If you’re a skilled or seasoned forex trader, you may be tempted to plow some of your capital into cryptocurrencies. After all, both fiat and digital currencies share a number of similarities, especially in terms of their core purpose and volatile nature.
However, there are also numerous differences between these asset classes, with the crypto market home to more than 12,000 separate tokens and particularly vulnerable to investor sentiment. Certain crypto assets are also considerably less liquid than major fiat currencies, making them far harder to buy and sell in real-time.
So, if you do look to trade crypto assets as a beginner, you’ll need to consider a viable and relevant strategy. Here are some ideas to keep in mind:
1. Dollar Cost Averaging (DCA)
Let’s start with one of the most popular and crypto trading strategies, which works best when deployed over an extended period of time.
The enduring popularity of this strategy is underpinned by its simplicity, as it requires you to divide your capital into small amounts and invest this into predetermined assets at particular times of the day.
This will see you invest your total capital incrementally over time, with a view to reducing the impact of inherent market volatility and making more informed (and hopefully profitable) decisions.
Overall, adopting a DCA strategy will help you to get more value for your investment, especially as it affords you the opportunity to track weekly price movements and alter your investment approach as and when required.
2. Golden Cross
The ‘Golden Cross’ strategy (which may also be referred to colloquially as ‘Death Cross’) is one that utilises two moving averages (MAs) to identify potential crossovers and optimal times to invest.
Moving averages are essentially chart indicators that display the mean average of an asset over a predetermined period of time, and you’ll use these to determine viable crossovers between the 50 MA and 200 MA.
More specifically, the golden cross occurs when the 50 MA crosses above the 200 MA, while the divergence (or death cross) describes a scenario where the 50 MA dives below the 200 MA.
Once again, this strategy works particularly well over an extended period of time and observation, especially when deployed for 18 months or more. It’s also another simple strategy for beginners to understand, and one that may also be used widely when trading forex online.
3. RSI Divergence
We close with a more technical but relatively simple strategy and one that can be used to great effect when looking to time trend reversals before they actually occur.
Trend reversals take place when prices start moving in the opposite direction, from an uptrend to a downtrend or vice-versa.
RSI stands for Relative Strength Index, which is a chart indicator that measures momentum by calculating the median number of gains (and losses) over a period of at least 14 days. This way, a line can be drawn to highlight whether an asset is overbought or undersold, creating opportunities to buy or sell at the optimal time.
Just be warned; while this system is a viable crypto trading strategy, it’s also known to deliver false results at times. So, you may need at least some knowledge of the market to help quantify findings, especially if you’re to make successful trades or investments.