What is a trading strategy and why do you need one?

Cryptocurrency buyers who want to do more than buy and hodl have many trading options available, but in a highly volatile market with more than a few questionable players, a defined strategy is key to success

There are many loud proponents of hodling — or holding — in crypto and particularly in Bitcoin. Buy and do not sell, as Bitcoin will always go up over the long term, the argument goes. But for traders who want to stay ahead of the curve, there are strategies. Otherwise, you’ll be buying based on FOMO — fear of missing out. And if you’re following the herd, you’re generally buying high and selling low.

While a strategy is necessary in any type of smart investing, it’s doubly so in the extremely volatile cryptocurrency industry, where prices rising or falling 10% in minutes is common and more than 50% in a few hours is not exactly rare. Beyond that, available leverage for margin trading can be dangerously high — as much as 100x at some exchanges — and there is very little regulatory infrastructure to protect investors from bad actors. Then there are factors that simply cannot be accounted for, like a whale suddenly dumping a huge amount of Bitcoin on the market and driving down prices.

What will help is having a strategy that you follow consistently, sources of data you can rely on, and an exchange with the reliability, speed, and liquidity to execute your orders in a timely fashion.