Suppose you’re looking for a safe, secure place to invest your money and are unsure about alternatives to traditional financing. In that case, cryptocurrencies offer a variety of ways to earn on your investments.
One of the most significant advantages of crypto over fiat currency, like the dollar, is that crypto is decentralized, meaning that it isn’t under the regulatory control of a government or central bank and derives its value from the volume of trades that drives it the value of the crypto.
For an investor, that means that crypto can operate independent of tactics designed by the central bank to lower inflation–but at a cost to the average investor.
There are many different types of crypto trading, and below is a breakdown of the kinds of trading strategies for everyone, from the novice to the expert.
Types Of Crypto Trading
As you get involved in cryptocurrency, there are two main types of trading to consider. There are basic, beginner-level trading strategies and more advanced trading types to explore.
Trading Crypto For Beginners
Before getting started with any type of investment, you must first grasp some of the basics.
For example, the various types of trading options available, the multiple platforms you can trade crypto on, understanding blockchains and trade volume, and some high-yield, high-risk options for the more advanced trader are things you need to know heading into any crypto trading.
Day Traders: A day trader is a strategy that involves taking positions within a 24-hour window, usually, before trading begins and before it concludes for the day. For day traders to succeed, it requires technical know-how that includes understanding the ebb-and-flow of trading occurring and the best time to get in and out of a particular token.
Scalpers: Similar to day trading, scalpers look to make quick positions by buying and selling in a short amount of time, typically less than an hour. The strategy involves increasing trade volume to increase profits. Though there is some risk involved, a scalper will analyze crypto assets, past trends, and volumes and use margins to add purchasing power outside of the trader’s own money.
Swing Traders: Swing traders look for advantages in price changes, known as price swings. These positions are typically held for a few days to a few weeks. They ignore the day-to-day volatility and instead rely on fundamentals analysis to identify critical trends and momentum in their decision-making.
Position Traders: Position traders are investors in the long term. They choose and hold a position for years and gain advantages by analyzing the underlying value and trading volumes.
They ignore volatility in the short-and-medium terms. As a result, position traders typically are the investors with the most experience and ability to benefit from lending their tokens out for DeFi yield farming.
More Advanced Crypto Trading Strategies
As with any investment trading, the simplest investments are usually the best for the average investor. However, there are some advanced strategies to consider for more advanced investors willing to take much more considerable risk to yield better profits.
DeFi Yield Farming: With DeFi yield farming, you own several tokens, lock them in at a specific price and then loan them out to others in exchange for payback in terms of interest.
Often individuals and companies will need some more tokens to be able to gain an advantage over others, either to create longer-term sustainability for their own coins or to force changes with other tokens–much like a shareholder would leverage their percentage of ownership to enact some changes in a corporation.
High-Frequency Trading: High-frequency trading, or HFT, is a trading strategy that utilizes algorithms to create short positions in the crypto market to buy and sell, often in the nano-seconds. To perform HFTs requires a lot of complex understanding of the market and influences, as well as being able to program a bot to recognize specific trends and then act accordingly.
Dollar-Cost Averaging: Dollar-cost averaging is about finding the perfect entry and exit points in the crypto market. It involves investing a specific amount of money at regular intervals to create an advantage of the investment. The trickiest part is timing the exit strategy with the peak value of the crypto markets.
NFTs: NFTs stand for non-fungible tokens, meaning that they are irreplaceable and one-of-a-kind. There is a unique signature assigned to the metadata of an NFT that allows for a lot of real-world applications that are wholly unique to the owner of the NFT.
When someone creates an NFT and looks to sell it, they will use an NFT smart contract that allows the seller to transfer the metadata over to someone else. NFT smart contracts are ways to facilitate and implement a sale agreement.
People have used NFTs to create and sell art, real estate, and music, just a few examples. However, the key to making money through trading crypto and NFTs, in particular, is implementing NFT smart contracts.
I have been writing about crypto for over two years. I have a vast amount of experience in the industry and my work has been featured on some of the biggest publications in the space.