Cryptocurrencies are digital currencies that work on decentralized systems, which are controlled by no central authority. These virtual currencies are changing how people use money every day.
Currently, there are more than 2000 types of cryptocurrencies worldwide, with price variations some as high as 10000%. Every currency possesses a different cap value at present, along with some having no value but having the potential of giving considerable profits in future.
Crypto trading strategies in Pakistan
Crypto trading strategies vary from individual to individual depending on their financial situations or money requirements at a specific time or in the future. There is no fixed strategy that works for everyone all the time. Different traders have different approaches based on market fluctuations and their risk appetite. Here are some popular crypto trading strategies used in Pakistan.
Follow trends
Trends play an essential role when trading cryptos; therefore, it’s better to follow trends and make decisions accordingly. For instance, it is said that buy when there is blood in the streets and sell when everyone wants it. This strategy can be successful if you can understand previous price trends of a cryptocurrency that you want to trade for profitable gains.
Invest during a crisis
Another popular crypto trading strategy is investing during a crisis. You should find out the reason behind the current decline in cryptocurrency prices and invest at such a time when a trend reverses, and prices go up again. After every few months, it usually happens that all cryptocurrencies hit a low, which brings them back to normal value or even higher than before.
In addition, this strategy also helps in hedging risk by identifying future risks beforehand so that traders avoid making mistakes. Generally, calm investors make profits while traders who get greedy make losses.
Swing trading
One more way to trade cryptocurrencies is swing trading. It is a method of trading that takes advantage of medium or low volatility periods in the market to generate income for investors holding positions over several days.
Day traders are usually individuals trying to catch short-term price movements by opening and closing their positions quickly over a day, though they sometimes hold trades overnight. They generally seek small but frequent payouts on their investments.
Arbitrage
Perhaps one of the most effective strategies regarding cryptocurrencies is arbitrage. Arbitrage is purchasing an asset in one market and then selling it immediately in another market at a higher price, thus taking advantage of the temporary price difference. However, it is risky because of the low volume of exchanges.
HODL
Another effective strategy regarding virtual currencies is ” HODL “, which refers to the act of holding onto a cryptocurrency, not selling it for long periods. This philosophy suggests that if you keep your cryptocurrencies for a more extended period, you will be able to sell them at much higher prices in future, so why take risks by selling before the price goes up?
Risks involved with trading crypto
As with any investment, there are always potential risks while trading cryptocurrencies. Cryptocurrencies are highly volatile, and no one knows when they can go up or down. Therefore, traders must think about their risk appetite while investing money in these digital currencies. It’s better to purchase cryptos through the dollar-cost averaging method, which reduces the risk of losing all your money in just one go.
Finally
This is a general overview of various popular crypto trading strategies and how they work. Before using any strategy, it’s better to do lots of research and analysis before carrying out transactions or making investments through virtual currencies to avoid losses which can be huge at times. New traders who want to buy cryptocurrency in Pakistan should contact a reputable online broker from Saxo Bank and trade on a demo account to practise different strategies before investing real money.