11 Best Crypto Trading Strategies to Improve Your Portfolio

The market may be unpredictable, but with the right crypto trading strategies, you can navigate volatility, protect your assets, and maximize your returns. 

In March 2024, the global crypto market capitalization surged past $2.5 trillion, highlighting the immense potential for savvy investors. However, the crypto market remains a wild ride. Keeping up with price swings, complex projects, and trading regulations calls for a strategic approach. 

By understanding how different crypto trading strategies cater to different trading styles, you equip yourself to find the most rewarding opportunities, make informed trades using technical analysis, and weather market downturns with confidence.

Moreover, using the right cryptocurrency exchange enhances your trading experience. Think of a trading platform like it’s a Forex for crypto. Pick one with tight security, low fees, and a user-friendly interface.

Cryptocurrency trading strategies exist for all risk appetites. Each approach comes with its own level of potential for loss, and figuring out how these strategies work empowers you to pick one that aligns with your own comfort level.

Long-term trading strategies are designed for investors who want to hold their cryptocurrency assets for an extended period, ranging from several months to years. They generally impose less frequent trading and try to ride out market volatility for overall growth.

Short-term or active trading strategies mean frequent buying and selling of cryptocurrencies to capitalize on short-term market movements. These strategies are ideal for experienced crypto investors and traders who can invest the necessary time and effort and have expertise in technical analysis. These strategies can yield higher returns but carry increased risk.

1. HODLing 

HODling, or “hold on for dear life,” is a classic buy-and-hold strategy. HODLing investors believe in the underlying technology and future potential of their chosen cryptocurrencies. They’re comfortable riding out market volatility and plan to benefit from price appreciation over the long term. 

The HODling strategy asks you to have confidence in your chosen assets and patience to handle market ups and downs.

• Pros: Simple to implement, doesn’t need constant monitoring
• Cons: Exposes investors to prolonged market downturns

2. Dollar-cost averaging 

Dollar-cost averaging (DCA) is a well-liked strategy for softening the impact of market volatility. Users commit to investing a fixed amount of money regularly, regardless of the current price. This approach helps acquire crypto at various price points, with the potential to average the cost per unit over time.

DCA’s disciplined approach removes the suspenseful element of trying to time the market perfectly. It reduces the impact of volatility and lowers the danger of making a significant investment at an unsuitable time.

• Pros: Reduces the stress of market timing, smooths out purchase prices over time
• Cons: May miss lower prices if the market drops significantly

3. Range trading

Range trading monitors trading volume and uses price changes within a predictable range – to your advantage. Traders look at the past performance of cryptocurrencies and track their support and resistance levels. Here, support refers to the point when prices tend to bounce back up after going down a bit. Resistance happens when prices that tend to hit the ceiling come back down.

Investors buy when the price falls at the lower end of the range and sell when it reaches the higher end to lock in profits before a potential drop. Range trading assumes that the asset will continue to move within this range; it can be an excellent way to accumulate profits incrementally.

• Pros: Can bring regular profitable opportunities within a predictable range
• Cons:  Involves risk of losses if the asset breaks out of the range

4. Arbitrage trading

Arbitrage trading capitalizes on price discrepancies for the same cryptocurrency between different exchanges. It identifies opportunities to trade a particular coin for a lower price on one exchange than another. Investors can then buy on the lower-priced exchange and quickly sell on the higher-priced exchange to pocket the difference.

Arbitrage trading requires speed and automation tools to take advantage of fleeting price gaps. It’s generally used for short-term gains but also fits into a long-term approach if consistently applied.

• Pros: Contains low risk when executed correctly
• Cons: Potential limitations due to withdrawal fees and limits

5. Moving average crossovers

Moving averages are the averages of a crypto's price over a specific period, such as 50-day or 200-day averages. This crypto trading strategy uses the averages to identify potential uptrends or downtrends. Investors look for a crossover or intersection between the two averages to make an informed decision about trading.

If the shorter-term moving average exceeds the longer-term moving average, it may suggest an uptrend, a sign that traders should buy crypto. On the other hand, if the shorter-term dips below the longer-term, it might mean a downtrend, a sign that traders should sell or avoid buying that crypto.

• Pros: Helps identify trend setbacks, can be automated for more effortless execution
• Cons: May generate false signals in a sideways market and require technical analysis knowledge

6. Relative strength index 

The relative strength index (RSI) is a technical indicator that measures the speed and change of price movements on a scale of 0 to 100. It checks whether a cryptocurrency is overbought and potentially due for a price correction or oversold and potentially undervalued. 

RSI can also identify any hidden divergence in the financial markets for digital assets. By analyzing the RSI value, crypto traders pinpoint buying opportunities in oversold conditions (RSI below 30) and selling opportunities in overbought conditions (RSI above 70).

• Pros: Offers clear entry and exit points, easily interpreted.
• Cons: May not be reliable in trending markets and presupposes an understanding of momentum indicators.

7. Scalping

Scalping involves making numerous short-term trades to profit from minor daily price movements. It aims to capture small profits for scalpers by quickly entering and exiting positions based on tiny price fluctuations identified through technical analysis tools and algorithms. 

Due to the frequent trading involved, this strategy doesn’t work well without a high level of focus and discipline, along with automation tools and effective risk management techniques like stop-loss orders.

• Pros: Can accumulate significant profits and numerous trading opportunities
• Cons: High stress and risk, quick decision-making, and continuous monitoring necessary

8. Crypto day trading strategies

Investors capitalize on day trading cryptocurrency on intraday price movements. This means that day traders enter and exit positions within the same trading day with the aim of profiting from short-term volatility. Crypto day trading necessitates constant chart monitoring, in-depth technical analysis skills, and quick reaction time in the face of market changes. 

Day trading strategies are quite demanding and pose a significant risk of loss if not executed properly.

• Pros: Potential for quick profits, avoids overnight market risk.
• Cons: Needs constant monitoring of trading platforms and technical analysis skills.

9. Swing trading

Under swing trading, investors hold positions for several days to weeks. This strategy differs from scalping and day trading because its goal is capturing profits from price swings with an extensive range. 

Swing traders identify potential entry and exit points based on short-term trends and market conditions. They look for chart patterns, like moving averages and trend lines, and make purchase decisions accordingly. It demands less active monitoring than day trading but still involves active portfolio management.

• Pros: Less time-intensive than day trading, benefits from upward and downward market movements
• Cons: Requires good technical analysis, timing, and exposure to market setbacks

10. News-based trading

News-based trading strategy reacts based on breaking news and announcements that crypto prices. These can include events related to specific cryptocurrencies or broader economic developments. Investors with access to real-time news feeds and a deep understanding of the crypto landscape perform well when they use this technique.

News-based trading calls for quick reaction time to distinguish legitimate news from hype and a strong understanding of how news influences specific crypto projects.

• Pros: Provides significant opportunities during volatile periods
• Cons: Must stay updated with news, unpredictable

11. High-frequency trading

Last but not least, we come to high-frequency trading (HFT), which falls outside the categories of long-term and active trading. 

HFT operates at a whole different pace and relies on supercharged computers and complex algorithms to execute a large number of trades at rapid speeds. The algorithms consume massive amounts of market data to find quick profit opportunities for traders. It isn’t about holding onto coins. Instead, it capitalizes on tiny price discrepancies and market inefficiencies that exist for mere milliseconds.

• Pros: Improves market liquidity with a constant flow of orders, can generate profit from small price movements
• Cons: Requires substantial investment in technology and infrastructure and may lead to market manipulation.

How to implement a crypto trading strategy

Implementing a crypto trading strategy involves several steps to ensure that your approach is methodical, risk-managed, and aligned with your goals. Here's how to go about it:

Set clear objectives

Before diving into crypto trading, define what you want to achieve. Are you aiming for quick profits, building a long-term investment portfolio, or diversifying your assets? Understanding your goals will guide your decisions. Assess how much risk you’re comfortable with and establish a budget using only funds you can afford to lose.

Choose the right trading strategy

The strategy you choose should align with your goals and trading habits. For instance, day trading is great for those looking to profit from short-term market movements, while swing trading focuses on medium-term trends. Scalping involves making small gains through quick trades, while HODLing is a long-term approach where you ride out market fluctuations. 

Conduct research

Success in crypto trading depends on understanding the market. Monitor factors like market sentiment, regulatory updates, and economic news that impact crypto prices. Study the fundamentals of specific cryptocurrencies, such as their utility, technology, and development team. Combine this with technical analysis, using tools like moving averages or RSI to identify patterns and make informed predictions.

Select a reliable exchange

Your choice of exchange can make or break your trading experience. Look for platforms with strong security features, high liquidity, and competitive fees. Reputation matters, so check user reviews to ensure the exchange is trustworthy and offers reliable support.

Develop a trading plan

A well-structured trading plan is essential. Based on your analysis, define clear entry and exit points. Use stop-loss orders to limit potential losses and take-profit levels to secure gains when prices hit your target. Position sizing—deciding how much to trade per transaction—should align with your risk tolerance and account size to maintain a balanced approach.

Practice with a demo account

Before risking real money, practice your strategy on a demo account. This is a risk-free way to test your approach, refine your tactics, and build confidence in your decision-making.

Monitor and adjust

Crypto markets are incredibly dynamic, so regular evaluation is a must. Analyze your trades to see what’s working and where to improve. Stay flexible and adjust your strategy as market conditions change to maintain your edge.

FAQs: Crypto trading strategies

More questions? Find your answers below.

Q. How do I secure my crypto assets?

A. Always use strong and unique passwords. Make sure to turn on two-factor authentication (2FA) for your account. House your assets in secure offline storage solutions like hardware wallets. Be cautious of phishing scams and only use trusted exchanges and crypto wallets.

Q. What is the most profitable crypto trading strategy?

A. The most profitable strategy will vary for everyone. The choice depends on individual goals, trading skills, and market conditions. However, some options to explore include HODLing for long-term gains, arbitrage for gaining price differences across exchanges, swing trading for capitalizing on market volatility and scalping for small and quick profits. Remember, they all demand different levels of expertise, and none of them is without risk.

Q. What are the best crypto trading strategies for beginners?

A. Beginners can start with HODLing and dollar-cost averaging, both explained above. However, if you’re new to crypto, be cautious and only trade as much as you can afford to lose.

Q. Is crypto worth day trading?

A. Due to market volatility and 24/7 trading hours, you can make money with crypto day trading, but you have to apply significant time, knowledge, and emotional discipline, making it more suitable for experienced traders. Beginners should be cautious due to the high risk involved.

Jack of all (crypto) trades

The cryptocurrency market offers a wide range of trading strategies for investors and traders. Before choosing one, carefully consider your investment goals, risk tolerance, and level of expertise. 

Regardless of whether you invest in Bitcoin (BTC), Ethereum (ETH), or any other altcoins on a crypto exchange, make certain to understand the inherent volatility of the cryptocurrency market. Staying informed about market trends, regulatory developments, and technological advancements, like integrating AI and decentralized exchanges, also helps traders like you position themselves for maximized success.

Store and manage all your crypto assets from different exchanges in a single and secure cryptocurrency custody software.