Cryptocurrency trading: Choosing the right strategy


Cryptocurrency attracts many people who see it as a tool to make extra money. However, newcomers often enter exchanges and trade intuitively, which leads to capital depletion in the first few days. 

The main advantage of all strategies described below is their high profitability and minimal risks. It is important to understand that it is impossible to trade in the cryptocurrency environment without any risk – there is always a possibility of a sudden collapse in the rate of digital assets. 

Trading cryptocurrencies involves creating speculative positions to buy or sell digital currencies. If you use an exchange to invest, you can only profit when the cryptocurrency is rising. If you trade through a broker, however, you can increase your financial investment in both buying and selling.

Ways to trade crypto-assets

The simplest definition of “financial instruments” is that they are assets that can be traded. In traditional financial markets, these can be securities or precious metals. Financial instruments can be derivative or cash and equity or debt based.

Cryptocurrencies can also be regarded as financial instruments, as they can be used as objects of trade. However, there is not yet a clear classification of cryptocurrency financial instruments, due to the relative immaturity of the cryptocurrency ecosystem. It is likely that new definitions will emerge in the future as new sectors develop in the vast cryptocurrency market.

Financial instruments can be traded in markets in a variety of ways, which have significant differences from each other. The following are some of them:

  • Spot market – In this market, financial instruments are traded by immediate exchange for money. In the case of cryptocurrencies, this means that the exchange of one coin for another occurs instantly when an order to buy or sell is submitted.
  • Derivative market – this uses assets whose value is based on other securities. It is essentially the making of contracts between parties.
  • Trading on margin is a way of trading that uses leverage. However, the use of margin can entail significant risks, including the loss of equity pledged as collateral. This method of trading in the cryptocurrency market is usually provided by cryptocurrency brokers.


This strategy can be called a classic strategy. It was first used in Forex, and is still a favourite of amateurs and professionals alike. Its essence is as follows: a trader makes a large number of trades in a short time and then closes them after a few minutes (in some cases, seconds). The strategy is inherently simple, but it is not recommended to invest a significant amount in scalping, as cryptocurrencies can crash in value and bankrupt the trader.

This strategy can be used on any cryptocurrency pair. For example, you buy 10 Litecoin for $30. When the price reaches $35, you immediately sell all Litecoins, making a profit of $50 (excluding trading commissions). However, it requires constant monitoring, plus the certainty that this particular coin will rise in the short term.

Day trading

Day trading is a strategy in which a trader opens and closes his positions within a single day. This approach originated in the financial market, where exchange trading hours are defined.

The situation is slightly different in the cryptocurrency market, as it operates around the clock, allowing traders to trade at any time. This is why action trading in the cryptocurrency market focuses on active trading during the day, and traders do not leave their positions unattended.

This trading strategy typically relies on technical analysis to identify the most promising assets to work with. Some traders choose to trade several types of cryptocurrencies, while others limit themselves to one or two.

However, day trading is considered a rather complex strategy due to the high risks of losing investments, so it is only suitable for experienced traders who understand and are willing to take full responsibility for their actions.

Swing trading

Swing trading in cryptocurrency trading involves holding a position for several days or months. This method is suitable for beginners and experienced traders alike. Experienced traders usually study the market to find assets with high growth potential in the near future.

Beginners are advised to choose proven cryptocurrencies to reduce the risk of losses on unexplored assets. Swing trading can be an ideal choice for novice traders, as they are not stressed by fast trading and making quick decisions, which ensures maximum efficiency.

Technical analysis is the most common way of analysing the market. However, in some situations, it makes sense to include fundamental analysis as well, as it is useful for selecting strategies which will be implemented over a longer period of time.


While other strategies can be applied in the short term, HODL, or ‘buy and hold’, is the most effective in the long term.

It is very simple: a trader buys only selected crypto assets and keeps them in his wallet until they significantly increase in value.

There are many examples to defend this strategy: When the cryptocurrency market peaked at the end of 2017, the prices of many assets rose sharply. This trend continued for some time, enabling smart players to make substantial profits. Those who once bought bitcoin for $10 were able to reach $20,000 per BTC.

However, in order to follow this strategy, one needs not only to study the market carefully, but also to have nerves of steel. The fact is that any cryptocurrency can correct significantly in price, causing a strong desire to get rid of cryptocurrencies and get your fiat money back.

As part of this strategy, you need to choose a frontier – a price below which you are not willing to hold the asset, and once the currency reaches that value, the asset must be sold.

Turning back to history, there were many cryptocurrencies on the market at the end of 2017. Within two weeks, the price of some of them rose 2-3 times or more. Simple maths – if in mid-December 2017 one could buy 1 ETH for $670, just one month later the coin could be sold for twice as much.

Automated trading

Technically savvy traders can create robots with a suite of programming environments and tools for creating trading robots.

Many convenient and powerful options are now available, such as TradeScript (SmartX), Arbidex, CQG Integrated Client, Wealth-lab, TSLab, LiveTrade (CoFiTe), TradeMatic, Smartcom, MetaStock, StockSharp, Quik, TRANSAQ.

Sum it up

In addition to market volatility, uncertainty about registration and verification of exchanges, AML/KYC requirements, theft of money from hot wallets and exchanges, high commissions and more create difficulties for traders.

In any case, the following fundamental principles should be kept in mind when trading cryptocurrencies: forget perfectionism, take losses wisely, plan your actions carefully and minimise risks.

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