Top 5 crypto trading strategies

What is cryptocurrency trading? 

Cryptocurrency trading involves taking a position on the price movements of digital currencies like bitcoin, ether, litecoin and ripple. With CFDs (Contracts for Difference), traders can take advantage of both rising and falling prices.

When trading cryptocurrencies via CFDs, you don't own the coins themselves. Instead, you open a position based on whether you believe the price will increase or decrease:

• Go "long" by buying a CFD when you expect prices to rise
• Go "short" by selling a CFD when you expect prices to fall

Trading crypto with CFDs offers the benefit of leverage, allowing full market exposure with a small initial deposit (margin). This magnifies both potential profits and losses, making risk management essential.

The crypto market operates 24/7, creating opportunities to capitalise on price movements at any time. Whether you're interested in bitcoin or exploring alternative coins like ether and litecoin, the market offers diverse trading possibilities.

Top 5 crypto trading strategies

1. Moving average crossovers
2. Relative strength index
3. Event-driven trading
4. Scalping
5. Dollar-cost averaging

1. Moving average crossovers

Moving averages help identify the direction of current price trends by smoothing out price data over specified time periods.

The strategy involves plotting both short-term and long-term moving averages on a price chart and watching for "crossover" events:

• Golden cross: When the short-term MA crosses above the long-term MA, signalling a potential upward trend
• Death cross: When the short-term MA crosses below the long-term MA, suggesting a possible downward trend

These signals can help time entry and exit points, though it's important to remember that moving averages lag behind current price action. For best results, use them alongside other indicators to confirm trend strength and direction.

2. Relative strength index

The relative strength index measures the speed and change of price movements on a scale from 0 to 100:

• Readings above 70 generally indicate overbought conditions
• Readings below 30 suggest oversold conditions

Crypto traders use RSI to:

• Identify potential support and resistance levels
• Spot divergences between price action and RSI values

A bullish divergence occurs when prices make new lows while RSI forms higher lows, potentially signalling an upcoming rally. Conversely, a bearish divergence happens when prices make new highs while RSI forms lower highs, possibly indicating a coming correction.

To avoid false signals in the volatile crypto market, use RSI in combination with other technical tools rather than in isolation.

3. Event-driven trading

Cryptocurrencies are highly sensitive to news and events, which can trigger significant price movements. Event-driven trading capitalises on these market-moving developments, such as:

• Regulatory announcements
• Partnership news
• Exchange listings
• Protocol upgrades
• Macroeconomic events

Consider the following when taking this approach:

• Stay informed through reliable crypto news sources
• Act quickly when significant news breaks
• Maintain strict risk management due to potential volatility
• Be prepared for unexpected market reactions

Event-driven trading requires market awareness, quick decision-making and the ability to separate market-moving news from noise. While potentially profitable, this strategy demands discipline and a solid understanding of how different types of news affect crypto markets.

4. Scalping

Scalping is an ultra-short-term strategy that involves opening and closing multiple positions within minutes or even seconds. Instead of looking for large price movements, scalpers aim to capture small but frequent gains.

Key elements of successful crypto scalping include:

• High execution speed, often using tear-off tickets for quick order placement
• Tight profit targets and stop-losses
• Focus on liquid cryptocurrencies with narrow spreads
• Strong discipline to exit trades that move against you

This approach works particularly well during volatile market periods but requires intense focus and the ability to make rapid decisions under pressure. Scalping isn't suited for beginners as it demands market experience, technical knowledge and emotional control.

5. Dollar cost averaging

Dollar-cost averaging offers a more passive approach that helps manage the impact of crypto volatility. Instead of investing a lump sum at once, DCA involves:

• Breaking your total investment into smaller, regular purchases
• Buying at fixed intervals regardless of price (weekly, monthly)
• Acquiring assets at various price points over time

This strategy reduces the risk of investing a large amount at an inopportune moment. While DCA may not maximise potential gains, it provides a disciplined framework that helps avoid emotional trading decisions.

DCA is particularly valuable for those new to crypto markets or investors seeking a lower-stress approach to building positions in digital assets over the long term.

Start trading crypto with IG Singapore

Follow these four steps:

1. Learn the basics
2. Build a trading plan
3. Select your platform
4. Place your first trade  

Step 1) Learn the basics

Understand how the crypto market works, including blockchain technology, market dynamics and factors affecting prices.     

Step 2) Build a trading plan

Create a strategy that includes risk management rules, clear goals and your focus cryptocurrencies. Determine whether you'll use technical analysis, fundamental analysis or a combination.

Step 3) Select your platform

IG offers multiple ways to trade cryptocurrencies:

• IG online trading platform
• IG mobile trading app
• MetaTrader 4
• L2 Dealer

Step 4) Place your first trade

Once you’ve created your IG account, you can begin trading various cryptocurrencies. Monitor your positions using platform tools and close trades when your targets are reached or risk limits are approached.

Remember that cryptocurrency trading involves significant risk due to market volatility. Always start with amounts you can afford to lose and consider practising with a demo account before trading with real funds.

Key points to remember

• Cryptocurrency trading offers opportunities in both rising and falling markets through CFDs
• Choose your strategy based on your risk tolerance, time commitment and market experience
• Technical approaches like moving averages and RSI help identify potential entry and exit points
• News-based and passive strategies offer alternatives to technical trading methods
• Successful crypto trading requires proper risk management regardless of your chosen approach