Basic Crypto Trading Strategies You Need to Know

As a new trader, you may struggle with not knowing how to start investing in cryptocurrency. Learning about and understanding what are cryptocurrencies and how blockchain works is crucial before you start placing trades.

In this guide, we’ll walk through the most popular cryptocurrency trading strategies that can help you navigate the crypto market whether you’re a beginner or an experienced trader.

1. Understanding the basics of cryptocurrency trading

Cryptocurrency trading is the buying and selling of digital assets like Bitcoin (BTC) and Ethereum (ETH). It became popular in the past few years as the crypto market experienced several notable bull runs. As cryptocurrencies make their way into the mainstream, more retail and institutional investors join the sector.

Cryptocurrency trading is often about capitalizing on price fluctuations in the market. Ideally, you want to buy digital assets when prices are low and sell when prices increase, profiting from the market's volatility. While predicting the market is difficult, you can learn to spot patterns and react to the news and trends that drive prices up or down.

Before you make any trades, it’s important to understand basic terms like buy orders, sell orders, limit orders, market orders, and trading pairs, the difference between them and how to execute them on centralized exchanges like Freedx.
Let’s quickly go through a few essential trading concepts for beginners:

• Trading Pair: Exchanges support two main types of trading pairs: crypto-to-crypto (e.g. BTC/USDC) and crypto-to-fiat (e.g. BTC/EUR). These pairs represent two currencies that can be traded for each other. The value of the first one is expressed in terms of the second, so 1 BTC would be $98,000 USDC.
• Order Book: An order book is a real-time, dynamic list of buy and sell orders placed by traders on a cryptocurrency exchange. It shows a snapshot of supply and demand for a certain cryptocurrency at various price levels. An order book is divided into two main sections: buy orders (bids) and sell orders (asks). Buy orders are a list of orders from traders that want to buy cryptocurrencies at a specific price, organized from the highest bid price to the lowest. Sell orders are the orders from traders who want to sell the cryptocurrency at a specific price, organized from the lowest ask price to the highest.

2. What are crypto order types?

A crypto order is a set of instructions you give to a trading platform to execute a trade. The order determines how and when the transaction will be completed based on specific conditions whether you are buying or selling digital assets.
Some of the most common crypto order types include:

• Buy Order: An order to buy cryptocurrency at a specific price.
• Sell Order: An order to sell cryptocurrency at a set price.
• Limit Order: An order to buy or sell a cryptocurrency at a specified price or better.
• Market Order: An order to buy or sell a cryptocurrency immediately at the best market price at the time of the transaction.
• Take profit market order: A predefined order that automatically sells a cryptocurrency when its price reaches a specified level.
• Trailing stop order: A trailing stop order is designed to protect profits and limit losses by dynamically adjusting the stop price as the market price moves in the trader's favor. If the market reverses, the stop price remains fixed.

3. Types of cryptocurrency trading strategies

It’s easy to get carried away by success stories in crypto trading but remember that the market can be volatile and unpredictable. Start by investing a small amount to get a feel for the market. As you gain experience and confidence, you can consider increasing your investments in line with your goals and risk tolerance.

There are many crypto trading strategies that you can choose from, each with its own set of risks and rewards. Some are more suitable for beginners while others require experience and deeper understanding of crypto markets.

Having a well-thought-out trading plan is essential. Decide in advance how much you are willing to invest and your target profit. Some beginner-friendly crypto trading strategies include:

Day Trading

Day trading is a cryptocurrency trading strategy where you open and close positions within one day (24hrs). Traders often apply technical analysis in day trading to determine which assets to buy and sell. Typically, profits in such a short period are small. One way to offset this is to trade large volumes of digital assets or trade multiple cryptocurrencies at the same time to try to maximize your returns. Day trading is a very active trading strategy. It can be highly profitable, but it also carries a significant amount of risk because of price fluctuations.

Swing Trading

In swing trading, the time horizon is longer than with day trading, with positions typically held between a couple of days to a couple of months. You still try to profit from price fluctuations as you identify potential moves in the market. You buy a cryptocurrency and then sell it when the price rises to take profit. You can also sell an asset and then re-buy it at a lower price. Swing trading is considered a more beginner-friendly strategy because it’s not as fast-paced and stressful as day trading.

Swing trading seeks to predict “swings” in the market that don’t necessarily follow the broader market trend.

Position Trading

Position trading is a long-term strategy where you buy digital assets and hold them for months. Your goal is to profit by selling those assets when they reach a higher price in the future.

With position trading, you need to pay attention to market trends, economic and political news that can affect the overall direction of the market. The long-time horizon gives beginner traders ample opportunity to decide when to exit.

Scalping

Scalping is a strategy that takes place across smaller time frames than day trading. Scalpers try to capitalize on minute fluctuations in price, which usually involves entering and exiting positions within minutes (or sometimes seconds).


You can apply technical analysis to try and predict price movements and exploit bid-ask spreads to make a profit. The short time frames translate into thin profit margins, so you need to trade large amounts of assets to achieve sizable profits.


Scalping is a more experienced trading strategy as it requires making fast decisions and identifying the right patterns to take advantage of short-term fluctuations.

HODLing

Long-term investors, also called "HODLers," try to benefit from the overall growth of the cryptocurrency market. You buy and hold cryptocurrencies for a long period - months or even years.

HODLing is suitable if you are confident in the long-term potential of specific cryptocurrencies such as Bitcoin or Ethereum. You ignore short-term price fluctuations and keep your eye on the gradual growth over time.

If you are accumulating digital assets over time, you can combine this strategy with Dollar-cost averaging (DOA), which is low-risk and easy to implement for beginner traders. The "set it and forget it" approach of DOA makes it a popular option for new traders who don't want to get into time-consuming and complex crypto trading strategies.

Pick a strategy that aligns with your financial goals, lifestyle and risk tolerance. Remember to stick to your plan and avoid making impulsive decisions.

4. Tips for cryptocurrency trading for beginners

Crypto trading can be a profitable activity, but beginners should understand the basics and how to apply them. This may reduce trading risks and help you make more informed decisions.
Never Invest More Than You Can Afford to Lose
One of the golden rules of crypto trading is to only invest money you’re willing to part with. Crypto markets can be highly volatile, and prices can fluctuate drastically in a short time. Always ensure that your essential financial needs are covered before risking any money in trading.
Do Your Own Research (DYOR)
Never rely solely on tips from social media, friends, online media or influencers. Take time to understand the projects you are investing in. This involves reading whitepapers, looking up project teams, and understanding the token’s use cases. By conducting your own research, you’re better equipped to make informed decisions.
Learn to Read Charts and Use Fundamental and Technical Analysis
Cryptocurrency trading is more than just guessing where the price will go. To increase your chances of success, learn how to read price charts and use technical analysis tools. These tools help you identify trends, historic prices, resistance levels, and potential price movements.

• Candlestick Charts: Visual representations of price movements over a certain period.
• Moving Average: Moving averages make price data over a certain period more consistent, helping you identify trends and know when to buy and sell.
• Support and Resistance Levels: Price points where the market tends to reverse direction.
  Technical analysis will help with reading price charts, recognizing patterns, and leveraging indicators to spot potential price movements. Fundamental analysis is useful in assessing a cryptocurrency project’s underlying value and potential to determine if it’s a worthwhile investment.
  
  Use Stop-Loss Orders to Manage Risk
  A stop-loss order automatically sells your cryptocurrency if the price falls to a certain level. This helps protect your investment from major losses in a volatile market. Setting stop-loss orders is a risk management tool that can prevent emotional decisions and minimize potential losses.
  
  Follow trends and crypto news
  
  Cryptocurrency markets are heavily influenced by news and global events. Stay informed by following reliable news sources, subscribing to newsletters, and keeping an eye on announcements from major blockchain projects. Updates about regulations, partnerships, or market trends can impact prices and present trading opportunities.
  
  Avoid FOMO and Emotional Trading
  
  FOMO (Fear of Missing Out) is a common reason why beginners make impulsive trades. You may feel tempted to jump into a trade because you see the price skyrocketing, but buying at the peak can lead to significant losses. Stay rational and follow your trading strategy, even if others are hyping up a certain coin.
  
  Similarly, if the market drops, avoid panic-selling. Crypto markets are known for their volatility, and prices can recover just as quickly as they drop.
  
  

5. Final thoughts

Trading cryptocurrency can be exciting, but it comes with risks. Take your time to learn, practice patience, and avoid using strategies you are not comfortable with.


Learning is an ongoing process. Markets can be unpredictable and there are many new projects, tokens and cryptocurrencies being launched every week. Stay informed about the latest developments in the crypto space, prioritize research and learning and continue adapting your strategies as needed.

At Freedx, we put emphasis on education and provide ample tools, resources, and support to help you succeed. Remember, the more knowledge and experience you have, the better prepared you are to make informed trading decisions.

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