Cryptocurrency is one thing that is complex and complicated, and it is getting even more sophisticated day-by-day. Uncountable numbers of new people enter this field every day, and they come up with their own strategies and mechanisms with respect to trade. This is making the competition even fiercer, and the best algorithmic trading strategies are becoming more popular with each passing day. Please see a few below exclusively with respect to cryptocurrency.
Best Algorithmic Trading Strategies
Below we discuss the top cryptocurrency trading strategies that are being used as the best algorithmic trading strategies within this world of digital currency. These are all targeted towards making the trade more result oriented and are quite advanced in themselves.
1. Momentum & Trend Based Strategy: We are starting with this one because it is the simplest and the most widely used one. Herein, technical signifiers are generated and then used to carry out automatic transactions based on pre-fed conditions. These signifiers can be price level movements, average historical price movements, moving averages of prices, current buy volumes etc. Charts are a common practice among this type of strategy, and the bots automatically plot their own charts before making a trade decision.
2. Arbitrage Strategy: Such strategies are based on larger or smaller spreads between the ask price and the buy price of the cryptos. Some investors like to trade multiple times a day, with smaller trades, while some do it larger, once among many days. The algorithms are built based on how the investor wants it, and then they keep on executing accordingly.
3. Mean Reversion Strategy: This one is also among the best algorithmic trading strategies for crypto investors. This is based on the fact that the cryptocurrency market is very volatile, the prices can go up or down all of a sudden, but they usually return to some mean or expected value sooner or later. So if the algorithm can find the upper and lower value of the crypto tokens, the trades can be made when the prices go beyond the normal range.
4. Statistical Arbitrage Trading: Market inefficiencies lead to such trading opportunities and the algorithms identify them automatically and come to some conclusion. This is usually deployed in related crypto and statistical arbitrage trading.
5. Weighted Average Price Strategy: Volume or time, or both can be used to get out the weighted average pricing of some cryptocurrency. Larger orders occur with this one, and usually they are not released in a single go. Smaller fragments are created by the bot and this one is considered to be a bit complicated, yet the most effective and best among algorithmic trading strategies.
Things to Remember
A brief idea of some of the best algorithmic trading strategies have been given above, although one can explore any of these in more detail if required. It is also very much okay to implement more than one algorithmic trading strategy at a given point in time. There are a few online companies, like executium.com, that have also stepped forward to help investors in this regard.