Trading cryptocurrencies is now more popular than ever. People from around the globe have learned how to not only participate in the decentralized economy but prosper. While there are many options to accomplish this task, one of the easiest to start is trading.
Trading crypto isn’t for everyone as the profits are not guaranteed, but when mastered, it can provide access to ROI opportunities regardless of your location. Importantly, there is a learning curve when trading crypto. As such, you should only invest what you are willing to lose.
Types of Traders
There are a lot of different approaches one can select to begin trading. Day traders are crypto users who trade their holdings frequently. A day trader can make over 100 trades a day.
Each trade adds a little profit which in the end adds to their total ROI. Day trading isn’t easy as it requires you to have an in-depth knowledge of the market and the coins you trade. However, if done correctly, day trading is a great way to secure profits.
Another type of crypto user is weekly or monthly traders. These individuals take long positions. They will often trade into a coin for a week or longer before trading out. This strategy is less labor-intensive and overall less expensive than day trading because you accumulate far fewer fees. Additionally, trading using this strategy provides you with more flexibility in terms of your daily activities.
This trading strategy works in two ways. Most traders will have an entry and exit point. These points correlate to values for the projects they are joining. These users will conduct a risk assessment to determine just how comfortable they are with losses and pinpoint the exact amount of loss that would initiate an emergency trade out.
For example, let’s say you trade into Bitcoin at $63,000. Your goal is to trade out within the next 7 days or when Bitcoin hits $65,000. However, if the price of Bitcoin drops to $60,000, you determined that you will cut your losses and sell your holdings. Rather than just sitting around and watching the market, you can set up your account using limit orders to accomplish this task in a more efficient manner.
Using Limit Orders to Further Your Trading
A limit order is an order that executes at a preset price point. Notably, not every exchange offers limit orders as an option. At this time, it’s far more common to see this trading option on CEXs. In many instances, only the newest DEXs (decentralized exchanges) provide this service.
Using Limit Orders to Secure ROIs
One of the best ways to use a limit order to improve your trading results is to use it to purchase crypto. Monitor the project you want to trade into for a few days. Pull out the charts and look at the weekly activity. Notice where the lowest point in the week was and set your limit buy at this point.
The crypto market is volatile and it’s common for the weekly value of the coin to fluctuate sharply. Setting your buy order at the weekly low is a great way to lock in some easy profits. When the token’s value hits your limit buy, you will secure the trade and enter our position.
Now, you want to set up your limit sell order. In this step, you will need to once again look at the weekly chart to determine the highest value for the week. Set your limit sell at this point. If you successfully traded in at the weekly low via a limit order and set your limit sell for a little above the average, there is a good probability you will secure the difference between the two in profits.
Things to Consider About Limit Orders
There are a few things to consider when relying on limit orders. The primary thing to consider is that just because you have a limit order doesn’t necessarily mean it will fill. If the market moves too quickly, there is a possibility that your order will not get fulfilled as there was no trader willing to meet the terms within the market movements. Of course, this situation only occurs during very fast market movements. In most instances, your limit orders will fulfill consistently.
Stop-loss is a feature designed to protect you from major market downturns. This option allows you to set a price point that you wish to liquidate your holdings at market value. Stop losses are a powerful way to protect you from taking a major hit when the market begins to lose value quickly.
Cool Features About a Stop Loss
One of the best aspects of a stop loss is that it enables you to set a trigger price that will then kick in your order. For example, let’s use the same example from before regarding Bitcoin. You bought into Bitcoin at $63,000. This time you use a stop loss to protect your returns. You set the stop loss to place a sales order at $60,000 when the value of the coin hits $60,100.
Stop losses provide you with more consistency in terms of trading action because they can be set to place your order when the market hits the intended trading range. This strategy better ensures you trade completes versus a limit order in which there is still a chance that your order will get skipped if the market moves too fast.
You can also use a stop-loss order to secure a purchase price. For example, you could have your stop-loss set up to buy Bitcoin at $60,001 if the value of the coin hits $60,000. This strategy can help you to get the market positioning you desire with more consistency.
Improve Your Trading Strategies Using Limit and Stop Loss
Traders who master these strategies are sure to enjoy a more profitable and less labor-intensive trading experience. There are even multiple stories of savvy investors setting their limit orders super low in the rare chance the market or exchange they trade on suddenly has a flash crash. The main thing to consider is that the more trading tools you master, the better your chances to see returns.