Traditional traders are fast picking up the nitty-gritty of the crypto-asset market and using some really advanced and interesting trading strategies to register profits. In this article, we shall be learning about the pairs trading system – an incredible market-neutral strategy to make profits in the online crypto trading market.
This is a market-neutral cryptocurrency trading strategy wherein buying and selling of two different yet highly-correlated cryptocurrencies are carried out to register profit with the long position rising in value compared to the short position losing its value. Thus, irrespective of whether the market is correcting or rallying, you can still register profits with this non-directional or market neutral strategy. The cryptoasset market is extremely volatile where a non-directional strategy like pair trading proves to be extremely effective. In fact, you can expect to register profit even when there’s a 50% drop in the market!
How Pair Trading works?
Just like trading with traditional financial assets here too you’ll need to choose highly-correlated cryptocurrency pairs. The cryptoasset market offers a variety of digital currencies as well as tokens with similar features. For instance, online crypto traders will find private coins, digital currencies, smart contact platform tokens, exchange coins, and gaming coins et al. Now traders can use all of this to deploy their partner trading strategies.
Online crypto traders need to keep in mind that not all cryptocurrency exchanges facilitate short crypto-asset investments. Thus, it’s imperative to choose CFD brokers, which support cryptocurrencies, to use this strategy. One good platform to deploy a pairing trading strategy is executium.com which allows investments in short cryptoassets. Users on Executium can sign up as a retail investor and start deploying their pair trading strategy.
Which cryptocurrencies are best suited for pair trading?
Well, some of the hottest pair trading cryptocurrencies include long EOS vs. short Ethereum, long BTC and short BSV, BTC vs. LTC, NEO vs. NEM, ZEC vs. XMR, ETH vs. ETC and ETH vs. TRON. Traders need to find comparable tokens or coins, carry out thorough correlation analysis, and study their historical returns. This will help them determine which cryptocurrencies will outperform others.
Crypto Pair Trading - Risks Vs. Returns
Although pair trading is non-direction but still it’s not completely shielded from risks and crypto traders need to be aware of the risks before deploying this strategy. However, one should also keep in mind that the returns are worth taking the risks. Some of the common risks of pair trading include execution, Correlation Breakdown, and holding the coins on crypto exchanges.
Why opt for Executium for Pair Trading?
Executium.com is the preferred platform for pair trading because it facilitates short investment in one of the most secure environments. Holding on to your coins is not at all an issue because the security system deployed here guards your cryptoassets against all types of hacking. Pair trading is a strategy for the advanced users and it's best that the beginners avoid it.
Executium has a very user-friendly interface, which helps the new traders get quickly familiar with the different features of the platform, get ready charts for analysis, locate the ask/bid prices and short selling.