3 Cryptocurrency Trading Strategies That Work

Table of contents

This article aims to go through 3 top strategies in cryptocurrency trading. Each strategy has its unique risk management and profit maximization instruments. Depending on your risk appetite and financial goals you will choose the ultimate strategy that suits you the most!

To be successful when trading Bitcoin and other coins, you must have a strict set of rules and principles to follow. It is not about making as many right price predictions as possible, but rather an adequate risk to return ratio and analytical mindset. For example, you can have 3 winning trades in a row that will cover the next 5 losing trades.

You need to earn 2x-3x more than the risk you take per each trade

Smart Trading

This strategy implies mixing with different smart orders like, “Stop-Limit” and “Trailing Stop-Loss” when trading cryptocurrency spot or futures markets. In Smart Trade mode, you have the best risk and return control, which can be easily projected. Create different combinations using all available order types at Bitsgap.

Below is a list of some trade combinations you can use:

1. Take profit + Stop-Loss
This one is the easiest because you need to place only 2 orders. The Take profit to lock in return once the price hits the target zone. The Stop-Loss limits the loss in case if the market goes in the opposite direction.

Pro tip: TP 10-20% up, SL 5-10% down

2. Multiple Take profits + Stop-Loss
The next combination is a level-up for the strategy above. By placing more than 2 Take Profits you spread the risk and maximize the return. For example, you can set your first target at 5% up from the entry price and the next at 10% up. As the price approaches the first target, you close 30% of the entire position and the rest 70% at the next target. The total return you get is 8.5%.

Do not forget about the Stop-loss! For example, you set it 3% below the entry price. Now you have all the metrics you need to estimate your risk to return ratio. We take 8.5% and divide it by 3%, which equals 2.83. This is a perfect ratio as you get 2.83% of a return per 1% of a risk!

Pro tip: TP1 at 5-10% up, TP2 at 10-15% up, SL at 3-7% down
The only thing that matters in trading is “Realized return”. It goes straight to your balance. “Unrealized return” is a pending profit, which is still affected by the market upside and downside swings. “Unrealized return” becomes “Realized” when the Take Profit is hit.

The best way to find your winning combination is to trade in a risk-free demo mode:

As soon as you get enough confidence and the success rate is more than 70% (for example, you made $2000 in profit in 20 trades and lost $600 in 12 trades. In total your net return is $1400 and then divided by $2000 profit you get 70% of success rate), then you can start trading on real money.

Automated Trading

Trading automated bots on a cryptocurrency spot market is a perfect strategy for those looking for consistent daily returns on the sideways and rising markets. At Bitsgap robots trade regardless of the trend’s direction in a 24/7 mode. All you need to do is to spend 3 minutes on the bot’s configuration to make the most out of the current market. Some “Smart trade” orders are enabled in automated trading, which is the biggest advantage.

The primary aim of Bitsgap automated bots is to accumulate returns in a quote currency while being exposed to the volatility of the base currency. For example, setting the configuration to trade on BTC/BNB the bot automatically generates profit in BNB (it buys BNB with BTC at lower prices and sells BTC to BNB as the price goes higher).

Let’s assume your goal is to get more BNB coins as you believe its value relative to USD will appreciate in the future. Just find the cryptocurrency pair, which trades to BNB to generate more coins every single day (examples include: BTC/BNB, BTT/BNB, ADA/BNB). If you have BTC or BTT, or ADA in your portfolio, then you can use it to generate BNB!

Conservative strategy: trading coins to stablecoins like USDT, BUSD, TUSD

High-yield strategy: trading crypto to crypto like BTC/BNB

HODL

Probably one of the most insecure and at the same time rewarding strategies you can find in the crypto space. The risk is to lose everything and the return is unlimited. In HODL you just buy coins without setting the Take Profit and Stop-loss. The sky is the limit.

For example, you bought ADA, and the next day it trades 10% higher. 2 days have passed and ADA is trading 15% up from your entry price. Imagine 50 days have passed and ADA is now down by 50% from your entry price. Can you tolerate such risk is the biggest question you should ask yourself. However, if all goes fine and the price of your coin gradually rises you can generate 100-500% in a matter of several months.

Since HODL is the riskiest strategy it requires you to have a special mindset: “Forget for a while and let it go”. You risk losing everything, so allocate only the sum you can afford to say “Bye-bye”.

Golden Strategy

The ultimate solution is to grab all 3 strategies once you gain enough experience trading each. Proper diversification is the only thing required. For example, you can allocate 30% to “Smart Trading”, 50% to “Automated Trading” and only 20% to “HODL”.

Bitsgap robots not only generate daily returns on rising and sideways markets but substantially minimize the loss on a downfall. Automagically! Thanks to the GRID mechanism, which spreads the risk proportionately. You can read more about the dollar-cost-averaging effect in the blog here.

HODL is the riskiest, that is why 20% is enough. You can choose 5 cryptocurrencies to hold and even if 1 of them makes 100-500% in a matter of months, then the overall risk will be justified.

In Smart Trading, you are in charge of the risk and return you get. This is where you spend most of the time because you must monitor the market as conditions change and hence you should make some strategic adjustments (for example, move your Stop-loss higher).

Discover and optimize your golden combination in Bitsgap’s demo-mode. This is a perfect sandbox for you to learn from mistakes risk-free. Don’t forget about weekly webcasts where we share top tips and clues related to all 3 strategies and many other things. We have a blog for you to broaden your trading knowledge.


Written by Dmitry Perepelkin