7 Cryptocurrency Trading Strategies to Increase Profits

Cryptocurrency trading is one way to earn income from the crypto asset market. However, cryptocurrency trading is not easy. You have to face high volatility, competition and risk. To be able to make a profit in the cryptocurrency market, you need to have the right strategy.

A cryptocurrency trading strategy is a plan or method you use to enter and exit the market, and manage your risks and profits. Cryptocurrency trading strategies can vary, depending on your style, goals and preferences as a trader. There are many cryptocurrency trading strategies that you can try, whether you are a beginner or a professional. The following are seven popular and effective cryptocurrency trading strategies to increase your profits:

1. Breakout Strategy

A breakout strategy is a strategy that takes advantage of momentum when cryptocurrency prices break through a certain level, be it a resistance (upper limit) or support (lower limit) level. Breakouts can signal the start of a new trend or the continuation of an ongoing trend. Breakouts can also be a signal to enter or exit a trade.

One trader who uses a breakout strategy is Adrian Zduńczyk, who runs a trading group called The Birb Nest. He has a certain set of rules and signals used to enter into trades, which are often breakouts. These signals remain the same in both bear and bull markets, but what has changed now is that they “appear” more frequently than in 2022.

“I buy when there is a confirmed price breakout,” said Zduńczyk. Although these trades often fail, Zduńczyk says the win rate is only 30%. “I lost money to live on,” he said with a laugh. But he still uses tight stop losses (the maximum he can lose on each trade) and lets his winners run, so his 30% winners more than offset the 70% losers. This math is the same in both winter and spring crypto, but now he spends more time in trading rather than sitting on the sidelines.

The breakout strategy can be a profitable strategy, as long as you can identify important levels that can be entry or exit points. You should also pay attention to market volume and volatility, as these things can affect the strength of the breakout. Additionally, you should always use a stop loss to limit your losses if the breakout turns out to be false.

See Also:

Understanding Fakeouts in Trading

What is Consolidation in Crypto Trading?

Understanding Fibonacci Retracement Levels in Trading

2. Strategy “Moonbag”

The “moonbag” strategy is a strategy that takes advantage of the drastic price increase of a cryptocurrency project. Moonbag is a term used to refer to a pouch or bag containing coins that have risen in price significantly, or in slang, have "mooned" or "landed on the moon".

This strategy is a contribution from Wendy O, host of The O Show. If a project he invests in starts to “moon,” he starts taking profits and then returns his investment. “Whatever is left is my moonbag. I own it free and clear,” Wendy said. Sometimes he will place the bag on a staking platform (if available), so he can earn passive income while waiting for the project to reach its peak.

The moonbag strategy can be a profitable strategy, especially if you can choose projects that have the potential to increase in price massively. However, you also have to be careful, because not all projects can last long on the market. It's a good idea to do in-depth research before investing, and always be ready to sell your coins if there are any signs of decline.

3. Correlated Arbitrage

Arbitrage is a strategy that exploits price differences between two or more markets. Arbitrage can provide guaranteed profits without taking any risks, as long as you can execute trades quickly and accurately. Correlated arbitrage is a type of arbitrage that involves two assets that have a strong relationship or correlation in price movements.

Paweł Łaskarzewski, who doesn't care whether the market is bullish or bearish, gives an example of two assets that are correlated in price movement. “Tesla is moving in the same direction as NASDAQ,” he said. You can then draw two price curves – one for Tesla and one for NASDAQ. “If the spread between the two gets bigger, we can make money from that spread. We don't care whether the price goes up or down.” The same principle can be used for the forex market (like the spread between the US Dollar and the Euro) or in crypto, like the spread between Bitcoin and something like Solana or BNB.

A correlated arbitrage strategy can be a strategy that produces consistent profits, as long as you can identify correlated assets and find existing arbitrage opportunities. You should also pay attention to transaction costs and market liquidity, as these things can affect the profitability of your strategy.

See Also:

What is All Time High in Cryptocurrency?

What is Consolidation in Crypto Trading?

Buy Bitcoin vs Spot Bitcoin ETF, Which is More Profitable?

DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.