Let’s have a look at the fast-evolving crypto space; it seems that it enables traders to amass great money when they use the right strategies. Bitcoin is by far the most popular asset in the market, and most people start purchasing BTC when they first enter the sector. However, they quickly are faced with the need to diversify their crypto portfolios, so they start analyzing the market to search for opportunities to make a return. But immediately after flirting with the idea of purchasing altcoins, they start wondering if they have to adjust their trading strategies. Can they use the same trading strategies they used with Bitcoin? Are altcoins different? What should they do if they want to trade an altcoin like Render, for example? What aspects should they check if they want to buy Render?
This article is meant to help investors navigate the dynamic world of altcoins and provide them with information about strategies that could profit them from trading altcoins.
Do altcoins have any peculiarities?
Doing your own research is mandatory when you decide to invest in crypto because you need to gather information about the sector. Do the altcoins you want to add to your portfolio have any use cases? What technology was used to create them? Do they have particular features? What do you know about the development team? Are the developers experienced in the crypto sector? How did the assets behave in the previous bear market? Most importantly, what is the market sentiment towards the coin? Do people believe it has a future in the crypto industry?
Investing in alternative cryptocurrencies is a great idea because portfolio diversification is essential when you want to increase profit. However, there are so many projects available on the market, you might find it challenging to identify the ones that are worth your attention, without help. This is why it is advisable to research the sector so you can identify the best candidates for portfolio diversification.
Before investing in a project, do this:
- Double-check the project, even if it benefits from extensive social media coverage. Social media plays a vital role in the success of crypto projects because the more buzz is in the market, the higher the demand. However, when something is aggressively promoted, you should double-check it because it might be something fishy about a project that needs so much marketing to attract buyers. You need to ensure that you don’t lose money due to a scam project, so search the web for information about it and join forums where crypto enthusiasts discuss their experience with digital currencies.
- Don’t pour more money than you can afford to lose on the project. Altcoins, similar to Bitcoin, are volatile assets, so you should follow this vital rule when you trade both. All cryptocurrencies are considered highly volatile assets because their prices swing regularly. Sometimes, it might be overwhelming to track their movements over a long period because they undergo several changes. While some projects reach new all-time highs in every bull run, others never reach it again, and it’s almost impossible to tell which one of the altcoins will perform well in the long run. This means that some of the projects you invest in could underperform in the next bull run, even if the overall market tendency is to grow.
- Market sentiment is one of the main factors that drive crypto prices, so you should always stay in touch with it. Regardless of how reliable or solid the project looks, its value will fluctuate according to the market sentiment. Therefore, you shouldn’t make decisions in a rush and never allow your panic to control your investing style. Design strategies you follow regardless of the market conditions.
- Invest in projects with real use cases and extensive technical capabilities. Several altcoins like Render, Solana, Ripple, and Polygon have attracted the public’s attention because they have unique features and rely on innovative technology. You want to add such a project to your portfolio because it has greater chances to thrive in the long run and survive a harsh bear market. You can acquire LTC to HUF (Litecoin for Hungarian Forint) through a trusted exchange to get started on your crypto investment journey.
Trade using the short-term strategy
The short-term trading strategy is one of the most popular ones among both experienced and entry-level investors because it allows them to make a profit quickly. You purchase altcoins with the intention to hold them for minutes, hours, days, or maybe weeks. As a day trader, you will probably often turn to this strategy. Your goal will be to hold the asset in your portfolio short-term and sell it immediately as a profit opportunity arises. This is a great strategy to use if you anticipate that the market will turn bullish and particular alternative coins will increase in price. However, you will also have to stay connected with the market constantly because you need to react immediately as a change occurs so you can make a profit.
Other popular trading strategies
Your goals have a significant role in deciding what the best strategy is. So it would help if you established the level of risk to which you’re willing to expose your portfolio and keep in mind the current market conditions. Investors usually turn to the following strategies when they trade altcoins:
– Integration of Bitcoin insights. All crypto assets move in the same direction as Bitcoin, and you can estimate the movements of your altcoins by monitoring Bitcoin’s price movements.
– Trend following. You keep an eye on the market trends to identify the projects that are in an uptrend. The moment assets in your portfolio start on a downtrend, you sell them.
– Swing trading. Your goal is to capture medium-term price movements, so you dedicate time to holding the assets in your portfolio for a couple of days or weeks until the market provides you with the opportunity to make a profit.
The secret to trading altcoins successfully is to pick a strategy that suits your goals and portfolio. Altcoins might differ from Bitcoin, but you can use strategies similar to those used when investing in the market leader because they are all digital currencies.