Posted in:

Crypto Investment Strategies: Basics

© by Shutterstock

Trading cryptocurrencies may be risky, especially in periods of super high volatility. Therefore, if you want to start earning by buying and selling crypto assets, you need a strategy that will allow you to find better entry points. Such strategies may use various analysis tools like technical indicators, trend lines, support and resistance levels, etc. Moreover, you should also understand where to fix all your positions.

Buying Cryptocurrencies: Useful Tips

Building a strategy to buy cryptocurrencies may seem difficult, but with our recommendations, you have more chances to succeed. First things first, before even engaging in buying a particular token, it is worth choosing a timeframe that you are going to use.

All timeframes can be divided into three main groups. The first includes scales from 1 minute to 4 hours. Those time frames are comfortable for short term trading, meaning they are suitable for those traders who want to buy and sell cryptocurrencies within a single day.

Another group is useful for mid term traders, i.e., those cryptocurrency market participants who want to buy and sell cryptocurrencies in a matter of a week or so. Last but not least, are long-term traders who are ready to keep a particular token for months or even years in their portfolios.

Another recommendation that might help you find the best entry points is to find support and resistance levels. The support area is what “supports” the price from further decline. It is a horizontal line that is drawn through two or more horizontal lows that are located at the same level.

As for resistance, this is the area that prevents the price from getting higher. Like the support level, the resistance level is a horizontal line that is drawn through two or more highs that are located at equal levels.

Finding Current Market Trends

Crypto investment strategies largely use trend lines and various indicators that help traders find entry points and understand current market tendencies. A trend line is a line that is drawn through descending price highs for the downtrend and ascending price lows for the uptrend.

Apart from trend lines, market participants frequently use various technical indicators like Moving Average, Bollinger Bands, and others. Those indicators are known for being excellent supportive tools for traders to define trends and even find entry points if they are incorporated into some strategies.

Looking for Exit Points

Buying a particular asset is half the way to success. You should also understand where and when to leave the market. Again, you can use all those tools that were described above to close your current market positions. There is also a special risk/reward approach that makes it easier to find the best price to fix your trades.

Normally, the risk/reward ratio should be 1:3 in order to have an advantage over the market. Therefore, if you set a limit on the amount you can risk in a particular trade, you can equally set a limit on the amount you can earn in each particular market position.