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Retail trading without a plan and set strategy is little more than glorified gambling. While this has dominated the crypto space since the beginning, things are changings as big money investors continue to enter the space. Financial institutions are pouring into the crypto space, and we’re starting to see an evolution in crypto investing strategies backed by analysis, data and experience in other sectors.
Private investors can use that knowledge with their own portfolios and use the sharpest strategies in the world of finance to boost their profits on Binance and other crypto exchanges.
So, what are the best crypto trading strategies in 2024?
Dollar-Cost Averaging (DCA)
The Dollar-Cost Averaging (DCA) strategy is a safe strategy for long-term investors who want to avoid the market’s highs and lows and focus on solid returns.
Choose a fixed amount to invest in a set token at regular intervals over a set time. Depending on the coin’s and market’s volatility, that can be weeks, months or years.
For instance, in the early days of Dogecoin, social media posts and support from celebrities sent the price rocketing one week before the price fell dramatically. So, it showed significant volatility from week to week. Well established coins tend to be more stable, so a solid DCA investment strategy for those could involve investing the same amount on a set day each month.
Binance ran a Dollar-Cost Averaging experiment recently to show how effective this strategy can be. As a test, $100 monthly split was funded evenly between the coins listed on Binance’s CMC Cryptocurrency Top 10 Equal Weighted Index. The experiment lasted for 3 months and saw BTC and ETH returning 21.70% and -2.04% respectively while BNB outperforming the test at 56.23%.
Binance’s CMO, Rachel Conlan, highlighted the advantages of Dollar-Cost Averaging (DCA) for cryptocurrency investors, explaining, “DCA is all about using consistency to your advantage—it transforms market fluctuations into opportunities for steady growth.”
Following this simple strategy means you buy low and high without chasing the market and poorly timed lump sum investment at a potentially higher price. Essentially, an investor’s position costs averages out over time for more consistent profitability. The strategy protects buyers against emotional investing, FOMO buying and losses if the market suddenly turns for the worse after a lump sum investment. It does, however, intentionally sacrifice the big short-term wins.
Range Trading
This is a great strategy for novice or intermediate traders who want to access big profits but aren’t quite ready to risk it all with the more advanced methods. Essentially, range trading means buying a coin when it falls within a certain range and deciding well in advance when to sell.
The most effective technique is identifying a particular token’s current support and resistance points. Then buy low and sell high, but always within that range. Range trading is an effective short-term strategy that you can rinse and repeat until the coin breaks free of those invisible and yet critical support or resistance points.
You can think of support as the floor and resistance as the ceiling. Buy at support and sell at resistance. You execute the reverse strategy for shorting a coin. BNB offers a very good example of support and resistance that a range trader could take advantage of.
Arbitrage Trading
Token prices can vary by small and yet significant amounts between crypto exchanges. So, there is a niche of cryptocurrency trading that exists solely for buying coins on one platform and selling them at a higher price on another. It sounds like child’s play, but it isn’t always so simple.
Traders need to factor in fees and other costs, and the margins are often small. So, to make a significant profit takes a big initial investment, and the slightest problem along the way, such as price slippage or delays due to congestion on the blockchain, can result in calamitous losses.
Types of crypto arbitrage include the simplest, spatial arbitrage, where traders buy on one exchange and sell on another at a higher price. An example is Bitcoin selling for $50,000 on one platform and $50,050 on another. So, it’s a simple case of buying big on one while simultaneously selling on the other.
Another more complicated style is triangular arbitrage, in which traders look for misalignments in the exchange rates between several coins. The trader can profit from a series of transactions that are effectively cryptocurrency conversions.
Cross-border arbitrage involves exchanges in different countries and can take actual fiat currency conversions into account, as well as differences in regional demand and regulatory issues. This is advanced arbitrage, though, and is more suited to professional traders and institutions.
HODLing
This simple strategy involves buying a token with growth potential and just holding on for the long term. The name arose from a misspelling of ‘hold’ on a forum, but the term morphed into the acronym Hold On For Dear Life during the early days of manic Bitcoin volatility. Now, it is a meme, a slogan and a mantra all in one.
HODLing is an ideal long-term investment strategy that almost purposefully ignores short-term peaks and troughs in the market in favor of long-term growth. This is a strategy investors use for years at a time, and there are early Bitcoin investors who have held on to their investment for more than a decade at this point.
Day Trading
This is the polar opposite of HODLing and really isn’t for the faint of heart. Day trading looks for a profit in the small daily movements in coin prices. As the name suggests, traders buy and sell tokens on the same day, and can hold coins for just minutes at a time.
There are technical analysis tools that can help narrow down the right coins to buy and sell, and traders tend to focus on highly liquid coins like Bitcoin or Ethereum to ensure they can pick their entry and exit points without major slippage. Stop-losses and exposure limits also help contain the risk, but there is an inherent level of danger in day trading that means it isn’t for everyone. That’s especially true of traders who take huge positions with the help of leverage.
It’s better to start small and build up over time by reinvesting profits.