: technical analysis (TA).
Technical analysis (TA) is often used in both standard and alternative ways to trade in cryptocurrency. Also, the basic ideas behind a technical analysis approach stay the same across different markets. Technical analysis is all about looking at trading charts to determine how an object has traded and how its price has changed.
Technical analysis can be used on any object that records how it has been done. This includes various financial tools, such as stocks, derivatives, tangible assets, fiat and digital currencies, and other alternative assets. It is also used to predict how the interaction of supply and demand will affect the price of any object that can be traded.
Traders of cryptocurrencies use many different signals and trends to help them with their technical analysis. Most of the time, technical analysis indicators are used to find these signals and directions. We’d like to show you five technical signs that are often used.
- Chart patterns
- Moving averages
- Price trends
- Momentum and volume indicators
Day trading is a method that is often used for trading altcoins. The suggested process involves making trades on the same day to buy and sell assets. People who deal daily in cryptocurrencies try to take advantage of price changes during a single trading session or day.
Traders make many trades throughout the day to make money in traditional finance. In the Bitcoin market, the basic rules have stayed the same. It’s important to know that crypto day trading is riskier than other types of investing. But it also gives you a better chance of getting more prizes.
Dollar-cost average (DCA) could be a good choice for someone who wants a robust method without any signs. People who are new to trading and have been trading for a long time use this method.
When trading altcoins, using a Dollar Cost Averaging (DCA) plan is the best to get the most out of your investments. This means dividing your investment capital into smaller, easier-to-handle pieces instead of putting all your money into a single asset. Your investment is spread out over a set period, during which you always buy a digital object on a particular day and time.
By using Dollar-Cost Averaging (DCA) when trading altcoins, the harmful effects of market volatility can be lessened. By investing regularly, you can see the ups and downs of the market, which will lead to a more stable and steady average cost.
The fourth strategic method is called arbitrage trading. In crypto arbitrage, you try to take advantage of slight price differences between different markets and platforms. Arbitrage is an essential technique for trading altcoins. It means buying an asset on one exchange and quickly selling it on another business where the price is higher.
Arbitrage dealing can be very profitable, and few or no risks are involved. Also, you don’t need to be a professional trader or have much money to start arbitrage trading.
The last altcoin trading strategy is HODLing. “HODL” is a misspelling of “hold” This idea has been around since the beginning of the crypto community, around 2013. As the name suggests, the suggested method is an altcoin investment strategy that involves buying and keeping a digital asset for a long time.
By using the HODLing strategy, investors can avoid the harmful effects of short-term changes in the market. In contrast to day trading, the HODL approach tries to make money off of altcoins’ long-term value growth.
In theory, HODLing has less risk than other ways to trade altcoins. HODLing might be a good plan, but it is not risk-free. Because of this, you should always do a lot of research before making an investment choice.
How to Choose the Best Trading Strategy for Altcoins for You
After looking at five ways to trade cryptocurrency worth mentioning, one may wonder, “Which way should I choose?”
Unfortunately, there isn’t a clear answer to the question above, and there isn’t a single solution that works for everyone. Your personal preferences will determine the final choice. When making investment choices, it’s essential to consider how much time you have, how willing you are to take risks, and how much you know about investing.