CRYPTOCURRENCIES TRADING STRATEGIES

WHAT IS CRYPTOCURRENCY

Cryptocurrency is an internet-based medium of exchange which uses cryptographical functions to conduct financial transactions. Cryptocurrencies leverage blockchain technology to gain decentralization, transparency, and immutability.

TRADING STRATEGIES

Trading strategies are created to provide objectives for traders to earn more with lesser capital just like how a successful business should operate. There are multiple of trading strategies that are being presented to the public lately, but what we’ve noticed is that most of these so-called “strategies” are just plain common sense; something that is hard to come by nowadays.
Real trading strategies should be based on quantifiable specifications that can be analyzed based on historical data that can be used for future trading scenes. Finding the right strategy to help traders earn more is the first step of the ladder to success.

similarly, Investors use Fundamental analysis and technical analysis to determine stock value as well as stock performance predictions.

FUNDAMENTAL ANALYSIS

Fundamental Analysis is most generally utilized among financial exchange brokers, especially the individuals who put resources into individual stocks. This specific technique centers around earning per share (EPS), price-to-earnings (P/E) ratio, dividend yield, and debt-to-equity ratio.

The primary target of fundamental analysis is to decide the intrinsic value of the individual stock. If the cost of the stock is trading below its intrinsic value, a trader might want to purchase the stock. Investors utilize fundamental analysis with other resource classes, for example, bonds, products, and elective ventures. Despite the advantage class, the goal is consistently the same – to decide the intrinsic value of the underlying asset.

The challenge with applying fundamental analysis to cryptocurrencies is that cryptocurrencies are not corporations. They do not have public financial statements. Their viability depends on the strength of the community in the network.

You can begin fundamental analysis by seeking each of the coins projects whitepaper, which will outline goals and functionality. You can also look for content on the cryptocurrency’s blog or other community forums, like Reddit.

TECHNICAL ANALYSIS

Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories. For any security with historical trading data such as cryptocurrencies, forex, commodities and stocks , you can apply the Technical Analysis.

When you take existing, real-world data from the cryptocurrency market and attempt to plot it forward in the hope of predicting where it will go next, you need to use technical analysis. In the best case scenario, this allows you to forecast when the market will be bearish (trending down) or bullish (trending up). If predicted correctly, this allows you to buy when the market price is low (buying on the dip) and sell when it is high in order to make a profit.

PROS OF TECHNICAL ANALYSIS

1) Data required are easily available and reliable.

2) Easily understood with some basic knowledge.

3) It gives a idea of entry and exit price.

CONS OF TECHNICAL ANALYSIS

  1. Not effectively use the technical analysis for the long term investment

2) It requires years of experience to exactly determine the right movement of the market.

WHY DOES TECHNICAL ANALYSIS WORK

A chart of prices and volume represents all the past decisions taken by market participants (buying and selling). This information will, in turn, affect future participant decisions in two ways:

  • Psychological: What you did in the past affects how you approach future situations. For example, many traders tend to focus on the price at which they bought an asset, and if it declines, they want to sell when it reaches break-even again.
  • Reflexive: Some traders identify trends and chart patterns which are common, and act accordingly (buying or selling).

WHICH IS BETTER?

For decades, fundamental analysis was the only investment method that was given any credibility. That has changed as the advent of high-speed computing has made technical analysis easier and more widely available. Many large investment firms use black box trading, or computer modeling, to determine their entry and exit points.

That means that many of the largest market players are making their trading decisions based on computer algorithms. In fact, some estimate that computerized trading represents up to 70% of the volume on exchanges today. Consequently , Like it or not, your investments are moving based on technical factors as much as fundamental ones. The markets have changed, and we need to change our strategies with them.

The best approach to investing likely involves some combination of fundamental and technical analysis. Consequently , choose stocks or sectors that have strong fundamentals and then use technical analysis to help decide when to buy or sell them.

Other Article : Initial Coin Offering (ICO).

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