Best Crypto Trading Strategies in 2024

Ben Beddow

Last updated: January 24, 2024 06:41 EST | 26 min read

Ask multiple traders which is the best crypto trading strategy and you’re likely to get multiple different answers. That’s because there is no one right way for everyone to trade crypto, and each trader needs to find a trading strategy that suits them. Your level of trading knowledge and skill, your risk tolerance, and the time you have to trade are all factors in which trading strategy will suit you best.

Here we dive into some of the most popular crypto trading strategies, covering what they entail and what type of trader they suit best. We’ll also serve up tips for creating trading strategies from technical analysis along with some tips that every crypto trader should know.

1. Day Trading

Day trading is the most popular strategy for trading cryptocurrencies, and it is common for those day trading crypto to also trade on other markets, e.g., stock markets.

Day trading involves buying and selling coins and tokens on the same day—also known as intraday trading—to capitalize on single-day movements and use the volatility of the crypto markets to make a profit.

Day trading crypto is not considered to be for the beginner trader as it requires understanding and using fundamental analysis, to understand the true value of an asset, and—most importantly in the cryptocurrency trading world—technical analysis, which involves understanding and interpreting chart patterns, price actions, and volumes to determine which way the price of an asset is going to move.

One of the advantages of crypto day trading, when compared to stocks and forex, is that the trader does not need a brokerage account to connect with and trade cryptocurrencies because they can use decentralized exchanges to do so. However, many traders prefer to use one of the best centralized exchanges because of the many benefits they offer their users.

While the above is the broad definition of day trading, many of the strategies below can also be classed as crypto day trading strategies if executed across a daily time frame. The best crypto day trading exchanges will allow you to carry out a range of day trading strategies with detailed charts and analyses to support your trades.

The online broker Capital.com breaks down the elements of day trading in this 13 minute video.

2. High-Frequency Trading (HFT)

High-frequency trading is exactly what the name suggests, making a large number of trades at a fast pace. These trades are created and executed by highly sophisticated bots that use complex algorithms to analyze a target part of the market for discrepancies in price and turn them into profits.

This type of trading focuses on speed and volume over range, meaning that the goal of this strategy is to trade lots of small opportunities very quickly to create big profits. The algorithms that run these trades can spot and execute trades in mili- or even microseconds (1 millionth of a second). In the time it might take a human to recognize one of these trades, if they even could, the HFT bot has already entered and exited the trade.

Nasdaq states: “It is estimated that 50 percent of stock trading volume in the U.S. is currently being driven by computer-backed high frequency trading.”

HFT is very popular in crypto because the market’s high volatility provides ample opportunity for these bots to take advantage of.

HFT trading is one of many crypto bot trading strategies, and it is mainly used by institutional investors. These types of bots are becoming more available to solo traders, but traders must be wary of scams purporting to offer highly efficient bots for upfront monthly premiums.

3. HODL (Hold On for Dear Life) – Buy to Hold

Hodling is a strategy—or the name is at least—that has emerged from the cryptocurrency markets and has been taken up by many who are long-term bullish on cryptocurrencies. It has also become a well recognized meme topic.

Hodl stands for Hold On for Dear Life and it is a simple yet effective trading strategy that involves buying assets and holding them until a predetermined price target is reached—making it one of the best crypto trading strategies for beginners.

The term originates from a Bitcoin Talk forum post from 2013 where the poster corrects their spelling of the word hold multiple times, before sticking with their misspelled version, hodl. In the post, the trader admits that they’re choosing this strategy because they’re a bad trader.

On the upside, the hodl strategy is easy and can lead to high returns. On the downside, hodlers have to grit their teeth through bear markets and times of high volatility, and could risk losing their whole investment should their chosen crypto go to zero—emphasizing the importance of conducting thorough research before executing a hodl strategy.

4. The Long Straddle

The long straddle is used when the trader expects market volatility to increase, but they’re not sure in which direction the market will move.

Executing a long straddle is a high risk strategy that involves purchasing call and put options with the same price and expiration date. Let’s break it down:

• A trader chooses an asset they think will increase in volatility, but they’re not sure in which direction the price will go. Typically this is around times of information release—the volatility created by Bitcoin ETF approval in January 2024 would’ve been excellent for a long straddle.
• A trader buys a call option (the option to buy an asset at a predetermined price at a predetermined time) with a set price and execution time.
• They also buy a put option (the option to sell an asset at a predetermined price at a predetermined time) for the same asset, with the same set price and execution time.
• If the asset becomes volatile, and the price change is larger than the range covered by the trader’s predetermined prices then they make a net profit when their options execute.
• If the asset’s volatility doesn’t increase by the execution time then the trader makes a net loss.

The long straddle is one of the more advanced crypto trading strategies on this list and it is mainly used by options traders. For a more in-depth explanation visit the Long Straddle page by Fidelity Investments.

5. Crypto Futures Trading

Futures, as defined by the investment bank Charles Schwab, are “contract agreements to buy or sell a specific commodity asset or security at a set future date for a set price.” These two parties do not know each other, and your side (or position) of a futures contract can be traded on the open market until it expires.

The buyer hopes the price of the asset goes up, higher than the price they’ve agreed to buy at, and the seller hopes the price goes down, meaning that they sell their asset for above market price once the contract expires.

When trading futures you don’t own the underlying asset. This is why traders and investors will often use futures to hedge against the assets in their portfolio. Futures are also used to speculate on the future price of an asset, and looking at the futures market can be a way of looking the market sentiment around an asset or commodity.

Crypto future trading strategies are for the more advanced trader, and are well suited to traders who pay close attention, and want to trade on, the crypto news.

6. Scalping

Scalpers aim to profit from small price changes in the price of a stock and make a high volume of trades, sometimes hundreds, throughout the day to make small profits on each—which, hopefully, outweighs their small losses and add up to an overall large profit.

Scalpers typically take advantage of the bid-ask spread for an asset, buying at the bid price and selling at the ask price. They must, however, stick to a strict exit strategy because one large loss can eliminate all the small gains they’ve made over that day.

The style of trading undertaken by a scalper means that they need the right tools and personal stamina to recognize and complete enough trades over a trading period to be profitable. Because of this, scalping is a strategy that is best used by the experienced trader, however, some will use it to supplement long term crypto trading strategies.

The US Forex broker IG offers explanations of several different scalping strategies traders can use.

7. Arbitrage Trading

Arbitrage trading is an investment strategy that, to be successful, employs high-frequency trading (HFT) bots to spot and take advantage of opportunities across multiple markets. As a result, it is typically a trading strategy reserved for the professional or well-experienced investor.

Arbitrage trading involves taking advantage of the price discrepancies for the same asset on two different markets. While the same asset, say Bitcoin, is available on two different markets, the prices on these two markets for this asset can be slightly different—check out the Markets tab for Bitcoin on CoinMarketCap to see this in action.

An arbitrage trader takes advantage of this difference, buying at the lower price and selling at the higher price, pocketing the difference as profit.

Such price discrepancies only last for an extremely short period of time. This is why HFT bots are needed to identify and take advantage of these discrepancies quickly. While these price discrepancies are small, conducting many trades over the course of a day adds up to a lot.

8. Range Trading

Range trading is an active investing strategy that involves finding a time frame on a chart, e.g. day, hour, 30 minutes, etc, where the price of an asset swings in a particular range between two price points, rejecting the higher one and bouncing off the lower one.

The chart below shows SOL trading against USDT on a four hour timeframe. The blue lines mark the resistance level of $100, and the support level of $91—and the price of SOL has touched both twice. The arrows show where the range trader might expect the price to go next, trading until they think the asset will break out of this pattern.

For security purposes, once they’ve bought their asset, a trader should always place a stop loss below the support level to protect their investment should the asset break out of this pattern to the downside.

Range trading isn’t typically done over longer periods, and is an excellent strategy for the beginner crypto day trader. The Fidelity Investments company dives into further detail about range trading and the indicators range traders can use.

9. The ‘Moon Bag’ Strategy

‘Mooning’ and ‘to the moon’ are slang terms that have emerged from the cryptocurrency community. When a project or coin is mooning that means it is climbing the charts at a dramatic rate. To say ‘to the moon’ is to state that you expect a particular coin to go to do this.

The moon bag investment strategy is an excellent one for the beginner trader, as it is a buy and hold strategy that is a little more active than the Hodl strategy discussed earlier as it involves profit taking.

Using the moon bag strategy, if a project you have invested in starts to moon then you take profits to cover your initial investment, along with some profits for yourself. This means that everything left in the market is pure profit.

You can now wait for it to moon again, without worrying about losing your initial investment. While waiting, many moon baggers will put their moon bag in a staking platform so they can earn passive income from it while they wait for it to moon again.

10. Index Trading

Indices are used to represent a basket of associated assets. Even the non-trader will know some of the world’s biggest indexes:

• S&P 500: Tracks the 500 largest companies on US stock exchanges.
• FTSE 100: Tracks the largest 100 companies on the London Stock Exchange.
• Nikkei 225:Tracks the 225 largest companies on the Tokyo Stock Exchange.

While the above indices group assets by their size, indices can group assets by function, industry, or geographic location.

Brokers and exchanges will create their own indices which traders can buy to expose themselves to all the assets in that index, without having to hold and trade each asset individually.

Investing in indices is a lower risk strategy as it increases a traders exposure to the market while also diversifying their investment to lower the risk. It is a great strategy for first-time investors who are unsure of where exactly to invest their capital in where to trade.

11. Crypto Bot Trading

Crypto bot trading is exactly what it says on the cover, using a bot to trade crypto. There are multiple different crypto bot trading strategies out there, and users can even design their own strategy if they have the technical know-how.

One of the biggest advantages of this strategy is that by utilizing bots for trading cryptocurrencies the owner can trade the crypto markets round the clock, meaning they don’t miss out on trades while they’re away from the markets. These bots are incredibly versatile and can be programmed with both complex and simple trading strategies.

However, using trading bots can often require a little coding knowledge, along with the ability to conduct technical analysis on charts to set the bot’s trading parameters.

These also bots need to be given access to the trader’s exchange account and portfolio of assets, so bot selection is very important, as a crypto trading bot is only as good as its program, and the provider of the bot needs to be trusted otherwise it could be a scam that drains your account. Check out our list of the best crypto trading bots to get started.

Developing a Crypto Trading Strategy Based on Technical Analysis

Technical analysis is the study and analysis of data gathered from past trading activities around a particular asset or token. Data points studied include price movements, volatility, trading volume, and trends, and can be studied over different periods: years, months, weeks, days, hours, minutes, or even seconds.

Each trader uses the data points available to them to build their own trading strategy that suits the way they want to trade, over the time frame they want to do it. Here we’ll cover a few different technical indicators and strategy techniques that traders can employ in their trading—and you can go here for the best crypto tools.

Trend Following

When a price continues to move in a certain direction it is called a trend. Prices can trend up, down, or sideways, and traders who can analyze the data to understand which way the trend is going can trade these trends—buying on the up, and selling as, or before, it goes down.

Trends can occur over all periods, from years to seconds, and how long a trader is willing to hold a position for will define what period they work with when following trends.

Traders who follow trends leave little to speculation, and use technical indicators like moving averages, volume, the relative strength index (RSI), and stochastic to confirm that a trend is happening, and then enter the market.

Trend following traders don’t typically set themselves price targets, and instead watch and trade the trend until it exhausts itself, i.e. the indicators point to the trend no longer continuing, and then take profits by exiting the market.

Trend following forms the groundwork of many trading strategies and is the best place to start when learning to trade cryptocurrencies.

Counter-Trend Trading

Counter-trend trading is not, as the name might suggest, trading directly against the trend. Instead, it involves trading the pullbacks the trader recognizes in the main trend.

These pullbacks may offer opportunity, but they also offer more risk to traders as they often have fewer indicators for their reversal than the main trend, and the main trend can be resumed at any time. This means that traders need to watch these more closely and incorporate proper risk management techniques like stop losses into their strategy.

To identify upcoming counter-trend trading opportunities, traders will look for support and resistance levels, reversal candlestick patterns, and use the RSI indicator to see if the asset is overbought or oversold.

Understanding Market Sentiment

This is the overall attitude of investors toward the particular asset in question. Market sentiment can be positive (bullish), neutral, or negative (bearish), and can help to indicate the future direction of asset prices.

Market sentiment can be gleaned from certain indicators, depending on which period they’re used over. One indicator in particular that can be used to gauge market sentiment is the moving average.

Market sentiment also takes into account the items that technical analysis and market indicators cannot show you, such as investor emotions around an asset, or news items published concerning an asset.

Reading the Fear & Greed Index

The Fear and Greed Index is a technical indicator that gives a nice number, from 1-100, that sums up the overall market sentiment in crypto.

• 50 is neutral
• 1 is extreme fear
• 100 is extreme greed

When the index is below 50 the market is expected to go down, as people are selling because of fear. When the index is above 50 the market is expected to go up, as people are buying because of greed.

Those who are long-term bullish on cryptocurrencies interpret a Fear rating as a buy signal, as crypto is getting cheaper, and Greed as a sell signal, because more people are aping into the market.

The Fear and Greed Index takes numerous metrics into account, including volatility, trading volume, price momentum, bitcoin dominance, and social media data.

The Bitcoin Dominance Ratio

Like the Fear and Greed Index, the Bitcoin Dominance Ratio is another indicator of market sentiment. Bitcoin has long been deemed digital gold, and this means that it acts as a safe haven asset like gold, but for the crypto market.

When bitcoin’s dominance is increasing, along with the bitcoin price, this is typically determined to be a signal to buy bitcoin as money is going into bitcoin and, potentially, out of altcoins.

When bitcoin’s dominance is decreasing, along with the bitcoin price, this is typically determined to be a signal to buy altcoins as it signals confidence in the wider crypto market.

While helpful, the Bitcoin Dominance Ratio has become a more complex indicator as the altcoin market has evolved and eaten into bitcoin’s dominance, which currently stands at 49.8%.

Social Media

Social media is an integral part of today’s society, and as cryptocurrencies are digital by nature their communities live and communicate online.

While each project often has its own channel, e.g., Discord or Telegram, for intra-project communications, many users and, more importantly, trader post their sentiments in public channels.

Specifically, Google Trends, trending topics on Reddit, and trending topics on X (Twitter) can be used to gauge social sentiment around particular coins and, combined with technical analysis, can be used to predict and confirm market moves.

Studies have also been done that show a positive correlation between including social media indicators in a price change prediction and improving the accuracy of the prediction.

Why Should I Use a Trading Strategy in Crypto?

Crypto trading strategies are an essential part of the successful crypto trader’s arsenal. Without a trading strategy, you are effectively trading blind, in a hit-and-hope method that is most likely going to end badly. Here’s why you should implement a crypto trading strategy:

• Implementing a crypto trading strategy gives you an organized framework for researching, planning and executing your trades
• This framework can help to prevent you from making impulsive decisions when prices jump or dump, or news events and social sentiment (from the internet and your friends) are ringing all around you.
• Using a trading framework helps to mitigate the risks associated with trading the highly volatile cryptocurrency market, keeping you focused on your goals and the goals of the trades you’ve already set up.
• A trading framework ensures that you have an exit strategy, preventing you from getting too greedy, and potentially losing your gains to the market in a moment of emotion.

All trading strategies help to cement the above points and protect your goals as a trader, not only increasing your chances of being a profitable trader but also helping you to reduce your losses. No trading strategy is set in stone, and they evolve with the markets and your continued learning on your trading journey.

5 Strategy Tips That Every Successful Crypto Trader Should Know

Each strategy has its own unique elements, meaning that it comes with its own tips and hints. However, there are some crypto trading tips that can be universally applied to traders of all levels, trading any strategy. But first, the golden rule of trading: Never invest more than you can afford to lose.

Have Clear, Predefined Goals and Limits

Ultimately, making a profit is the goal when trading, but to do so a trader needs to know how they’re going to do that within their strategy. To do so they need to plan how that formula is going to operate.

As with anything in life, setting clear goals within a strategy is integral to creating a formula for success, as it helps to stop yourself from pushing too far and going outside the limits of your strategy.

Employ Risk Management Techniques

Unlike the regular stock market, which runs 9–5, 5 days a week, the cryptocurrency market trades 24/7/365, which, means wild price moves can happen at any time of the day or night—including while your not watching.

As a result, it is imperative that a cryptocurrency trader incorporates stop-loss and take-profit levels into their strategy.

• Stop-Loss: A stop-loss prevents you from huge losses by exiting your trading position before things get nasty. Stop losses are typically set around 5% below your entry price (the price you bought the asset at) so that, if the asset does tank while you’re not looking your losses are contained to that amount.
• Take-Profit: A take-profit level is set so that you automatically sell an asset when it hits your target price—reaping the rewards of your trading. This means you don’t need to be watching the markets all the time and that you don’t miss that moment while you sleep.

Keep Emotion Out of It

Trading on emotion, or “feeling”, is one of the biggest mistakes beginner traders will make. Not only does trading on emotion often lead to error, but it also leads to annoyance, which can result in more emotion-based trading—which is done on stronger emotions and can lead to bigger errors.

Stick to a trading strategy and trust the cold logic of your mind without letting the hot blooded temperament of your emotions foil your plans.

Do Your Own Research (DYOR)

Along with “not your keys not your coins”, DYOR is one of the long held mantras of the crypto space. With no regulation on who can create a token or project and shill it to users through bots and fancy websites, it is up to the user to discern what is real and what isn’t.

Conducting your own research includes thoroughly researching a coin or project before investing your money in it. It also includes properly planning out your strategy so you’re confident and ready to stick to it when you start getting cold feet.

Conducting thorough research on the asset and your strategy will help you to keep emotion out of your trading when crunch time comes.

Diversify Your Investments

No one should keep all their eggs in one basket, and diversification is the key to long term survival, which is key to long term success. This doesn’t just mean diversifying within crypto—maybe holding some layer 1 coins, some DeFi tokens, and some metaverse tokens—but also diversifying amongst other assets.

Cryptocurrencies might one day be rejected by governments around the world, or the highly volatile market could flash crash at any time, leading to catastrophic losses. Hedge against this by also investing in more traditional asset classes.

Final Thoughts on Crypto Trading Strategies

As mentioned at the beginning, if you ask multiple traders which of the many crypto trading strategies is the best you’re highly likely to get multiple answers. This is because each person tailors their crypto trading strategy to suit their own skills, strengths, and knowledge.

Building a bank of knowledge about the underlying assets you’re trading, along with a solid knowledge of how to conduct a technical analysis are great first steps down the road to trading cryptocurrencies. One of the most important things with trading any asset, especially in the volatile markets of crypto, is to ensure that you’re not in over your head and are trading a strategy that suits your skill level.

Intermediate and advanced trading strategies typically involve a much higher risk level and require the trader to be able to make quick and confident conclusions about the charts they’re reading—skills which come from experience.

Beginner crypto trading strategies, on the other hand, come with less risk and allow for more time between potential trading actions, giving the trader more time to find the cryptocurrencies with the highest potential, make risk assessments, come to solid conclusions about their trading decisions, and put in their stop loss and take profit levels. This extra time and knowledge taken to build a solid trade means that the trader is less likely to bring emotion into their trade or overstep the limits they’ve set themselves.

Finally, traders and investors of all levels, no matter what assets they’re trading, should always remember the golden rule of trading: Never invest more than you can afford to lose.

References

• YouTube.com: Day Trading Explained for Beginners!
• Nasdaq.com: High Frequency Trading (HFT)
• Bitcointalk.org: I AM HODLING
• CoinDesk: Bitcoin ETF Debut Serves as a Lesson for Ether ETF Speculators
• Fidelity.com: Long Straddle
• Schwab.com: Understanding Futures
• Ig.com: Four Simple Scalping Trading Strategies
• Harvard Business School: What is Arbitrage
• Coinmarketcap.com: Bitcoin Markets
• Fidelity.com: Range Trading
• YouTube.com: Moon Bag Strategy Explained
• Yahoo.com: List of World Indices
• Coinmarketcap.com: Categories of Cryptocurrencies
• Coinmarketcap.com: CoinMarketCap Index
• Coinmarketcap.com: Bitcoin Dominance Chart
• CBSNews.com: Why Gold is a Safe-Haven Asset
• Cornel University: Technical Trading and Social Media Indicators

FAQs

1. What Are the Best Crypto Trading Strategies for Beginners?

For absolute beginner crypto traders, the “HODL” and “moon bag” strategies are the best way to start their trading journey. For those with some understanding of technical analysis, or those looking to learn more and improve their trading skills, range trading is the best strategy for beginners to start actively trading the markets. Finally, for beginners looking for exposure to numerous crypto assets without having to organize a portfolio, index trading is the best way forward.

2. What Are the best Advanced Crypto Trading Strategies?

Which advanced crypto trading strategy you use is dependent on your risk tolerance levels, as well as your personal skill set and overall intentions with your trade. Traders who prefer options should consider the long straddle trading strategy, while those with in-depth knowledge of crypto and who want to trade on news items and market sentiment should trade crypto futures.

Advanced traders with superior market analysis skills and the ability to stick to a strategy should use the scalping trading strategy, while those who are looking to actively trade the market using fundamental analysis should consider day trading crypto. Finally, those with a knowledge of both code and technical analysis should consider arbitrage and high-frequency trading, using crypto trading bots.

3. Is Using a Crypto Trading Strategy Profitable?

Crypto traders who utilize a trading strategy are more likely to be successful, i.e. profitable, than those who don’t use a strategy. Which strategy you use is dependent on your risk tolerance, personal skill level, and knowledge of technical analysis.

4. What’s the Best Crypto Trading Strategy?

The best crypto trading strategy varies from person to person, according to their personal outlook, risk tolerance, and skill level. However, those who are bullish on cryptocurrencies long-term would say that the hodl and moon bag strategy, as some of the simplest, are some of the best and most effective strategies for traders to use.

5. Which Cryptocurrency is the Best for Trading?

The best cryptocurrency for trading is one that is established in the market, with higher volume and lower volatility, as these attributes allow traders to use technical analysis and build trading strategies around those tokens. Those that fall into those categories include top ten coin like bitcoin, Ethereum, and BNB.

About the Author

Ben Beddow

Ben is a freelance writer with almost a decade's experience writing across multiple industries. He has a passion for, and great understanding of, cryptocurrencies and the underlying blockchain technology, and strongly believes in their ability to change the world. He has been writing on the topic of cryptocurrencies and blockchain technology for over three years.

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