Last update: 17 December 2020
12 min read

How to Trade Cryptocurrency Successfully: Strategies and Analysis

If you’re considering getting involved in the world of cryptocurrency, you may be wondering how to trade cryptocurrency successfully. You may even be questioning whether it can be done at all – is cryptocurrency trading just guesswork?

The good news is that you can definitely learn how to trade cryptocurrency successfully. The bad news is that it isn’t as quick or as easy as some people think. To become a profitable cryptocurrency trader, you need to do your research and employ a tested trading strategy.

Luckily for you, our experts are here to help. On this page, we show you exactly how to trade cryptocurrency and how to create an effective trading strategy. With this knowledge, you’ll be ready to trade Bitcoin, Ethereum, and hundreds of other crypto coins to make a profit!

Our guide on how to buy cryptocurrency will show you:

  • How to create a solid crypto trading plan
  • What you can do to predict crypto price changes
  • The most popular cryptocurrency trading strategies
  • Expert cryptocurrency trading tips


Everything you need to know before trading cryptocurrencies

Cryptocurrency trading is incredibly lucrative and exciting. If you do it well, you can make sizeable profits in a short space of time. However, learning how to trade cryptocurrency successfully all starts with creating a solid cryptocurrency trading plan.

A cryptocurrency trading plan should consist of a trading routine and a tested trading strategy. Your plan should also reflect your trading style, goals, knowledge, and personality.

To get you started, our experts have created a list of preliminary factors you must consider before beginning to trade crypto.

Decide what type of cryptocurrency trader you will be

When you start learning how to trade cryptocurrency, you first need to assess your own situation. Factors like your budget, your time, and your goals will all impact what kind of crypto trader you will become.

For starters, you should assess how much time you have to trade. Unlike forex trading, the cryptocurrency market is accessible 24/7. This is beneficial, as it means you can trade whenever you like, yet you’ll still need to create a routine and stick to it. Consider how many you wish to make in one day, how much time you wish to dedicate to checking and managing your positions, and how much time you wish you spend analyzing the markets.

Once you’ve decided what kind of time and effort you want to put into cryptocurrency trading, the next step is to pick a style of trading. There are three main styles of trading that you should familiarize yourself with when learning how to trade crypto:

  • Day trading: Day trading is where you open one trade or more per day, and close it when the day is over
  • Swing trading: Swing trading is a longer-term approach, which allows you to keep trades open for a few days at a time
  • Scalping: Scalping is a high-frequency trading style. You will make multiple trades throughout the day, keeping them open for only a few minutes at a time.

If you already trade forex, you may be familiar with the trading styles mentioned above. In this case, our experts recommend that you stick to your regular style as you’re more likely to be aware of the advantages and disadvantages it carries. For beginners, we recommend trying day trading first as it allows you to learn how to trade cryptocurrency without having to manage too many positions at once.

Decide which cryptocurrencies you want to trade

Deciding which coin, or coins, you will trade is a huge part of any crypto trading strategy. This is because each coin has different properties and potential for profit.

Whilst there are currently thousands of cryptocurrency coins in circulation, only a select few can be traded with a cryptocurrency broker. This is good news for beginners, however, as it means you won’t be overwhelmed with options.

Almost all of the best cryptocurrency forex brokers will allow you to trade Bitcoin. Bitcoin’s mainstream nature means it’s ideal for beginners – it’s popularity means it’s more liquid than other coins and, as bitcoin news is more common, you probably know the most about it compared to other coins. Bitcoin’s ubiquity can also be a problem, however. As more companies adopt bitcoin and more regulations come into place, the market can be volatile at times.

Ethereum is another major coin offered by most cryptocurrency brokers. Ethereum is a good choice if you’re learning how to trade cryptocurrency as it is also a liquid asset, but it isn’t affected by the news as much as Bitcoin.

Other major crypto coins include Litecoin (LTC), Ripple (XRP), and Bitcoin Cash (BCH). You may also be interested in established altcoins, such as Binance (BNB) and NEO. Trading established altcoins can be profitable as you have a better chance of unearthing useful information that could affect the coin’s price, but which isn’t included in mainstream crypto trading news.

Decide how you will approach cryptocurrency trading

There are a couple of dominating crypto trading approaches, that will shape your trading routine, and which trading strategy you decide on. If you’re already a forex trader, who is now learning how to trade cryptocurrency, you’ll probably be familiar with both. It’s worth remembering, however, that these two approaches have different advantages and disadvantages when it comes to cryptocurrency.

  • Technical analysis: To perform technical analysis, you’ll study past market data, observe trend lines, and check support and resistance levels to predict price changes and to work out when to enter a trade. If you decide to use technical analysis when trading cryptocurrency, you may wish to avoid trading ahead of news announcements as the market will be volatile and prices may move in an unexpected direction.
  • Fundamental analysis: Alternatively, you may choose to focus on fundamental analysis. This is a more overarching approach that considers everything external which may affect the price of a coin. This includes news, roadmap updates, coin launches, and the regulatory landscape.

Learn more about trader psychology and risk management

There is a common saying in crypto which is ‘buy the rumor, sell the news’, but this underpins how important market psychology is. To learn how to trade cryptocurrency successfully, you’ll need to think several steps ahead and stick to your strategy even when the market seems to be acting irrationally.

Sentiment is incredibly important in cryptocurrency trading and often defies logic. For example, a positive development for a coin may be met with no price increase or even a drop. Those who panic sell often pay the price. You can avoid this by setting realistic trading aims, being patient, and avoiding trading when your emotions are running high.


Popular cryptocurrency trading strategies

As you learn how to trade cryptocurrency, you’ll notice there are many different strategies available. Whilst the best strategy for you will depend on your budget, aims, risk appetite, and experience, it’s worth familiarizing yourself with the most popular cryptocurrency trading strategies.

  • HODLing: Holding – or hodling, as it’s informally known – means investing in a coin and holding onto it until it increases in value. This is a simple method suitable for those of you who don’t want to spend a lot of time trading or analyzing charts.
  • Trend Trading: If a certain coin is gaining attention, or perhaps falling out of fashion, trend traders can take advantage by acting on this ahead of other investors. When the price changes, you can sell or buy to cash in on the market trend.
  • Hedging: Hedging involves opening several trades at once so that a gain or a loss on one position is offset by another. As such, hedging can help to limit your losses when trading cryptocurrencies.
  • Breakout Strategy: Thorough analysis can help you recognize breakouts, where a coin beats the resistance point and shoots up in value before settling. Reading the situation ahead of a breakout means you can profit from the price boost.


Using fundamental and technical analysis to trade cryptocurrencies

As we mentioned earlier, you can use both technical analysis and fundamental analysis when learning how to trade cryptocurrency. As a beginner, you should pair these approaches with a strict trading routine and one of the strategies mentioned above.

To fully understand the cryptocurrency market, you should spend time learning and performing both types of analysis. If you’re looking for a shortcut, however, and simply want to know which is best then our experts recommend technical analysis.

Why cryptocurrency trading works best with technical analysis

Technical analysis is often better than fundamental analysis because there is it’s almost impossible to accurately determine the intrinsic value of a cryptocurrency. Cryptocurrencies can be tradable without any long history and they may not have even been adopted on a grand scale yet. Remember, cryptocurrency is an emerging market and most coins are start-ups or in their infancy. This means that fundamental analysis can be difficult and impractical for most traders.

Instead of guessing what a coin is worth, or what it may be worth in the future, you can use technical analysis to make trading decisions based around market trends and investor psychology. Predicting the value of a coin relative to its current value – as opposed to a magical number which it “should” be worth – is more practical and easier to measure.


Expert trading tips – The best indicators for cryptocurrency trading

Our experts have tones of tips to show you how to trade cryptocurrency. As mentioned, technical analysis is a great place to start, but what exactly does that mean? Here, our experts explain have explained some of the best indicators to use when learning how to trade cryptocurrency. Our experts all use these indicators themselves, so you can rest assured they’re important and valuable.

  • Relative Strength Index (RSI): This popular oscillator measures the speed and direction of price movements. RSI can help you to identify a breakout (when the price of a coin has surged or dropped too far from its ‘true’ value) and allows you to profit from this before the market corrects itself. This is a powerful tool in cryptocurrency trading, as the volatility of the market means breakouts are common.
  • True Range Breakout (TRABOS): This indicator allows you to track how much a coin has already increased or decreased in value within a certain time frame. For example, within a 15-minute or 24-hour period. You can then use this information to assess whether this is reflective of the coin’s appropriate price and profit from any corrections. The TRABOS indicator is very beneficial for high-frequency traders, as it generates far more trading signals than other indicators.
  • Moving Averages (MA): As cryptocurrency markets are volatile, and spikes in one direction or the other are common, a moving average indicator can help you to make smarter trading decisions. It is easy to misinterpret a spike or a drop as a reversal of a trend, especially if you are still new to learning how to trade cryptocurrency. A moving average indicator allows you to see the average price over a time frame so that you can avoid overtrading.
  • Volume indicators: Our experts can’t stress enough how useful it is to include volume indicators in your technical analysis. Often overlooked, volume indicators show you how many people are buying or selling bitcoin at a given time and you should check them before using other indicators. This is because a price movement only has momentum if there are enough people behind it. For instance, if a coin usually costs $100 but is currently selling at $300, that looks like the value of the coin has tripled. However, if only 10 people have bought it at this price, its value is still closer to $100.
  • Money Flow Index (MFI): This technical oscillator combines the benefits of the RSI indicator and volume indicators. Hence, it is sometimes referred to as the volume-weighted RSI. You can use this indicator to identify oversold and overbought zones.

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Frequently asked questions (FAQs)

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New Cryptocurrency Rules for UK Traders As of January 6th 2021, brokers operating under regulation from the UK Financial Conduct Authority can no longer offer their clients crypto-derivatives, including crypto CFDs. We advise all UK traders to avoid any brokers who offer crypto-derivatives and claims to have an FCA license. To avoid scams, check out our top UK brokers instead.