There's a lot of people talking about cryptocurrency, how profitable it is and how it's easier to make money with it than stocks, bonds, and other types of investment. Indeed, digital assets are profitable investments, but they also have a lot of complexity involved.
Currently, the most profitable activity within the crypto industry includes arbitrage, day trading, and swing trading, which are different techniques used by individuals with different goals and profiles. One might then naturally start looking for more information on each option, and what they entail.
In this article, you will discover the best methods to make money trading tokens. Be it that you decide to buy Litecoin, ETH, ADA, SOL, or any other cryptocurrency, this guide will show you the right steps to take.
Arbitrage
Practiced since the early days of maritime trade (15th-16th century) by merchants selling silk from China in Europe, arbitrage consists of buying a product at a low price in one place and selling it at a higher price in another.
In the crypto world, the simplest way to carry out an arbitrage happens when an investor transfers his cryptocurrencies from one exchange to another. Hence, after identifying an opportunity to buy at a low price and sell at a higher price, it's just a matter of transferring the funds.
Nevertheless, practicing arbitrage requires a lot of attention, especially as asset prices change very fast. Investors interested in arbitrage must constantly monitor the price on the exchanges they arbitrate, especially when there is a lot of volatility going on in the market.
The volatility of cryptocurrencies is precisely one of the main reasons that make them attractive for arbitrage, as it allows arbitrators to make good profits with daily pricing variations.
Also, the diversity of altcoins permits arbitrators to make considerable gains with the different conversion rates, both when compared to fiat currency and Bitcoin.
However, arbitrage involves a lot of risk. So, before entering the game, arbitrators must study hard - reading articles, books, and everything they can- and acquiring a deep knowledge, especially in subjects such as fundamental analysis, market monitoring, etc.
Crypto Day Trading
One of the favorite strategies of advanced traders, crypto day trading refers to shorter term investments. This way, a crypto day trader employs several strategies to profit with digital assets, ultimately assessing all his gains/losses within a 24h period.
Its name suggests, crypto day traders follow the market and its fluctuations daily. This way, they can decide the best time to buy or sell specific assets, taking advantage of price fluctuations to profit.
When opting for crypto day trading, you should be aware that you tend to make very little profit on most trades, as daily variations tend to be small. However, day traders can have if they manage to repeat a winning strategy for several days.
As with any other crypto trading strategy, it is essential to know fundamental analysis to predict the next market moves with better accuracy. Also, it is crucial to know that this strategy requires more time as you will need to keep an eye on the market all the time.
Swing Trading Cryptocurrencies
Although swing trading shares some similarities with day trading, the time window used in both strategies is quite different. While day traders operate within a 24-hour scope, swing traders can employ strategies that last for days, weeks, or even months.
Another difference is the percentage of rewards. While day traders typically do not surpass a return rate of 1% to 3%, swing traders tend to have much higher profits, considering they stay exposed to price fluctuations for longer periods.
Nowadays, the key strategies of most crypto swing traders involve tools such as limit orders or stop orders. Hence, swing traders can set a target price for selling or buying a specific asset, ensuring they will take advantage of the volatility at the right time.
While cryptocurrency trading is not generally recommended for beginners, novice traders may benefit more from swing trading strategies than day trading strategies.
In any case, it's fundamental to study a lot before entering the market as a swing trade, as it is necessary to have a deep knowledge of the crypto-financial market and, especially, the specific asset that you want to negotiate.
A good way to learn how to identify if a scenario is either positive or negative is learning the interpretation of financial charts, which also includes fundamental analysis. With proper knowledge and further interest in the subject, swing traders can profit huge numbers.
The Best Ways to Make Money Trading Tokens - Final Thoughts
Although it is not easy to enter the crypto market as a newbie, there is no right time to start. Nowadays, it's much easier for traders to buy and sell cryptocurrencies, so what are you waiting for?