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Strategies For Trading Cryptocurrencies


Cryptocurrencies are a hot topic among traders at the moment.  The recent massive rise and equally large fall in the value of Bitcoin is just one example of why even non-traders are aware of the cryptocurrency world.

But, for the serious trader, what kind of strategies and tips will help with trading cryptocurrencies?

Why cryptocurrencies are different.

Before you start building your strategy and compiling tips, it is essential to understand the difference between cryptocurrencies and other types of assets.  For many traders, the approach is more like stock investing but with the awareness that they are not stocks – they are commodities.

Different cryptocurrencies have different prices, and there may be some similarity between the trades, the underlying technology that powers Bitcoin.  There are also many ways that you can apply underlying technology including for institutional and retail capital.  The decentralised nature of cryptocurrencies means they cannot easily be shut down or manipulated.  For many traders, their reason for investing in Bitcoin and other cryptocurrencies is because of all the above.  Quite simply, they are investing in the future.

Trading tips.

Now let’s move on to trading tips and how to look at cryptocurrencies, their volatile markets and how they are different from other CFD trading markets.

Have a strategy.

One thing cryptocurrencies share with other assets is that you need a strategy in place before you start to trade.  Generally, the longer you plan to hold the currency, the less risk is involved.  It is the same for stocks and cryptocurrencies.  But, there can be times when you want to cut and run.  Declines due to unforeseen structural issues is one example.  That means you need a strategy that covers long-term and unexpected events.

Consider hedging your bets.

You may want to consider hedging your bets with cryptocurrencies as many exchanges allow short orders.  It means you can place bets on either side of the price movement of the currencies.  A simple example would be to have 90% long and 10% short.  It means you are more confident in the long position but have covered yourself a little for the short position.

Don’t limit yourself to Bitcoin.

While Bitcoin is the most well-known of the current cryptocurrencies, there’s no reason that you can’t consider others, often known as Altcoins.  These are less prone to public speculation, and smaller market caps mean they are prone to bigger pricing swings.  Each altcoin has a purpose and intent, working in different niches.  While the risk may be more significant, so too can be the rewards.

Read and learn.

Creating a strategy isn’t a static thing – you need to keep reading and learning about the market and refining it.  That means signing up for financial newspapers, blogs, forums and even social media groups.  Listen to what people are saying and filter this through your own experience and approaches.  Also, use websites that offer plenty of learning opportunities to help you with your education.

Making the most of volatility.

Perhaps the key point to being successful with cryptocurrency trading is in understanding and making the most of instability.  Yes, there are risks – hackers always seem to be trying to find ways to exploit vulnerabilities in these currencies, for example.  You need to use a tested and trusted platform such as Olsson Capital Cryptocurrencies markets to ensure you can be confident in what you are doing.  By having a clear strategy, understanding how the markets are affected by different factors and being prepared with what you will do in these situations, you can make a success of your cryptocurrency trading.