Wednesday, October 23, 2019

The importance of Trading Strategy

In business, running a successful company means trying as much as possible to reduce the company’s running and operating costs while maximizing its profits. It is not any different when it comes to investing in cryptocurrencies. In order to become a successful trader, you have to maximize the gains using the least capital possible.

In order to do that, traders engage a lot of strategies some of which we will be looking at in this brief article. There are general strategies spread across the internet such as try to keep emotions out of your trades and take profits at intervals. As much as these may be true, we will be discussing some of the best strategies out there to employ in order to make the profits that you want. But first, let’s discuss why trading strategy is important.

Importance of Trading Strategies

Reducing risks – risk-taking is part of the game but in order to play the game effective and increase your chances of winning, you will need to reduce your risk while increasing the upside to making profitable gains what is called balancing risks and profits.

Reducing emotional involvement – planning on the right way to take advantage of the cryptocurrency market swings is essential because it enables you as the trader to become more emotionless when making trading decisions.

Reminds you of your goals – this is a more general reason for using a trading strategy but it just as true as the once mentioned above. Sometimes, especially when trading in the cryptocurrency space, traders get pulled into market manipulation techniques such as FUD (fear uncertainty and doubt) and FOMO (fear of missing out.) Cryptocurrency markets are nascent industries and more often are affected by these techniques. As a trader, you will need to stay strong to your initial goals while pulling emotions out of your decision-making process in order to make profit-maximizing decision.

Now that we got that out of the way, let us jump right into some of the best cryptocurrency trading strategies.

Cryptocurrency trading strategies

Longs Vs. Shorts – they are sometimes referred to as bulls and bears. The longs (bulls) trade in favor of a rising trend in the market while the shorts (bears) do the reverse. As a trader, you can decide to only trade when the trend is well defined and confirmed. This is the safest route to take because it minimizes risks but also the gains are arguably minimal. The stagey is very similar to trend trading or swing trading and sometimes the terms can be used interchangeably.

Scalping – this technique is for more advanced traders with hefty sums of capital with which to play. It involves traders who make small gains from their trades but the scale of their investments makes up for the tiny percentage gains. Over time these sums add up to become tidy gains.

Bot trading – this one is becoming increasingly popular in the cryptocurrency market and for good reason. The digital asset markets are extremely volatile due to their relative young growth stage and this means that they are vulnerable to market sentiments as opposed to sound trading signals. There are also several digital assets to keep track of them. Therefore, traders have devised trading algorithms that help them to take advantage of profit-making opportunities while te trade makes the least effort.

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The importance of Trading Strategy

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