Vital tips on how to build the best cryptocurrency trading strategy

Cryptocurrencies are here to stay. Adoption has surpassed retail and is now at the institutional level, with publicly-traded companies and even governments bringing it into the fold too.

There are many approaches in these markets but trading has the least barriers to entry.

For an individual who is almost dipping their fingers into the world of crypto trading, you may want to make sure that you have the best strategies for trading crypto at hand.

Excitement and investing money without a clear plan is the surest way to get wrecked. How can you then build the best cryptocurrency trading strategies and realize steady profits?

First, let’s get a better understanding of crypto trading strategies.

What are crypto trading strategies?

These are fixed plans for realizing profits by either going short or long in a crypto market.

A trading strategy is usually helpful in that when thoroughly researched, it’s results can be quantified, they are consistent and the strategy can be verified and modified when need be.

Steps to build your crypto trading strategy


Many believe that the charts have all the information you need but this isn’t the case.

A good crypto trading strategy is built on solid research. These markets are still young with a lot of development, partnerships, regulatory clashes and activities that affect price.

It is extremely important to discern between fundamentals and technical.

Crptocurrency trading fundamentals are the core attributes of a crypto project that provides its intrinsic value and induce behavior that contributes to the project’s growth.

Technicals deal with price action, volume and some other data points you see on charts.

Read the whitepapers of different cryptos and their tokenomics to find out things like whether the coin started as a fair launch or whether there was an initial coin offering.

Dive into the distribution of the tokens to find out what portion was allocated to incentivizing developers, and how much of the token is concentrated in initial investors’ hands.

If a particular individual or company is sitting on a huge stash of it, who’s to say they won’t dump it right when the price has risen enough for them to get a decent profit?

Pay attention to these important details so as to make sure that you are not caught napping.

Find out the circulating supply, total supply, maximum supply plus whether the crypto asset is deflationary or inflationary, the rate of inflation and if it applies a rebase mechanism.

Take note of what other markets follow such as market cap, trading volume and liquidity.

If an asset has a low market cap, there may be tremendous upside for it. And if it has low trading volume, that means that one large trade could suddenly move the price drastically.

While this might sound like a lot, it’s actually just the basics. Trading without being aware of any of these things is reckless behavior that will probably have you losing money.

Set risk levels & goals

Different cryptocurrency trading strategies facilitate you to achieve different goals. So before you pick one strategy, its advisable to ask yourself some intriguing questions.

Why am I trading crypto? What do I want to achieve? Are you just trying to quickly flip that money for a new pair of headphones into a new car? Do you want to stop renting and own your own home? Or are you a diamond-handed “hodler” hoping to retire on your crypto profits?

Without a clear vision, you’ll never be sure if you’ve made enough. You’ll always treat crypto trading as a game, totally driven by the question of how much you can make.

You might get caught out by sudden dumps and end up panic-selling. Always start by envisioning your goals in terms of real-world achievements, and not just zeros and commas.

Clear goals and a timeline to achieve them offers a better idea of how much risk to take on.

If you’re pursuing a short-term goal, you might have to risk more money to capitalize on small changes in the near term. But if you’re targeting a much further goal, you can start with small amounts and gradually increase the risk you take on, or keep it moderate.

Choose your asset

With solid research, look at a number of assets and see which one fits your vision the most.

For example, getting into a matured market is better if you’re looking for steady and modest gains that last over time. But if your goals are getting rich quick, you definitely need to go further up the risk curve and get into a low market cap asset.

Always remember that while these younger assets have a lot of upside theoretically, if you jump in at the wrong time, the violent swings will dent your pocket very fast.

One thing for sure is, don’t be a fanatic.

Don’t get caught up in the hype around a coin and get in for silly reasons like a logo, memes, a celebrity entrepreneur or superstar developer on the team and a sudden pump.

If all that draws you to a certain cryptocurrency project is catchphrases such as “Doge to the moon” and“my link stinks,” slow down and give the idea some more critical thought.

Choices can’t boil down to “I saw this YouTube video with a thumbnail saying it was going to a million very soon.” Don’t let the YouTubers and TikTokers feed you on what we call hopium.

Choose a bar interval

After choosing an asset, you’ll need to settle on an interval when reading the charts.

While you might think that the right cryptocurrency trading interval to choose depends entirely on whether you’re trading short-term or long-term, the reality is different.

An individual may not be planning to sell their cryptocurrency for at least three years, but that doesn’t mean that they should stay zoomed out on the monthly chart.

At the end of the day, it’s about how much activity is in the markets.

If the price of the cryptocurrency becomes considerably volatile, it pays to zoom in and even at times look at the hourly chart for good opportunities to enter the market.

However, if you’re looking for some quick gains, you have to watch the shorter time frames.

Ultimately, it is considerably beneficial to indulge in alternating between the hourly, daily and weekly intervals to help you differentiate between patterns or trends and one-offs.

Choose entry and exit rules

Trades should never be done impulsively. Many people try to time the market so they can get in at the very bottom and exit at the very top. The problem is, you can’t always be sure.

You could see a significant dip in the cryptocurrency’s value and enter the market, only for the price to go even much lower. And the same can happen on the way up.

This is why it helps to have rules on when you get in or out.

An entry or exit rule can be as simple as “I’ll buy an amount X every time the price drops by 10%” or “once my money has doubled, any additional 5% increase will warrant a sale of 10%.”

Entry and exit rules help you avoid getting huge chunks of your money in or out while there’s still action. They also help you buy or sell at a decent average price over time.

You’ll be able to buy very close to the bottom and sell very close to the top both when the price is going up or down. You can therefore, always modify your entry and exit trading strategy rules to buy or sell more as the price continues in a particular direction.

Back test your assumptions

With rules in place, you need to apply them to a chart and see what results you get. Pick different starting points in the history of a chart. Your strategy will most likely provide different results depending on the point at which you made your first entry.

Analyze your results

It is critically important to take a look at how long it took you to get back in the green when you started near the top versus when you started near the bottom.

You may find that you need to increase the percentage change that triggers a buy or sell.

In a market that moves by over 20% in either direction every couple of weeks, it may not help much to have your entries and exits triggered by a mere 1% change in the price.

If the market only moves by about 2% every couple of months, you might need to have your entries and exits more dependent on much smaller fractions of a percentage change in price.

Revise your strategy

If you realize that your current strategy doesn’t get you anywhere near your goals within the desired period, you should adjust it to be a little more aggressive.

However, a cryptocurrency trading strategy shouldn’t be revised entirely because it isn’t very profitable. The best strategies are those that speak to you and your situation.

Sometimes the more profitable strategy requires you to make sizable trades, yet you don’t always have huge stacks lying around. As you revise your cryptocurrency trading strategy, make sure that it not only increases your profit but also stays within your capabilities.

Tips to improve your crypto trading strategy

Institute safeties

Since it is practically impossible for you to always be glued to screens watching charts 24/7, you need a contingency plan in case your predictions start going terribly wrong.

A stop loss or trailing stop loss can protect you from losing too much on a trade just in case the price does the opposite. Endeavor to take profit as part of your safety measures.

Limit risk

The whole “go big or go home” mentality isn’t ideal for crypto trading. Markets can make a U-turn at the first sign of bad news so it is not wise to always have all your money in a trade.

Divide your portfolio and create cushions for when you’re losing. Try to play with only a portion of your money so that you still have resources to deploy if a trade goes south.


Rather than having all your eggs in one basket, its advisable to try different markets. Not all coins move in sync and some may occasionally have inverse correlations.

For example, we have observed in the many times when Bitcoin hits a peak and plateaus or starts to go down that the gamblers move to altcoins and many start to pump.

Therefore, it is a good strategy to have your money spread out in different markets. You should also try different time frames in order to take advantage of abrupt opportunities.


Use data

Analyze multiple data points to gauge the results of a cryptocurrency trading strategy in comparison to different goals, resource levels and a number of other factors.

Find out how many other people use a similar strategy and what the implications are.

If a considerably good number of people are always preparing to react in the same way to a particular crypto trading event, it may become easier for you to bet against them.

You may also start to hear things like “buy the rumor, sell the news.”

People may tell you to prepare for an event X on a day Y and then act way before you so that by the time you notice what was happening earlier, they are on their way out.

Switch up your back tests

Don’t always look for the same kind of setup in the history of a chart when backtesting. It is important to see how your strategy performs both in a bull market and in a bear market.

You should also try it out in periods of prolonged sideways movement. Therefore, always backtest in different market conditions because things won’t always be the same.

Adjust accordingly

If your crypto trading strategy’s back tests show that your efforts lose performance in certain conditions, make sure you adjust the strategy as those conditions get closer.

Sometimes, stretching out a bit is vital and in other cases, you need a near total overhaul.

Choosing the best tools to build your crypto strategies

  • Focus on user-friendliness and flexibility
  • Go for tools with access to lots of data, especially historical data for backtesting
  • Look for tools that don’t need programming skills
  • Check for the ability to apply indicators on multiple timeframes within the same strategy
  • Find tools that enable you to customize existing indicators
  • Get a tool with advanced analytics for strategy results
  • Search for tools that have a demo trading option to allow you to simulate the market before committing real money
  • Opt for a tool which offers both live trading and automation of strategies
  • Choose tools that help you follow your investments easily, with easily comprehensible results for a deployed strategy

At the end of the day, what you’re doing as a crypto trader is balancing greed and fear.

This isn’t something that you get right once and never have to think of again. The cryptocurrency markets will always have an emerging anomaly offering to test you.

Therefore, developing the best cryptocurrency trading strategies is a continuous effort.

What’s winning today won’t always be winning.

Gerald Ainomugisha is a freelance Content Solutions Provider (CSP) offering both content and copy writing services for businesses of all kinds, especially in the niches of management, marketing and technology.