Forward-looking investors are eager to learn how to make money from trading cryptocurrency. Ever since Bitcoin was released to the public in 2009, investors have tried to figure out how to profit from emerging digital assets. While crypto has had severe value swings in the past decade, it’s still here; even traditional skeptics have begun to acknowledge its staying power.
While resistance to cryptocurrency is leveling out, investors still need to be smart about trading it. Successful crypto trading involves specialized skills, disciplined analysis, and a strong stomach in times of market volatility. As of now, there are over 17,000 active and tradable tokenswith more being developed every day. Traders continually find new strategies and platforms within their grasp.
In this guide, Gorilla Trades looks at the key strategies for crypto investing: day trading, swing trading, arbitrage, and long-term investing. It also explains how to conduct analysis, manage risk, find the best crypto exchanges, and steer clear of common crypto trading mistakes.
How to Make Money From Trading Cryptocurrency: Proven Strategies
There are no entrenched rules about how to make money from trading cryptocurrency. However, most crypto traders align their approach around at least one of the following four strategies.
Day Trading
In day trading, investors buy and sell cryptocurrencies within the same day, often within hours or mere minutes. The goal in day trading is to take advantage of market volatility and profit from relatively small price movements.
Day trading in any investment vehicle isn’t for the faint of heart — or those who trade on hunches or hope. The practice demands constant attention and an arsenal of technical indicators. Day traders look for short-term patterns rather than extended forecasts. They also execute speedy transactions and make decisions on their feet. Crypto’s unrelenting price swings make it a good fit for day trading, but not without heightened risks.
Swing Trading
Like day traders, swing traders hold onto their positions for a temporary time. However, in swing trading, the timeframe is several days or weeks instead of a single day. There’s a bit more strategy involved with swing tradingand the pace is much less manic than day trading.
Technical analysis, monitoring crypto news cycles, and market sentiment are hallmarks of swing trading. Although it doesn’t have the breakneck pace and time consumption of shorter trading windows, swing trading still demands advanced skills like chart interpretation and grasping market psychology.
Arbitrage
Arbitrage is the practice of earning profits from price differences of a single commodity between different exchanges. A trader buys shares at the exchange at a lower price and resells them almost immediately at the higher-priced exchange. The practice requires speed and precision, as well as access to multiple exchanges.
In the traditional stock market, arbitrage is largely open only to institutional investors. But in crypto, retail investors have a smidgen more access. This is because crypto is still a sort of wild frontier. Markets are still fragmented and spread out, and not all exchanges are in sync with each other.
While retail traders have a better shot at arbitrage in crypto, they still need certain skills and tools to compete effectively. They need bots, low-latency execution, capital in multiple markets, and constant knowledge about spreads, fees, and withdrawal limits. Although institutional investors still dominate crypto arbitrage, the little guys have more of a shot.
Long-Term Investing (HODLing)
Long-term crypto investing is self-describing. It’s just holding onto cryptocurrencies for multiple months or years. It’s also called “HODLing” as a kind of investor joke — once a user made the typo “hodl” instead of “hold” on a Bitcoin forum, and the name stuck. It’s now used as a sort of rallying cry among long-term crypto investors, who say “HODL” stands for “Hold On for Dear Life.”
HODLing requires faith in the long view of crypto and blockchain technology. Short-term volatility is not emphasized in long-term holding. Fundamental and technical analysis is more of a focus. Important factors unique to the crypto industry include shifts in regulation, innovation, and adoption.
Which strategy is best for you? The answer depends on your favored level of risk tolerance, how much time you can commit to active trading, and your knowledge of the market.
Mastering Technical and Fundamental Analysis
Learning how to make money from trading cryptocurrency involves adapting some metrics related to traditional investments. Two of the most relevant are technical and fundamental analysis; traders should use these in a balanced way to evaluate crypto.
Technical analysis involves scrutiny of a commodity’s price charts, indicators, and historical data to forecast crypto price movements. Tools like moving averages, Relative Strength Index (RSI), moving average convergence divergence (MACD), and candlestick patterns help day and swing traders spot short-term trends.
Fundamental analysis addresses a cryptocurrency’s intrinsic, underlying value. Factors include its use case, management team, community, and tokenomics. This can be tricky, given crypto’s short history and quick rise — consistent metrics can be hard to come by. Traders may use whitepapers and adoption trends for fundamental analysis.
Risk Management in the Face of Market Volatility
Cryptocurrency is still young. It’s very much a speculative commodity, subject to outsized price swings even in a single day. Risk management is therefore important to adopt with crypto trading. Risk management strategies in crypto echo those of traditional trading: Don’t invest more than you can afford to lose, set stop-loss orders to avoid drastic hits, and size your positions to match your risk tolerance.
Diversification is a means for mitigating risk in investments, and it can apply to cryptocurrency as well. Spreading your investments across multiple currencies — Bitcoin, Ethereum, Solana, and others — facilitates diversification. So can other strategies, like blending swing trading with long-term investments.
Discipline is a crucial part of risk management as well. Sticking with a solid plan, avoiding panic-selling, seeing past hype, and not chasing losses can be the difference between consistent gains and costly mistakes.
Picking the Right Crypto Exchange for Your Strategy
The crypto exchanges you employ can impact your trading results. For more active strategies like day-trading and arbitrage, you’ll want an exchange with high liquidity, instant execution, and reasonable fees. For longer strategies, you’ll want an exchange with stability and security, as well as support for cold storage.
Look for well-regulated platforms with commendable track records. They should have the features you need with easy-to-understand interfaces and processes to facilitate trading.
Avoiding Common Pitfalls in Crypto Trading
Some of the common mistakes that can trip up even experienced crypto traders include:
- Trading too much, which incurs extra fees and causes poor decisions
- Buying into social media hype and ignoring proper research
- Relying only on technical indicators and overlooking fundamentals
- Not using stop-loss orders or risking too much capital on a single trade
- Making any decision based on emotion, panic, or simple greed
All of these errors are avoidable. Dispense with the notion of riding luck and take hearsay at face value — that is, almost none. Stick to a well-constructed strategy, use trustworthy sources, and stay on top of developments in the crypto world to stay informed.
Charting the Path to Crypto Success
Knowing how to make money from trading cryptocurrency requires more than luck and momentum. It demands a thoughtful strategy, dependable market insight, effective risk management, and emotional discipline. These pillars apply to short- and long-term crypto investors in different ways.
Cryptocurrency has already weathered a few hype-driven storms. While the future is unpredictable by definition, with patience and thoughtfulness, crypto can evolve into a lasting opportunity for smart, strategic, and adaptable investors.
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