Best Crypto Futures Trading Strategies For 2022
Trading crypto futures can help you maximise your profits. Crypto futures are contracts between two investors that bet on a cryptocurrency’s future price.
To help you maximise your profits, the most established and top crypto futures exchanges offer you high leverage. So you get the chance to make more money by investing less. However, we cannot deny the fact that the crypto futures market is extremely volatile. As a result, you will need to have the best crypto futures trading strategies to make profits. To help you out, here we have mentioned a couple of good strategies:
The Pullback Strategy
The pullback strategy is one of the most powerful yet popular trading strategies out there. As you can see in the name, the trading strategy is based on price pullbacks.
Price pullbacks are a common thing during trending markets when the price breaks below or above the resistance or support level, reverses and gets back to the broken level.
Talking about resistant levels, it is a price point at which the market fails to break above. On the other hand, support levels are price points where the market is having difficulties breaking below.
During a market uptrend, the price breaks above an established resistance level and reverses and retests the resistance level. Once the retest is completed, you can enter the market by taking a long position in the direction of the underlying uptrend.
On the other hand, during an uptrend, the price breaks below an established support level. Then it reverses and returns to the support level again. This creates a pullback, and you can enter the market with a short position in the direction of the downtrend.
In the market, pullbacks are a common thing, and it appears when traders start taking profit which pushes the price of crypto futures in the opposite direction of the original breakout. So the traders who missed the initial price point can wait for the price to come down to the resistance level so they can enter the market. And this pushes the price of the crypto futures to go up again.
Going Long Or Short
Going long or short are two of the best crypto futures trading strategies. By going long, you hope that the crypto futures price will go up over a certain period of time. And when it reaches a favourable price point, you simply sell your holdings and book a profit.
As a trader, your job is to predict the direction and timing of the crypto futures market. To do this, you need to learn about technical analysis, which is a study of historical market data and patterns. Plus, use different indicators to figure out the next move of the market.
Also, apart from going long, you can short sell crypto futures. This means that if you believe that the price of crypto futures will fall, then you have to sell your assets first, and once the price of the crypto futures goes down, you simply buy your assets back. Plus, thanks to leveraged trading, you can enjoy maximised profits if trades go in your favour. But if it does not go as per your predictions, there will be huge losses too.
Breakout trading is another popular trading method that is used mainly in day trading. But it can also be used for trading crypto futures. A breakout occurs when an underlying asset’s price moves out of an established trading range.
Breakout trading purposes of catching the market volatility when the price is breaking out of support and resistance levels, trendlines, and other technical levels.
Breakouts often happen in the market, and you can easily spot them by using different indicators and trendlines. And it gets accompanied by an increase in the volume of buys or sales in the market.
Also, after a breakout happens, the market experiences great volatility. This happens due to executions of numerous pending orders.
You can take advantage of this volatility by taking a long or short position. You need to take a short position when the price breaks below support. Or go into a long position when the markets break the resistance levels.
You can next try out spread trading. In this trading strategy, you are required to purchase 1 crypto futures contract and sell another futures contract at a different time. The main goal of this strategy is for you to profit from an unanticipated change in the relationship between the buying price of 1 contract and the selling price of another crypto futures contract.
Spread trading lowers your risk in trading. Also, each spread is a hedge, and trading differences between 2 crypto futures contracts result in lower risks to a trader. Plus, spread trading is also not affected by market volatility.
Trading The Range
Trading the ranger stands for a trading bounce off important support and resistance levels in a chart. In this case, when the market faces difficulties breaking above a certain level, the market participants will refer to that level as the resistant level.
And when the price reaches the same level again, there will be some traders who will start taking profits, and others will open short positions in the market. This will increase selling pressure on the crypto futures price, and the price of it will fall down.
Similarly, when the price fails to break below a certain level and reaches the same price level again, traders who have short sales will start taking profits. Also, some traders will start buying at a lower price. This will create buying pressure in the market which will drive the price up.
When trading in the range, the first thing you need to care about is whether the market is actually trading in a range or sideways. If there is an absence of higher highs or lower lows in the price, then the current market environment would be a ranging market typically.
Additionally, you can use trend-following technical indicators like the ADX indicator. An ADX value below 25 indicates that the market is not in a trend. So you can place your stop loss at important resistance levels if you are shorting the market or below an important support level in case of taking a long position.
Buyer And Seller Interest
As a trader, you can also use the data of buyer and seller interest to decide whether to buy or sell a futures contract. Buyer and sellers’ interest is determined by the Depth of the Market or DOM window, which shows the number of open buys and sells orders for a crypto futures contract at a number of price levels.
Also, DOM shows the liquidity for the underlying futures contracts. If there is a higher number of market orders at each price, then it refers to higher liquidity and vice versa.
Some brokers refer to the depth of the market as the order book, which is a common thing found across all the exchanges.
The order book gets updated in real-time, and it reflects the current trading activity in the market. Also, you should know that large trading orders will not affect the price of highly liquid security.
But if the depth of the market and liquidity is low, even small trading orders can have a significant impact on the price.
Finally, there is counter-trend trading. In this trading strategy, you can take positions in the opposite of the underlying trend. For instance, a counter-trend trader would look for sell opportunities during uptrends and buy opportunities during downtrends.
In counter-trend trading, your job is to take advantage of the price common that succeeds each impulse move and place your profit targets at around 50% of the impulse move or at an important Fibonacci level. However, you should know that counter trend trading is extremely risky compared to other crypto futures trading strategies. And you should only follow this strategy once you have gained enough experience in crypto futures trading.
So those were some of the best crypto futures trading strategies. As a trader, you must try out different strategies, learn technical analysis and follow proper money management. Once you have gained enough experience, you should only then risk higher funds when trading.