Leverage Trading is a great option to increase profits; however, each strategy comes with its risks. Before choosing a strategy, you should be educated on all available options. Let’s go through seven of the best crypto leverage trading strategies.
Range Trading
One of the most popular leverage trading strategies out there is range trading. Range trading is usually done over a short period, and it is a strategy that identifies a range where the investor buys or sells.
One thing to look out for in this strategy is overbought and oversold zones. Overbought zones are when the traders purchase a currency too many times, resulting in the price falling. Oversold, on the other hand is when the crypto is undervalued, which results in the price going up.
One method to figure out oversold and overbought zones is using indicators such as a relative strength index or RSI.
Trend Trading
This leverage trading strategy relies on technical analysis with its primary goal to detect which direction market momentum is headed. Trend trading is a strategy best suited for position trades or swing traders. They must open positions for as long as the trend is in action.
As the market volatility is bound to affect the asset price, the trader needs to take a long or short position. If the trader believes the market is in an uptrend, they should go for long, and if the market is in a downtrend, then short. To effectively use the trend trading strategy, traders need to use indicators to identify future moves in the market.
Breakout Trading
Breakout trading is another well-known strategy in which traders enter a trend early on. Once entering the trade, the trader waits for the price to break out of the range. Breakout trading is a common strategy used by both day and swing traders. This is a trading strategy for short to medium term. Breakout traders usually look to enter the market at the correct level, aiming to catch trading opportunities and make profits.
In addition, it is common in breakout trading to place a limited entry order around the support and resistance levels. As a result, the breakout trade will be executed automatically. Furthermore, the majority of breakout leverage trading strategies are volume-based. According to the theory, there is a breakout from the support or resistance level when volume levels begin to rise.
Reversal Trading
Reversal trading is known as one of the best leverage trading strategies. It is based on detecting when a trade will change its direction. Once the trade changes direction, the trader’s job is to understand the trend and quickly take a position.
Of course, reversal trends can go in both directions, whether downward or upward. Although the market, in most cases, retraces itself, a trader needs to detect whether it’s a reversal trend or a fake indication. To figure this out, there are various indicators that can be implemented.
Gap Trading
Gap trading is one of the leverage trading strategies that is used when there is no trading activity on the market. This usually happens when prices move sharply high or low, but in between, there are no moves. However, gap trading is appropriate for the day trader who monitors the previous day’s price gaps and looks for opportunities between these and the next day’s trading range. In addition, an opening range higher than the previous day’s close is a gap indicating going long. In contrast, an opening range lower than the last day’s close suggests an opportunity to go short.
Momentum
Momentum trading is a strategy that focuses on price trends and their direction. This occurs when there is a significant price movement and traders sell and buy assets for an extended period. When the price changes, the momentum also tends to shift in a different direction.
Scalping
Lastly, there is Scalping in the leverage trading strategies we will talk about today. These trades are usually short-term and have small price movements. These traders, in most cases, have a strict exit strategy. In addition, they stand apart from other traders because they tend to take out their profits before the market gets an opportunity to move.
Furthermore, it is common for scalp traders not to make a significant profit on each trade. Instead, they concentrate on increasing the total number of smaller winning trades.
Final Thoughts
Now that you have a more detailed understanding of the seven best leverage trading strategies, you can choose which one best pertains to you and your goals as a trader. Before starting with any strategy, it is important to know how the market works and how to execute these strategies best.
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