By Hassan Mehmood (Saudi Arabia)
The crypto market is an extremely volatile entity as it simply doesn’t work the same such as the forex or stock market, because these are a bit too elaborative, but the crypto market, on the other hand, is repressive. If you were trying to implement some of the strategies from the stocks or forex market into the crypto market trying to generate a consistent stream of profit, then you would see that you have failed because the same strategy which used to work before is not working now.
There is no consistency, and that is why the crypto market is a bit difficult to manage and live up to as compared to stocks and forex markets combined. When there is a bullish trend, it means that everyone out there, every trader, no matter in which capacity they are taking part in the market, is making some money and is being considered a genius. However, this limelight of being a genius only lasts for the duration of a bull market because when the market is bullish, everyone is a genius as the turnover is pretty high for every trade.
The true capacity and mettle of a genius trader are contemplated in bearish trends because whoever can hold their position at that specific interval of the market is truly a genius. Surely you also want some crunch at being a genius trader, and that is why you are here.
Of course, when the market is in a serious deficit and the prices are being slain across the board, it registers as a bearish market, and the liquidation aspects from the traders start to kick in. People are throwing away their assets which they have saved for years on end, to gain some sort of reclamation for the initial investment they have made, and that is via ridding themselves of these assets that are dwindling hard on the price scale.
But that time also generates tons of buying opportunities in the liquidation aspect because the asset in question right now is not going to crash indefinitely but also going to rise and see a better outcome in the future. That is why it is only wise to buy that crashing asset right now, especially if it has some kind of history or a pattern of doing the same in the past.
With that being said, there is no hard and fast rule out there that you can approach for the sake of making a consistent profit in the crypto market, you have to balance your strategy, and you have to remain active during the time of such opportunities piling up before you and taking advantage from them. Following are some of the most elementary strategies that professional traders out there are utilizing to turn a handsome profit even in times of serious market liquidations and crashes.
Choose Your Investments Wisely
It doesn’t only go for the professional traders but every trader out there that they should pick the most elementary investment they can think of or is present currently within the market. You have to develop a strategy and then stick with it; you can’t simply start trading in a definitive asset only to leave it or get rid of it in the future and then turn your attention towards something else. Either go with profit-making crypto and stick with it or choose loss-bearing crypto that can outsmart the liquidation phase of the market and stick with it.
Changing your mode of investment or the specific section that you were earlier investing in is going to bring you pain and suffering in the long run. Market volatility is a necessary evil for day traders, and they should never let these things play with their heads. Market volatility might scare away the buy and hold investors that are interested in buying an asset and then holding it off for a definitive time period, but it is an opportunity for day traders because they can buy these assets right off from the bat and then turn them in by the evening to have a handsome profit at their hand.
Learn about the Asset Class Before Investing
Volatility, for one, doesn’t mean the same for other kinds of traders, and you should be clear about the class of traders you want to become or are interested in. You should be able to do more than just read the charts; you should be able to know about the blockchain that you are investing in or those where your crypto is hosted, the network size of that blockchain, its governance principles and protocols in place, and other such aspects should allow you to paint a complete picture before you put anything in it as an investment.
This is going to give you a competitive edge because you would know about this crypto class more intimately than any trader out there, and this is going to present you opportunities as time passes by, and markets continue to take turns becoming bearish and bullish once again bearish. It is alright for you to dwindle and take a few setbacks because not every coin is going to make perfect sense to you because at the end of the day, it is complete chaos, and you need to make your way through this chaos, and that can only be achieved by learning about the coin that you are interested in or want to invest in more profoundly than any other trader out there.
Another thing that you should learn about is asset liquidity. It is a measure of how conveniently you can convert an asset into cash without affecting much of its value or getting its value skimmed in the process. Stocks and forex shed their price in the blink of an eye as these are either gaining momentum for their current price and value or are losing it profoundly, but the crypto market is 10 times faster in this approach which means that you won’t even get to blink your eye and the market would either be climbing or declining so speedily that you won’t be able to make any sense of it.
Simply a few nanoseconds or minutes would have been a contextual window that you needed meaning that you have either scored a big profit or a big loss. Flash crash is also something that you should be aware of, and these happen when the large sell orders for a dedicated market clear out only the top buy offers present at that specific time period, it happens is that traders try to chip in their position as soon as possible and with no buy orders present at the moment the price of the asset is going to plummet into the ground.
You don’t want to be in that specific boat when that happens, and the only thing to make sure that you are safe and sound from this madness is to continue studying the market and start dumping your coin slowly instead of going for closing your position as soon as possible. This is exactly what professional traders do they start dumping their coins even before a market crash is in full swing because they can sense such a scenario approaching their way, and they start to outsmart the game even before the chips are dealt.
Build a Winning Trading Strategy
There are many types of techniques that are used by professional traders out there to make suitable gains on fluctuations that take place in the crypto market on a daily basis. The winning strategy that you should develop and act on must come from intensive research because taking up someone else’s data and strategy is not going to help you win big because it would soon lose all of its effects. The winning strategy that you should be using must have clear and concise guidelines for entering and exiting the position onto the crypto market so that the traders enter when the opportunity presents and exit at something similar.
You could take some help from copying other traders, but as elaborated above, it is not going to be a fruitful endeavor for the foreseeable future. Many beginners have had their luck with trading bots as these are automated software tools that are used by traders for the sake of buying and selling crypto assets at a time that is preconfigured or when a predefined set of conditions are met.
These bots can help you to streamline the process of buying and selling assets, especially if you are not sitting before your computer all day long. You can opt for a free trading bot or a paid one, and of course, the variety of functions that you would be able to get on a paid bot is not going to match with the low-level sophistication of a free one.
Opting for Scalp Trading
This scalp trading or scalping is a strategy that allows you to have the fastest turnaround by gaining leverage from a huge amount of liquidity when the prices for crypto are lower or decreased because of a recent blowout in the crypto market. This strategy involves buying and selling Bitcoin and other altcoins as well, and the period for which these need to remain intact by the trader ranges from a few hours to a few days. You can buy these assets and hold them off for only a few hours and cash all of these out by the end of the day on small percentage gains.
This way, you can make frequent trades with the same crypto pair that is suggesting a decline in its price to have a high amount of yield. The next day you can opt for some other pair or crypto asset that you believe is behaving out of the ordinary or in an anomalous way, and you could repeat the same thing with it. Of course, the gains are not going to be as steady and profitable as compared to investing in an asset for the long term, but this way is also good if you have got the time and you know how to manipulate the market when it is at its bare low.
Perform Technical Analysis
If you truly want to commit to crypto trading and want to make a considerable sum of profit not only when the market is in its full swing but also when prices are declining, and a bearish stance is active, then you have to get into the technical analysis of things. It is the study of financial data for a dedicated crypto-asset such as historical price and volume data points for the sake of identifying a statistical pattern that exists for that specific crypto within the market.
Technical analysis is going to provide traders with a lot of science that they can utilize to be able to find opportunities and down points for specific crypto. This will help them to buy the crypto when the price is at its bare minimum and sell it out when the maximum performance for that specific crypto has been reached. This can also help you to identify how the past performance of this specific crypto is going to shed some light on future gains or losses. Every crypto trader out there has their own specific take when it comes to technical analysis.
Some believe that it is a lost cause because of the absence of global regulations and the different number of crypto exchanges to help people with the buying and selling of the cryptocurrencies, changing the metrics for that specific crypto as the exchange on which it is being traded changes. Other traders do believe that there are some indicators, such as the relative strength index, that are worth using as it evaluates the very relationship between the price of specific crypto and the demand for that within the market.
If something is in demand and its supply is short, then, of course, the price is going to rise, and as a proposed opportunity, a crypto trader could buy that asset only to sell it when the demand further increases or buy the asset when the demand is at its lowest only to sell it when it has reached a significant momentum.
The best use of technical analysis is combining it with another definitive crypto strategy in mind because it works in conjunction with other strategies that you are going to develop around specific crypto. At the end of the day, it is all about making up your mind regarding joining a position and exiting from one at a suitable time to catapult your gains.
Make a Balanced Portfolio
Crypto trading is seeing all kinds of reactions from different countries; some are welcoming it with open arms, while some are skeptical about it and don’t want anything to do with it. Central banks across the globe are working in harmony to regulate these currencies as soon as possible and represent with a more sound framework around this.
With that being said, you can’t really trust a cryptocurrency just because it is soaring for the time being and promises great returns for the future. You might have heard about putting all of your eggs in a single basket, and many financial gurus over the years might have advised the masses not to do this. You must divide your eggs and put them in separate baskets, and in this scenario, it means in different cryptocurrencies out there.
You can’t be too careful with this because if you are not diversifying your portfolio or balancing it out from time to time, then you are opting for a journey that is not going to get you anywhere, and you might have to start all over again which is not eccentrically a pleasant sight for a crypto trader who has spent their time developing a strategy, implementing it and seeing such great returns only to lose these in the end.
Fixed Regular Investments
Another thing that you can try here is to go for a fixed amount of regular investment in these different cryptocurrencies, which is that you will be putting aside a dedicated amount for the sake of purchasing specific crypto and would not spend even a single cent more other than the dedicated amount that you have set aside. This is going to carefully help you to regulate your risks and yield strong profits for the future.
At the end of the day, the whole game is about balancing your portfolio, not giving in to sentiment, and being logical about every investment you make regardless of its volume and or the intention in which it was made.
These strategies might look a little bizarre, but if you give them a thorough read, then you would come to the conclusion that these are, in fact, what you require to become successful in the crypto market. We wish that there was this immaculate strategy that every crypto trader could use to reel in productivity gains, but sadly there isn’t one, and at the end of the day, all that you are left with is the overall knowledge for a specific cryptocurrency and a strategy of your own to help you all the way to the finish line.
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