In fact, it may be worth considering a hybrid approach by combining multiple strategies.Īctive strategies require more time and attention. In this article, we’ll consider two types of trading strategies: active and passive.Īs you’ll shortly see, the definitions of trading strategies aren’t necessarily strict, and there may be overlap between them. For instance, you could do paper trading on the Binance Futures testnet.
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Personalized guidance like this can also be included in your trading strategy.ĭevising a trading strategy may also include verification by backtesting and forward testing. Do you keep checking the Bitcoin price during the weekend? Always close your positions before the weekend. Or you can establish a trading schedule, so you only trade on specific days of the week. For example, you can define that you will never trade on Fridays or that you will never trade if you are feeling tired or sleepy. In addition, your trading plan may also contain other general guidelines, even down to some minor details. How you document and measure your portfolio performance What triggers your entries and exits (your stop loss placement) It prevents you from making hasty, impulsive decisions that often lead to big financial losses.įor instance, a comprehensive trading strategy may include the following: In other words, having a trading plan in place makes you prepared for the possible outcomes. If something unexpected happens in the market (and it will), your trading plan should define how you react – and not your emotions. While having a trading strategy is not mandatory for trading, it can be life-saving at times. It’s a framework you create to guide you in all your trading endeavors.Ī trading plan can also help mitigate financial risk, as it eliminates a lot of unnecessary decisions.
We can describe a trading strategy as an extensive plan for all your trading activities. With a solid trading strategy, you’re more likely to achieve your trading and investment goals. So, would you like to devise your own trading strategy? This article will help you with the basics of how you should approach speculating on the crypto markets. However, these may also apply to other financial assets, such as forex, stocks, options, or precious metals like gold. This article mainly focuses on cryptocurrency trading strategies. Since there are many different trading strategies, we’ll cover some of the most common ones. We’ll differentiate which one applies to which of these strategies, but make sure you understand the differences between these concepts before going further. The two main schools of thought you’ll need to consider when building a trading strategy is technical analysis (TA) and fundamental analysis (FA). This way, you can continually monitor and optimize your cryptocurrency strategy. Trading strategies help you organize those techniques into a coherent framework that you can follow. There are countless ways to profit off of trading cryptocurrency.
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