The token buzzword in mainstream media has turned crypto investments into more than just an enticing money-making gig. But the truth is that not all cryptos are created equal аnd you don’t need to be a professional investor to understand that some of them are pretty volatile, and you need to choose your crypto investing strategy wisely so that it suits your risk tolerance and makes you feel comfortable with the money you are investing.
One simple advice upfront
Do not wait for the right moment to come. The best strategy for making money in crypto is to take your investment decision sooner rather than later. While there is no right or wrong approach, historically, time in the market is better than timing the market. Similar to love, conditions may never seem perfect and it is only natural for us always to look back and see missed opportunities. So let’s not look back in anger then, but get long-term benefits from crypto trading with some investment strategies that can help you get favorable returns.
We said already that most of the cryptocurrencies are pretty volatile. This strategy will let you turn this otherwise negative feature into your own advantage. Day trading is basically taking positions and exiting the market within the same day. It is also known as ‘intraday trading’ because trades tend to get opened and closed within a single day. The entire goal of day trading crypto is to profit off small moves in the market, which (given the volatile nature of the market) can be very profitable.
Yet another short-term strategy relies on the volatility of the cryptomarket. You adopt a scalping investment technique when you start making frequent small profits from small price movements each day. Small gains from each trade added up can generate a substantial amount over time. What you need to embrace, however, in order to become a ‘scalper’ is agility. It all depends on your quick response to market movements. You have to react within minutes and sometimes even seconds. If speed and consistency are not an issue for you - scalp trading will bring you relatively low risks and will provide yields on the spot.
This strategy is an excellent option for investors looking to make high-frequency trades with very low-risk returns. In essence, this approach suggests that you buy a digital asset on one exchange and sell it (just about) simultaneously on another where the price is higher. That is how the difference in liquidity and trading volumes can become a perfect opportunity to book profit. To adopt this strategy, you should open accounts on exchanges that show a significant difference between prices for the crypto that you are trading at.
Buy a fraction of a coins
Cryprocurrencies’ prices vary so much that you may spend an inconceivable amount of time deciding how to diversify your portfolio and mitigate risks and pitfalls. Well, it may take a lot of time and money investment until you realize that you don’t have to buy full coins. This is not a joke but a diversification strategy. Buying fractions of coins can provide you with opportunities to invest as little or as much as you like. You can spread your funds across multiple currencies without having to put all your eggs in one basket.
DCA = Dollar Cost Averaging
This is a great strategy that works well for novices on the crypto market or for investors with less capital to work with. Using this method, you purchase small (usually fixed) amounts of crypto at regular intervals over time. This insulates you from rapid price movements as the cost of your investment will get averaged out over time. This is a long-term strategy with regular, bite-sized investments for building wealth in the long term. You will not worry about the short-term volatility of the market because, actually, it doesn’t matter what the market is doing – you’ll continue to accumulate coins and average out your cost.
This is literally the opposite of dollar-cost averaging. If you have a higher risk tolerance, then you can definitely try to maximize your investment returns with this one - instead of investing a smaller amount on a regular basis, as in the case with DCA, a large amount is invested in a particular asset all at once and all your capital is subject to the benefits of long-term growth from that day forward. Of course, you risk losing some or all of your capital in case the market backslides shortly thereafter, but if you invest at precisely this time, then you’re much more likely to enjoy better returns if the market recovers.
This strategy is a popular one and by no means - resilient to time and volatility. It requires, however, a bit more research, reading charts, and immersing in whitepapers. The invested time, however, pays out. The holding strategy is set to be a long-term one and taps onto crypto investors who buy and hold (typically for between 1-3 years) rather than trading in and out on the lower timeframes. If you decide to leverage your investments with this strategy, you should look for digital assets with long-term growth potential. It is particularly beneficial if you’re trying to build a nest egg for the kids and secure their future.
One more simple piece of advice after
Invest what you can afford, take your gains often and remember that volatility is actually beneficial. The very core of cryptocurrencies is to create wealth and financial independence but not leave you disrupted. There are now over 18,000 tokens in existence as of 2022 to choose from, and a lot of those cryptos have been increasing in value. Choosing a trading strategy will lower your risk and set up your opportunities for growth. Experience beyond exposure!