Interest in trading crypto assets remains at peak levels.

Explore top crypto trading strategies for you by browsing our list below.

Most Profitable Crypto Trading Strategies

A cryptocurrency trading strategy is a plan for buying and selling cryptoassets that minimizes risk while improving the chances of making a profit.

A trading strategy is based on predefined rules and criteria that are used to make decisions. 

Some examples of the things that should be included are:

• Assets we are going to trade
• Time frames
• Plan for entering and exiting the market
• Risk of each trade
• Stop-Loss placement
• How are we going to take profits

On the other hand, a strategy must have a statistical advantage over the market and it must also be replicable: it must be defined and it must be replicable over time.

Below we are going to look at four of the most profitable crypto trading strategies when investing in cryptocurrencies that can be used as a general framework within which to develop your own. 

Basically, the main differences between them lie in the duration of the operations.

Day Trading

Day trading is a short term strategy in which you keep your positions open for minutes or hours. The time frames used will generally be 15 minutes and 1 hour.

Basically, it is a similar strategy to swing trading but at a faster pace. The objective of day trading is to make a profit by taking advantage of the volatility that occurs intraday.

As we saw in the previous example, we can execute the strategy in several ways:

• Buy on a stand x

• Sell on resistance

• Buy or Sell on pullbacks

• Trade technical patterns such as pengnats, etc etc.

The difference is that in this case we will use smaller timeframes. For example, if we are going to trade a bull flag, in the case of day trading the pattern would be located in 15 minutes and in swing trading it could be a formation in a time frame of 4 hours.

Another important difference is that a day trader will not be concerned about the fundamentals of the cryptocurrency or token. For more information, you can read about crypto’s advantages and disadvantages. Nor will the long-term trend be relevant as it will have virtually no impact on our trades.

Instead of the above, it will be necessary to identify your bias for the day you are going to trade (the dominant trend on that day) to determine whether we will open long or short positions during the session.

Advantages

• A day trader can get more returns on his capital because he can make more trades.
• There is no overnight risk as positions will generally be closed.

Disadvantages

• Trading style with higher level of stress
• Higher commission expenses than other strategies
• It is not compatible with other work activities due to the time required for trading.

Positional Trading

Positional trading is a medium to long term strategy in which you keep your positions open for weeks or months. The time frames used will be large, usually daily and weekly.

When looking for candidates to open positions in, a good idea is to start from candidates with good fundamentals and combine it with technical analysis to determine the most optimal time to enter the market.

This is an appropriate strategy for the early stages of a bull market. Generally we seek to position ourselves in the market in the accumulation phase or at most in the consolidation once the new trend starts. The various crypto indicators can be quite helpful for this purpose.

Another way to enter the market is in situations of large drops produced by very negative news coupled with other factors such as excessive leverage or very extended prices. 

When these types of corrections occur, which are usually very fast and violent, they can be appropriate times to position ourselves in the long term.

Advantages

• It is not necessary to have a lot of time because it is a medium-long term strategy.
• Little stress since price fluctuations in short periods of time are not important.
• Profits can be higher than doing DCA since we start from a higher risk/reward potential.

Disadvantages

• Requires advanced knowledge of fundamental analysis, technical analysis and market cycles.
• The number of trades you take some times are very small and the variance can be large. Large doses of patience are required.

Swing Trading

Positional trading is a medium-term strategy in which you hold open positions for days or weeks. The time frames used will generally be Daily and 4 hours. The objective of a swing trader is to capture a single move in our favor in the market (known as a swing).

Some ways to execute this strategy can be:

• Buy on a stand

• Sell at resistance

• Buy or sell on pullbacks

• Trade technical patterns such as triangles, pennants or wedges.

The above ideas are in turn different trading strategies or ways of trading, but they all have in common that what is sought is to profit from a swing of the cryptocurrency that we operate, either long or short.

Advantages

• It is possible to find a greater number of trading opportunities.
• It can be combined with other activities or full time jobs.

Disadvantages

• You will not be able to profit from large upward movements as you will usually close positions earlier.
• You are exposed to the market during night hours and weekends.

Dollar cost Averaging (DCA)

DCA, or Dollar Cost Averaging, is a long-term strategy and is the simplest of all. More than a trading strategy it is an investment strategy but it is useful to know it for anyone who wonders how to invest in cryptocurrencies step by step.

It simply consists of dividing the available capital into smaller amounts and then opening positions at regular time intervals. In this way, over time, we obtain average purchase prices and reduce the impact of volatility on the prices at which we have obtained the cryptocurrencies.

Subsequently and according to our profit taking plan, we will be selling our cryptos to materialize our gains. An example would be to do something quite similar: sell in a staggered manner as the price reaches various upward targets.

Prior to its execution, we have to go through a process of searching for cryptocurrencies with potential to invest and that meet certain requirements according to the analysis we perform.

Advantages

• Low stress level: it is not necessary to consult charts regularly, calculate entries accurately or analyze the price action in short periods of time.

• If we stick to the strategy we avoid fear of missing out (FoMO) the moments to make purchases are very well defined and leave no room for improvisation.

• Low cost in commissions

• It requires little time for its execution.

Disadvantages

• It is important to have knowledge in fundamental analysis of cryptocurrencies.

• You can incur in losses maintained over time if you do not evaluate the market cycles and the state of the fundamentals of your investments from time to time.

What is the most profitable crypto trading strategy?

Like most questions in trading, there is no concrete answer. The most profitable crypto trading strategy is the one that suits you in every way.

It depends on the time you have available to trade, your knowledge and whether you position yourself closer to the long term investor side or the short term trader.

As I say it all depends on each one, but in general I advise to start initially at an intermediate point type positional trading or even swing trading.

We have to think that DCA is very focused on long-term investment (in fact it can be compatible with other trading styles). 

And at the other extreme we would find Scalping, which I have not even mentioned. It operates in very small time frames 1 and 5 minutes and honestly I see it totally discouraged to trade cryptocurrencies taking into account the characteristics of the cryptocurrency market.

Conclusion of Crypto Trading Strategies

In conclusion, exploring various crypto trading strategies is essential for success in navigating the cryptocurrency market. 

By understanding and implementing strategies like Dollar Cost Averaging, Positional Trading, Swing Trading, and Day Trading, traders can find the approach that best fits their goals, time availability, and risk tolerance. 

Remember, there’s no one-size-fits-all solution, so it’s important to experiment and find what works best for you.

F.A.Q

What's the most profitable crypto trading strategy❓

The most profitable strategy varies for each trader. Some find success with Positional or Swing Trading, while others prefer Day Trading. It’s important to explore and test different approaches to find what works best for you.

What are crypto trading strategies❓

Cryptocurrency trading strategies are plans or methods used to buy and sell cryptocurrencies with the goal of minimizing risk and maximizing profits.

How do I choose the best crypto trading strategy❓

Consider factors like your risk tolerance, time availability, and investment goals to determine   which strategy aligns best with your needs.

What is Dollar Cost Averaging (DCA) in crypto trading❓

DCA involves investing a fixed amount of money at regular intervals, regardless of the asset’s price, to reduce the impact of market volatility.

What is Positional Trading in crypto❓

Positional trading involves holding onto cryptocurrency positions for weeks or months, aiming to capitalize on medium to long-term market trends.

What is Swing Trading in crypto❓

Swing trading involves holding cryptocurrency positions for days or weeks to capture short to medium-term price movements, typically based on technical analysis.

What is Day Trading in crypto❓

Day trading involves buying and selling cryptocurrencies within the same trading day, aiming to profit from short-term price fluctuations.