Crypto trading has proven profitable for traders who optimize their investments. Join us as we explore how to maximize profits from every crypto transaction.
If you’ve invested in crypto transactions before, you probably have a concept of what it is. However, you should become acquainted with the lesser-known aspects of the cryptocurrency industry.
Understanding the virtual asset you’re investing in is critical for any investment, especially volatile cryptocurrency ones.
Cryptocurrency is a decentralized digital money built on blockchain technology.
Blockchain technology uses a distributed ledger to validate crypto transactions, which all computers must verify on a decentralized network.
Being decentralized implies no central point from which a database may be accessed. Instead, the entire network is disseminated worldwide, resulting in a decentralized network of systems.
Crypto’s decentralized structure makes it far more anonymous and safe. Crypto transactions are frequently faster and less expensive because no intermediaries (middlemen) are involved in the crypto transaction process.
This strategy contrasts sharply with the banking industry, which relies on intermediaries to facilitate financial transactions.
Bitcoin is the first and best-known cryptocurrency, but it is far from the only one. In 2021, more than 10,000 different cryptocurrencies were traded in various markets.
This can make getting started with crypto transactions intimidating, but there are plenty of chances for even the most inexperienced crypto trader or investor.
Understanding Crypto Trading
Cryptocurrency trading is similar to other forms of Trading, such as stocks, commodities, and FX. Traders seek to profit by predicting the price changes of volatile digital assets.
They use a cryptocurrency exchange to convert fiat money or other digital assets for cryptocurrencies, buying when the price is low and selling when it is high.
Trading, as we know it in stock markets, has been since the 1600s, but cryptocurrency trading began in 2009 with Bitcoin, the first and still most well-known cryptocurrency.
Since then, numerous cryptocurrencies with distinct properties have developed and traded.
With cryptocurrencies such as Bitcoin increasing in value quickly, crypto investors will benefit from having a backup plan and considering what to do with their cryptocurrency gains.
Wise investors understand they should not hang on to cryptocurrencies for too long, as a large correction could wipe out their gains.
As a result, it’s always a good idea to have a firm plan for what to do after a huge cryptocurrency gain. Spending money on a car or another luxury item is tempting, which may be somewhat justified.
However, realizing that these assets (cars, luxury bags, clothing, etc.) devalue over time is vital.
Rather than spending all of your cryptocurrency earnings on depreciating assets, try reinvesting them in other business and investment options.
After a considerable crypto win, a little foresight and planning can let you take your crypto gains and reinvest them for an even bigger return in the future.
Knowing when to join and exit markets to maximize profits and minimize losses is a secret to successful crypto transactions. Given market unpredictability, a trader’s decisions can significantly impact how much profit (or loss) they make.
Altcoins rise alongside Bitcoin, allowing investors to profit handsomely. However, it’s critical to understand when to take profits.
Some traders set themselves up for a loss by being greedy and expecting another tenfold increase.
Don’t be like them: develop a crypto transaction profit-taking strategy and hunt for intelligent reinvestment opportunities after the bull run stops.
As markets proceed, a bull market will most likely be followed by a bear market sooner or later.
How to Maximize Profits From Every Crypto Transaction
By implementing these strategies, you could maximize each of your crypto transactions.
- Moving average crossovers
- Event-driven trading
- Swing trading
- Scalping
- Relative strength index (RSI)
- Dollar-cost averaging
- HODL
- Yield farming
Moving Average Crossovers
Trading moving average (MA) crossovers necessitates understanding MAs and crossover trading tactics.
Let’s start at the beginning: a moving average is a lagging technical indicator that combines a financial instrument’s price points over a certain period and is divided by the number of data points to produce a single trend line.
This single trend line allows you to forecast the present trend while mitigating the influence of unpredictable price surges.
It also allows you to assess the support and resistance levels by analyzing past price movements.
So, how do you apply this indication to your crypto transaction strategy? One of the most common applications of the moving average is known as ‘crossovers.’
A price crossover, also known as a crossover, occurs when the asset’s price crosses above or below a moving average, indicating a probable trend change.
To trade a moving average crossover in cryptocurrency markets, you must wait for the price crossover before going long or short on the cryptocurrency in question, which can be done using a financial instrument such as CFDs.
Another method is to use two moving averages on a chart, one short-term and one long-term. When the shorter MA crosses over the longer MA, it indicates that the trend is going upward.
This is known as a golden cross and can be interpreted as a buy signal. When the shorter MA crosses below the longer MA, it signals a downward trend known as a death cross.
Event-Driven Trading
A strong media presence for a single coin or crypto exchange might impact cryptocurrency prices.
This cryptocurrency trading technique primarily focuses on taking advantage of these ‘events.’ It is a shared trading approach among inexperienced traders.
News coverage of current events can affect the pricing of various assets, including FX pairings, stock indices, commodities, and cryptocurrencies.
This influence is not merely speculation; many expert traders will exploit it.
Usually, you’d wait until the market forms a consolidation pattern before an expected news release (such as an earnings report) and act as soon as the market breaks out.
However, due to cryptocurrencies’ volatility and unpredictability, you may need to wait until such a press release is issued before Trading.
Simply put, you would buy your preferred cryptocurrency when positive news is announced and sell it when negative news is released.
Swing Trading
Swing Trading in crypto transactions is a tactical strategy designed to capitalize on the market’s short to medium-term trends.
This method works exceptionally well in crypto transactions because of the market’s high volatility and frequent price fluctuations.
Swing traders often hold positions for a few days or weeks, taking advantage of trend patterns and market momentum.
The key to successful swing trading is precise timing and a thorough comprehension of market indications. Traders frequently employ moving averages, RSI, and MACD to determine probable entry and exit positions.
They search for signals of a rising or negative trend in a cryptocurrency’s price and plan their crypto transactions accordingly, hoping to maximize gains from these moves.
Scalping
In crypto transactions, scalping is opening positions in response to a trend, frequently entering and quitting the market numerous times in a short period as it develops.
Individual trades are held for only a few seconds or minutes at most, making it one of the shortest-term strategies.
This trading approach is particularly effective for busy day traders. Scalping focuses on minute-by-minute price swings that are determined by quantity. As soon as the trade becomes profitable, you will exit it.
There is no ‘waiting for the market to show patterns’ since you must act quickly and stop deals that are losing money immediately. Scalping is more effective when the market is turbulent.
When scalping, consider using tear-off tickets. They let you put up a position in the opposite direction so that you are ready to exit, either reaping profits or limiting your losses.
Remember that scalping might be risky if you place several trades quickly. It is critical to manage your risks properly.
Relative Strength Index (RSI)
A technical indicator called the relative strength index (RSI) can be used to determine market circumstances such as momentum, overbought, and oversold areas.
Additionally, it can be applied to draw attention to concealed and divergent signals in the financial markets. Trend trading is another name for this kind of Trading.
The ratio of profitable to unprofitable price closures is calculated and displayed as a percentage in the RSI.
It is computed with the following formula:
100 – (100 / [1+RS]) is the RSI.
A smaller percentage usually indicates an oversold position, whereas a greater percentage indicates an overbought position. The indicator is shown as a percentage out of 100.
What is the greatest crypto transaction strategy for RSI, then? That would rely on your trading strategy and level of risk tolerance. The RSI can trade long and short signals when the price is rangebound.
However, since markets tend to move in trends, you may use an RSI indicator to identify good times to enter or exit the market, which can help you decide when to act.
Dollar Cost Averaging
Dollar-cost averaging, or DCA, is a crypto transaction technique that may interest you if you seek one without using indicators. DCA is a well-liked approach used by both novice and experienced traders.
You split your investments into smaller sums instead of putting all your money into one asset.
These sums are then allocated over a specified time and are consistently invested on a specific day and time each week—and only on that day and time.
How does this appear when put into practice? Suppose you decide to invest in crypto.
You determine that a DCA plan will be the best course of action after allocating $15,000 for this purpose. The first sum would then be divided by the weeks you want the strategy to run for.
For this example, let’s assume you want to invest $15,000 over six months. The first sum would then be divided by 24 (the number of weeks in six months), yielding $625 each week.
You invest your $625 in crypto every Tuesday at 2:00 PM for the following six months or until your initial investment is gone.
Why make these kinds of investments? When you purchase an asset at regular intervals, the effects of market volatility are lessened.
As a result, you usually end up with a larger final investment than if you had invested all of your money at once.
It’s crucial to remember that to utilize this method to its fullest, you must trade the particular currency on an exchange; with us, however, you are limited to trading CFDs as derivatives.
HODL
Fun fact: When someone spelled “hold” incorrectly on a cryptocurrency forum, some people mistook it for “hold on for dear life,” which is how the word “HODL” was born.
In the crypto world, it now refers to both of those concepts. Holding cryptocurrency and taking profits are reasonable options depending on your portfolio and goal.
HODLing is excellent if you have a sizable portfolio you don’t expect to sell anytime soon. Alternatively, you might stake your assets to increase your wealth, mainly if the cryptocurrency you’ve selected is more stable and profitable—Ethereum, for instance.
Since cryptocurrency users can now stake their ETH holdings, investors expect Ethereum to perform better during impending weak markets as it transitions to a PoS model.
Even if your investment decreases in terms of money, hanging onto cryptocurrency during a bear market can still be a good idea because you’ll effectively be carrying the same bag.
Yield Farming
Consumers can profit similarly to banks on specific decentralized finance (DeFi) platforms and decentralized exchanges (DEXs) by directly involving the loan process.
By connecting their cryptocurrency wallets, users can commit money and tokens to a lending pool alongside other users through yield farming strategies.
Afterward, that pool is utilized to make interest-and-fee-only loans to other people.
Users may receive compensation for participating in the loan process or interest based on the amount they deposit or maintain in their account.
Three variables determine how much money is made from lending cryptocurrency: the length of the loan, the amount, and the interest rate.
The three leading lending platforms in 2023 were Balancer, Curve, and Uniswap.
Additionally, many DEXs offer liquidity pools where customers may place their cryptocurrency bets. Other users can benefit from price fluctuations by using these pools to facilitate speedier crypto transactions.
Typically, liquidity providers get paid a portion of the cryptocurrency they have locked away in the pool.
You may yield farms on exchanges like Uniswap, Pancakeswap, and Sushiswap by contributing liquidity.
How To Make Profits From Crypto Without Selling
If you would prefer to go a different approach and make money in cryptocurrency without selling, here are several alternatives:
- Peer-to-peer lending
- Arbitrage
- Digital interest and dividends
- Act following a plan
Peer-to-peer lending
Peer-to-peer (P2P) lending is an excellent choice if you’re searching for a constant return on your investments without sacrificing much security. This is especially relevant if your wallet contains a sizable quantity of cryptocurrency.
P2P lending, based on cryptocurrencies and primarily uses smart contracts, is based on Ethereum. You may safely lend your cryptocurrency using P2P lending and receive a guaranteed return of 10% to 20%.
On sites such as Maker, where developers and company owners may obtain a safe source of funding without having to sell their cryptocurrency holdings, ETH lending is permitted.
Arbitrage
The cryptocurrency market is unaffected by outside regulations, so price fluctuations between exchanges are somewhat typical. Arbitrage is one-way cryptocurrency holders can profit from this extra revenue.
Arbitrage is one of the best ways to profit from price disparities between several exchanges in cryptocurrency. Choose a currency that interests you, then compare the rates across various exchangers.
On certain exchanges, you should notice deals at a significant discount.
Find another exchange where the same currency is traded for more money, take advantage of the deal, and sell it there.
The only thing that will have profited you is the price differential between the two. There can be a 5% to 40% price variation between discount and premium options.
Digital Interest and Dividends
Prominent cryptocurrencies like NEO, KuCoin, and BTMX offer dividends to their owners.
Holders can generate substantial sums of money as passive income by holding these cryptocurrencies in their portfolios. For additional details, see our piece on cryptocurrency dividends.
Also, certain cryptocurrency services, like StormGain, provide interest in the cryptocurrency that a user utilizes the most.
Act Following a Plan
“The secret is to hop off the elevator on one of the floors on the way up and not ride it back down again,” said American businessman William J. O’Neil.
Although O’Neil intended it for the stock market, profiting from cryptocurrencies can also be done using the same strategy.
A plan to guide your actions is crucial, regardless of your approach: taking money off the table, letting your winnings keep growing in the hopes of an even higher return, etc.
Thinking about collecting your cryptocurrency winnings might be an excellent place to start if you ask yourself any or all of the questions above.
Summary
Cryptocurrency trading provides several strategies for different investor types and goals.
Whether you want to accumulate money over time or profit from short-term market swings, understanding and selecting the proper approach is vital for success in cryptocurrency.