Retail trading without planning and strategy is nothing more than glorified gambling. This has dominated the crypto industry since its inception, but things are changing as big-money investors continue to enter the industry. Financial institutions are moving into the crypto space, and we are starting to see an evolution in crypto investment strategies backed by analytics, data, and experience in other sectors.
Individual investors can apply that knowledge to their portfolios and use the sharpest strategies in the financial world to boost profits on Binance and other crypto exchanges.
So what are the best crypto trading strategies for 2024?
Dollar cost averaging (DCA)
The dollar-cost averaging (DCA) strategy is a safe strategy for long-term investors who want to avoid market highs and lows and focus on solid returns.
You choose a certain amount and invest it in certain tokens regularly over a certain period of time. Depending on the coin and market volatility, it can take weeks, months, or years.
For example, in Dogecoin's early days, social media posts and celebrity endorsements caused the price to skyrocket a week before dropping dramatically. So we saw big fluctuations from week to week. Established coins tend to be more stable, so a solid DCA investment strategy for them involves investing the same amount on a fixed day every month.
Binance recently conducted a dollar-cost averaging experiment to show how effective this strategy is. As a test, monthly splits of $100 were equally funded among the coins listed on Binance's CMC Cryptocurrency Top 10 Equal Weighted Index. The experiment lasted for three months, with BTC and ETH recording returns of 21.70% and -2.04%, respectively, while BNB outperformed the test with 56.23%.
Binance CMO Rachel Conlan highlighted the benefits of dollar-cost averaging (DCA) for crypto investors, saying, “DCA is about using consistency to your advantage. I'll turn it into an opportunity.''
binance trading pairs
Following this simple strategy means making ill-timed lump sum investments where you can buy low or buy high without following the market. Essentially, an investor's position costs are averaged out over time, resulting in more stable profitability. This strategy protects buyers from emotional investing, FOMO buying, and losses if the market suddenly deteriorates after investing a lump sum. However, you are intentionally sacrificing short-term big wins.
range trading
This is a great strategy for beginners or intermediate traders who want to make big profits but are not ready to risk everything with more advanced methods. Basically, range trading means buying when a coin is within a certain range and deciding in advance when to sell.
The most effective technique is to identify the current support and resistance points for a particular token. Then buy low and sell high, but always within that range. Range trading is an effective short-term strategy that can be repeated until a coin breaks free from a key invisible support or resistance point.
You can think of the support as the floor and the resistance as the ceiling. Buy at support and sell at resistance. To short a coin, implement the opposite strategy. BNB provides a very good example of support and resistance available to range traders.
Binance trading support and resistance
arbitrage
Token prices may vary slightly but significantly between cryptocurrency exchanges. In other words, there is a niche market of crypto trading whose sole purpose is to buy coins on one platform and sell them at a higher price on another platform. It sounds like child's play, but it's not always that simple.
Traders must consider commissions and other costs, and profit margins are often small. Therefore, a large initial investment is required to achieve a large profit, and the slightest problem along the way, such as a drop in the price or a delay due to blockchain congestion, can result in disastrous losses.
Types of cryptocurrency arbitrage include the simplest spatial arbitrage, where a trader buys on one exchange and sells at a higher price on another exchange. As an example, Bitcoin sells for $50,000 on one platform and $50,050 on another. So it's a simple case of buying big on one side and selling on the other at the same time.
Another more complex style is triangular arbitrage, where traders look for exchange rate discrepancies between multiple coins. Traders can profit from a series of trades that are essentially cryptocurrency conversions.
Cross-border arbitrage involves exchanges in different countries and can take into account not only the actual fiat currency conversion, but also differences in regional demand and regulatory issues. However, this is advanced arbitrage and is more suitable for professional traders and institutions.
Hodling
This simple strategy involves buying tokens with growth potential and holding them for the long term. The name arose from a misspelling of “hold” on a forum, but during the early days of Bitcoin's frenzied volatility, the term morphed into the acronym “Hold On For Dear Life.” Now it's a meme, a slogan, and a mantra all rolled into one.
HODLing is an ideal long-term investment strategy that almost deliberately ignores short-term peaks and troughs in the market in favor of long-term growth. This is a strategy that investors use for years at a time, with some early Bitcoin investors having been investing for over 10 years at this point.
day trading
This is the opposite of HODLing and is really not for the faint of heart. Day trading seeks to profit from small daily fluctuations in a coin's price. As the name suggests, traders can buy and sell tokens on the same day and hold coins for only a few minutes at a time.
There are technical analysis tools to help narrow down the right coins to buy and sell, with a focus on highly liquid coins such as Bitcoin and Ethereum to ensure traders choose entry and exit points without significant slippage. There is a tendency. Stop losses and exposure limits can also help limit risk, but day trading inherently carries a certain level of risk that may not be suitable for everyone. This is especially true for traders who use leverage to take large positions.
It is better to start small and grow it over time by reinvesting your profits.
Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the personal opinions of the author and do not reflect the opinions of The Crypto Basic. We encourage our readers to conduct thorough research before making any investment decisions. Crypto Basic is not responsible for any financial losses.
