From Beginner to Pro: Profitable and Low-Risk Crypto Trading Strategies

There's no doubt about it: some people have made a lot of money with cryptocurrency. But there's also the reality that others (well, most) have lost big too.

Often, those who lose tend to follow the advice of self-proclaimed gurus, while those who succeed usually implement solid, mathematically proven strategies.

In this article, we'll walk you through simple strategies for beginners and intermediates, and we'll also share our favorite advanced strategy, which is based on math and logic.

We really like it because it constantly offers profit-making opportunities (no matter if the market is up or down).

And we'll explain how to get started with it if you are still a beginner but want to dive in.

Ready to explore? Let's jump in.

First Things First: What is a Trading Strategy?

A trading strategy is basically a game plan for making trading decisions.

It helps you figure out when to buy, sell, or hold onto a cryptocurrency to make the most money and avoid losses.

With a solid strategy, you don't have to guess what to do next – it gives you a clear plan to follow, making trading less stressful and more effective.

Level - Beginner to Intermediate

Let's start with some straightforward yet effective strategies for those who are new to crypto trading, or have some experience.

Keep in mind that these strategies do not guarantee long-term profits, as the market's direction is unpredictable.

1. Buy and Hold (HODL)

This is the simplest and most straightforward strategy. You buy a cryptocurrency and hold onto it for a long time, ignoring short-term market ups and downs.

You do this because you believe its value will grow over time.

Example:

  • You buy 1 Bitcoin at $40,000.
  • You hold onto it for several years.
  • During this time, the price goes through ups and downs.
  • After five years, Bitcoin's value has increased to $60,000.
  • You sell it and make a $20,000 profit.

Disadvantages:

  • No guarantee that the price will increase over time.
  • Your investment is subject to market volatility and directional risk.

2. Dollar-Cost Averaging (DCA)

DCA is a strategy where you regularly invest a fixed amount of money into a cryptocurrency, no matter what the price is.

By doing this consistently, you can reduce the impact of market ups and downs over time.

Example:

  • You decide to invest $100 in Bitcoin every month.
  • In January, Bitcoin is priced at $40,000. You buy 0.0025 BTC.
  • In February, Bitcoin is priced at $50,000. You buy 0.002 BTC.
  • In March, Bitcoin is priced at $45,000. You buy about 0.00222 BTC.
  • Over time, you average out your purchase price, potentially lowering your risk.

Disadvantages:

  • Still no guarantee of long-term profit.
  • Your returns depend on the overall market trend.

3. Setting Stop-Loss Orders

A stop-loss order is a predetermined price at which your crypto will be automatically sold if the price drops too much.

This helps limit your losses if the market moves against you.

Example:

  • You buy Ethereum (ETH) at $2,000.
  • You set a stop-loss order at $1,800.
  • If the price of Ethereum falls to $1,800, the order will be triggered and your Ethereum will be automatically sold.
  • This way, you won't lose more than 10% on your investment, or $200 for every ETH you previously bought.

Disadvantages:

  • Market volatility can trigger stop-loss orders prematurely.
  • Does not guarantee long-term profitability.

4. Rebalancing Your Portfolio

Rebalancing means regularly changing the amounts of each cryptocurrency you own to keep your investments balanced the way you want.

This ensures you are not overly invested in any single cryptocurrency.

Example:

  • You start with a portfolio of 50% Bitcoin and 50% Ethereum.
  • After a few months, Bitcoin's value increases, and it now makes up 70% of your portfolio.
  • You sell some Bitcoin and buy more Ethereum to restore the original 50/50 balance.

Disadvantages:

  • Frequent trading can incur high fees.
  • Still subject to market fluctuations.

Level - Intermediate to Advanced

Now, let's move on to a strategy for those who have a bit more experience in crypto trading. This method can be more complex, but offers great opportunities for profit.

Arbitrage

Arbitrage is a strategy that exploits price differences between different exchanges.

The goal is simple: buy a cryptocurrency at a lower price on one exchange and sell it at a higher price on another, pocketing the difference. It’s all about simple math – buy low, sell high, profit.

Example:

  • Bitcoin is priced at $50,000 on Exchange A and $50,100 on Exchange B.
  • You buy on Exchange A and immediately sell on Exchange B, making a $100 profit per Bitcoin.

Advantages:

  • Known expected value, making it a more predictable and reliable strategy. Expected value (EV) is the predicted return for an investment in the long term.
  • Profits are not dependent on market direction; you can earn in both rising and falling markets.
  • Less risky than speculative trading, as you are leveraging existing price differences.

If you're a beginner looking to dive into arbitrage, we've got you covered with our comprehensive free guide. It's packed with everything you need to get started. Get your free copy here.

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Conclusion

Crypto trading offers various strategies for different experience levels. If you're just starting out, you can stick with simple strategies like buy and hold or dollar-cost averaging.

However, these strategies do not guarantee long-term profits due to market unpredictability.

Trading is a zero-sum game (or even less due to exchange fees), meaning that for someone to win, someone else (or many others) must lose an equivalent amount.

To be successful in trading, you need a strategy with a positive expected value (+EV), meaning that over many trades, you are likely to be profitable.

Arbitrage, with its known expected value and yield, stands out as a superior strategy. It provides a clearer understanding of the market and offers more reliable returns compared to traditional trading methods.

Understanding and using these strategies can boost your trading skills and profits.

The key to successful trading? Keep learning, stay disciplined, and manage your risks well. Stay on top of market trends and adjust your strategies as needed.

Happy trading, and here's to a profitable and exciting crypto journey!