The market’s trends are cyclical. When a currency pair or cryptocurrency is hot, it has a long and strong trend. At times, trends reverse and become monotonous.
Staking crypto implies that your tokens will earn interest, and all you have to do is hang on for the long haul.
While this is a relatively new technique in cryptocurrency, purchasing and keeping an asset to earn interest is not a new idea and has been employed in FX for decades. The connecting thread between hot and cold trends is that the tactics used to trade them in FX can also be utilized to trade them in cryptocurrency. We will go through five FX methods that you may also employ in crypto.
5 Forex Trading Strategies for Crypto Trading
Forex traders are quite skilled at reading charts to identify patterns. Some trends are very long, while others are only sideways. A skilled trader will assess market conditions and implement a strategy that is appropriate for that market setting.
Fortunately, these tried-and-ttested FX methods may also be implemented and utilized in cryptocurrency. Let’s look at five prominent FX techniques and see how they might be applied to cryptocurrencies.
Strategy 1: Trading Breakouts on Metaverse Crypto
In general, there is a currency in a strong trend inside FX. The same thing happens with cryptocurrency. For example, metaverse crypto has been a very popular trend in recent months. Traders rushed to learn more about the metaverse and which coins serve these communities.
Once these hot trends are found, a proven and established approach that can be used to the metaverse crypto or other hot trends is known as “trading breakouts.” The trader will place horizontal resistance above a recent or all-time high. They buy when the market breaks above the barrier level. The advantage of this method is that it permits the market to be pushed higher by the strength of the hot trend.
Strategy 2: Passive Income
Prior to the 2008 Great Financial Crisis, carry trading was a common FX strategy. FX traders would sell the lower interest currency and acquire the higher interest currency. FX traders would earn interest on the difference in interest rates between the two currencies.
Cryptocurrencies also offer a similar form of passive income. After purchasing cryptocurrency, you can stake it to generate income. Regardless of whether the crypto’s value rises or falls, your investment earns interest in the native token. If the value of the token rises, you are earning interest on an appreciating asset. If the token’s value falls, the interest you earn will help cover some or all of the capital loss.
Strategy 3: Day Trading Smaller Trends
Crypto, like forex, is traded around the clock. Day traders begin their day by analyzing the news and determining what major patterns are emerging. After analyzing the charts, these traders will choose their entry and exit positions based on the charts’ shorter-term patterns.
Day traders will often open and close trades within a day, if not within two days. Their purpose is to repeatedly repeat a process, picking up bits and pieces of a wider trend to increase their account balance. As a result, a day trader is primarily interested in trends that will persist for several minutes to hours.
Strategy 4: Swing Trading
Swing trading is a popular first step for newbie FX traders. Swing trading has a somewhat higher margin for error than day trading. This is because traders do not have to babysit the market and watch every tick. Swing traders can establish their entry and exit points before switching off the monitor.
Swing methods can also be used when trading cryptocurrency. The technical indicators employed in a swing strategy, such as the MACD, RSI, or Stochastic, will be used in the crypto markets in the same way. Because cryptocurrency trades 24 hours a day, it is beneficial to develop a strategy that allows you to break away from the computer in order to maintain your attention and avoid burnout.
Strategy 5: Range Trading
Breakout trading is the inverse of range trading. The market can sometimes trade sideways with no discernible direction. For currency traders, this could be the result of two countries that are strong trading partners and are experiencing comparable patterns. Sideways trading could also be caused by illiquid trading hours when trade volume is low.
Ranges will evolve within crypto as well. Following a lengthy and powerful trend, the market may trade sideways to consolidate profits. Long traders will be frustrated by the sideways consolidation, causing them to close out, paving the stage for the next major surge. Furthermore, there are moments during the day or on weekends when trading volumes are low, resulting in a shortage of buyers or sellers to push the market.
