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Simple trading strategies for the crypto age

08 Jun, 2021

Congratulations on your decision to begin trading what is perhaps the most lucrative asset class in existence! There’s no denying that crypto has created more millionaires than any other instrument type in recent years. Experts believe this growth is set to continue well into the future. But while there certainly is a lot of money to be made in cryptocurrencies, your chances of doing so are pretty slim if you don’t devise and stick to a proper strategy. 

With all this talk of huge profits for Bitcoin traders, it’s easy to forget that their gains are other people’s losses. When someone makes $500,000 on BTC in a day, that means somebody else (or several other people) have lost just as much in the same amount of time. Extreme volatility means extreme risk and opportunity. Striking the right balance between the two is absolutely imperative. A solid trading approach is hands down the most practical way to achieve this. Here are two easy strategies depending on your personal risk appetite.

Tether-cost averaging

This simple strategy comes from the world of value investing and has been used by equities investors for decades, where it is known as Dollar Cost Averaging (DCA). You know what they say: if it ain’t broke, don’t fix it. Cost averaging is perfect for cautious newbies or die-hard hodlers alike because it protects you from the market’s ups and downs while also giving you a handsome average return. Let’s say, for example, that you buy $150 in Bitcoin once every Monday from 1 January 2018, spending a total of $26,700 and resulting in 5.07 Bitcoin (worth $190,217 at time of writing). If you’d spent $26,700 on Bitcoin all on 1 January 2018, you would’ve ended up with just $64,080 worth of Bitcoin (1.6 BTC). As you can see, the power of DCA is incredible, especially over extended periods of time. It requires patience and commitment, but the rewards in compound interest and prime buying opportunities make it well worth your while.

RSI divergence

If you’re a bit more ambitious and fancy trying your hand at day trading, this is a good entry-level option. As you probably know, the Relative Strength Index (RSI) tells us when an asset is overbought or oversold. That gives us an idea of whether it is likely to fall or rise, respectively. The RSI divergence strategy goes further by looking at discrepancies between the price and the RSI indicator, which allows it to identify when the price trend will change direction before it actually happens. Typically, both the price and the RSI move almost in lockstep. However, the price might occasionally trend down while the RSI rises and vice versa. This signifies a subtle shift in buying or selling volume and is a strong signal that momentum is in the early stages of reversing. The four-hour or daily charts are the best places to look for divergences because they show stronger shifts in the mid-to-long-term trend. StormGain allows you to overlay the RSI directly onto the in-app instrument chart to make your analysis even easier. Once you spot a buying opportunity, you can open a trade without having to switch tabs.

No substitute for practice

Before you even consider trading Bitcoin, Ethereum or anything for real, you simply must have some practical experience under your belt. A great way to do this is via a demo/practice account, which is pretty much the same as the real thing, except that you’re only trading imaginary money instead of your own hard-earned cash. One platform that offers a generous $50,000 USDT demo account is StormGain. With a balance like that to play with, you can try out a whole range of different strategies until you find one that suits you. Apart from honing your general approach, demo accounts also give you valuable experience with Stop Loss/Take Profit orders and leveraged trading. This means that when you start trading on a live account, you can avoid the costly teething problems that plague new market entrants. And if you simply can’t wait to get going, StormGain’s cloud miner offers a great, risk-free way to build up your Bitcoin balance while you prepare yourself for the big leagues. Just leave it running and wait for your payouts to start rolling in!

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