Dollar Cost Averaging and Relative Strength Index are two of the best strategies. Especially, for beginners in cryptocurrency trading. But it is important to have a base of practice. Cryptocurrencies create more millionaires than any other type of investment instrument in recent years. In addition, they are the most lucrative, but also the most volatile asset class.
Experts believe that its growth will continue in the future. However, if there is a lot to earn from cryptocurrencies. The chances of achieving this are slim if you do not design. Moreover, if you do not implement a proper strategy.
According to experts from StormGain, an international cryptocurrency trading platform:
“The profits of Bitcoin traders, make you forget that they are the losses of others. When someone earns $ 500,000 in BTC in one day, it means that someone else has lost the same amount in the same period of time.”
“Extreme volatility means extreme risk and extreme opportunity. Finding the right balance between the two is absolutely imperative. A sound trading approach is undoubtedly the most practical way to achieve this.”
The strategies to follow will depend on the level of risk traders are willing to take:
Tether Cost Averaging
This simple strategy comes from the world of traditional investing and has been used by stock investors for decades, where it is known as Dollar Cost Averaging (DCA).
According to the experts at StormGain:
“This strategy is perfect for both new and more advanced investors, as it protects against the ups and downs of the market while offering an attractive average return.”
For example, if the investor had purchased $150 worth of bitcoins all at once, every Monday starting January 1, 2018, spending a total of $26,700 and getting 5.07 bitcoins (worth $190,217), if they had spent $26,700 worth of bitcoins all at once on January 1, 2018, they would have ended up with $64,080 worth of bitcoins (1.6 BTC).
The power of DCA is incredible, especially over extended periods of time. It requires patience and commitment, but the compound interest rewards and better buying opportunities make it worth it.
RSI Divergence
For more ambitious traders who want to try their hand at day trading, this is a good option.
The Relative Strength Index (RSI) indicates when an asset is overbought or oversold. This gives an idea of the likelihood of a rise or fall, respectively.
According to the experts at StormGain:
“The RSI divergence strategy goes further by looking at divergences between price and the RSI indicator, allowing you to identify when the price trend is going to change direction, before it actually happens.”
Typically, price and RSI move almost in lockstep.
However, occasionally price may trend down while RSI increases and vice versa. This means a subtle change in buying or selling volume and is a strong signal that momentum is in the early stages of reversing.
The four-hour or daily charts are the best places to look for divergences, as they show stronger changes in the medium to long-term trend.
Platforms such as StormGain allow you to overlay the RSI directly onto the app instrument’s chart to further facilitate your analysis. As soon as a buying opportunity is detected, a trade can be opened without having to switch tabs.
There is no substitute for practice
Before considering investing in Bitcoin, Ethereum or any other, it is necessary to have some practical experience.
A great way to do this is to use a demo account, which is similar to the real account, but is traded with play money.
According to the people behind StormGain:
“Our platform has a 50,000 USDT demo. This allows access to a wide range of different strategies, until the investor finds the one that suits their needs”.
In addition to refining your overall approach, demo accounts allow you to gain valuable experience with Stop Loss / Take Profit orders and leveraged trading.
This means that when you start trading with a real account, you can avoid costly start-up problems. Additionally, StormGain’s cloud miner offers a great, risk-free way to increase your bitcoin balance.
