As per a recent news report, over 10 crore Indians own cryptocurrencies. The number, in all likelihood, may go even higher during this festive season.
According to
a recent report, more than 100 million Indians own cryptocurrencies, and this
number is expected to increase during the festive season. However, trading
cryptocurrencies comes with risks and challenges similar to trading equities
and commodities. To ensure long-term benefits and make trading enjoyable and
safe, it's important for market enthusiasts to develop effective strategies.
Let's explore some strategies that can help you achieve favorable returns.
Day trading
This strategy
involves entering and exiting positions within the same day. Traders aim to
book profits based on intraday price movements in their chosen
cryptocurrencies. Technical indicators are often relied upon to identify entry
and exit points.
Range trading
Traders seek
support and resistance levels provided by experienced analysts. Resistance
refers to the price level at which the cryptocurrency is expected to stop
rising, while support represents the price level below which it's not supposed
to fall.
Scalping
This strategy involves using high trading
volumes to generate profits. Although there are risks involved, smart traders
carefully manage margin requirements and adhere to important rules. Scalpers
analyze historical trends, trading volumes, and select entry and exit points
within a day.
High-Frequency Trading (HFT)
HFT is an
algorithmic trading strategy utilized by quantitative traders. It involves
developing algorithms and trading bots to quickly enter and exit cryptocurrency
positions. This strategy requires a deep understanding of complex market
concepts, mathematics, and computer science, making it more suitable for
advanced traders.
Dollar-Cost Averaging (DCA)
Timing the market in the volatile crypto
market is challenging, so DCA is a sound approach. DCA involves investing a
fixed amount at regular intervals, eliminating the need to time the market.
This strategy helps build wealth in the long term, but it requires studying
market trends and understanding market cycles for effective exit points.
Build a balanced portfolio
Since crypto
trading is still evolving and can be volatile, building a diversified portfolio
that includes various cryptocurrencies like Bitcoin, Dogecoin, and Ethereum can
help mitigate risks and increase the likelihood of favorable returns. Regular
investments in different cryptocurrencies also increase risk appetite in a
systematic manner.
Avoid trading based on hype
Relying on
social media for cryptocurrency news is a common mistake among new investors.
Investment decisions should not be driven solely by hype created on social
media platforms, as false information can spread quickly.
Conduct primary research
Conducting
primary research on the value of the cryptocurrency you wish to invest in is
crucial. Staying updated with news about the crypto industry is important, and
platforms like WazirX can help provide relevant news quickly. Evaluating your
own finances and setting investment goals beforehand is also recommended.
Arbitrage
Arbitrage involves buying a cryptocurrency in
one market and selling it in another to take advantage of price discrepancies.
The difference between the buy and sell price is known as the
"spread." Traders can exploit these differences in liquidity and
trading volume to generate profits. Opening accounts on exchanges that show
significant price differences for the targeted cryptocurrency is essential for
this strategy.
Betting on Bitcoin volatility
Bitcoin is known for its volatility. Traders
can engage in Bitcoin futures trading to capitalize on this volatility. This
strategy involves simultaneously buying a call option and a put option with
similar strike prices and expiration dates. When crypto prices experience
significant fluctuations, traders can exit the position by selling both options
simultaneously.
