10 Major Factors that Affect Crypto Trading Strategies

What are the major factors that affect crypto trading strategies? The amount of profit that you will make from crypto trading will largely depend on the specific strategy you choose to follow.

For this you will not only need to know about the different strategies that are followed by most of the crypto traders but also know about the significant factors that affect them as well as the characteristic pros and cons of it.

First, you should know about the strategies followed in crypto trading. Choice of it will differ according to your investment goals. These strategies are:

  • HODL strategy: This strategy should only be followed if you deal with crypto coins that are easily available and come with a high growth potential.
  • Swing trading strategy: This is a good strategy to choose only when the coins are easily available, the trading fees are low, and you want to have higher liquidity and trading volume.
  • Day trading strategy: This is a good strategy to go for high volatility, liquidity, trading volume, but exceptionally low spread or fees.

Once you know the strategy you want to follow, you should consider the factors that will affect it. Check out Best Crypto Tools to Use for Different Purposes.

This will ensure that you eventually pick the best and most productive crypto trading strategy according to your specific requirements and also based on the conditions so that you gain maximum profits.

10 Major Factors that Affect Crypto Trading Strategies

Major Factors that Affect Crypto Trading Strategies

The different factors that will affect your crypto trading strategies are volatility, availability and potentiality of the coins, spread and fees, liquidity and trading volume.

Apart from knowing these basic parameters there are a lot of other things to know and look into before you choose a particular crypto trading strategy. This guide will help you to do it most efficiently.

Remember, out of all those thousands of crypto coins that are available in the market right now, Bitcoin fits in perfectly with any crypto trading strategy you wish to follow.

However, that does not mean it is the only one to trade with. Do your research prior to selecting your crypto coin that you want to trade with.

1. Liquidity

In simple and non-technical terms, liquidity refers to the value that is exchanged within a specific period of time.

Ideally, as a crypto trader, you should look for high liquidity when you trade your crypto assets in a market. There are two distinct benefits of it such as:

  • It decrease the amount of risks that may exists if there is a large market gap and
  • It also results in less volatility.

This means that liquidity is a specific aspect that can be correlated with the market capitalization pretty well.

It is directly proportional to it which means, the larger is the market capitalization, higher will the liquidity will be.

However, when trades are made in exceptionally large volumes, such as by the institutions, liquidity plays the most vital role, which is not the case for the retail investors or those who trade in smaller volumes.

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It is most prudent to trade crypto assets when the market experiences high liquidity because it will not only minimize the risks involved in larger market gaps but will also not cause larger turns.

One of the best crypto coins to trade with to take the full advantage of high liquidity is Bitcoin which also has a significantly high trading volume.

2. Volatility

Volatility refers to how much a particular crypto asset or coin has moved at a specific period of time. This can be said in another simpler way.

Volatility is that which can be correlated with the total market value and is inversely proportional. This means when the market value is higher, the volatility of the coin will be lower.

Every crypto trader wants high volatility because of two specific reasons such as:

  • It results in a change in the price of the coin and
  • It also paves the path to make more profitable trades.

To put it in simple words, when you trade your coins depending on the volatility, you can make profits in both ways, whether there is an upward or downward movement in the price of the specific type of crypto coin.

As for example, Bitcoin is known to be a crypto coin that is least volatile cryptocurrency.

The best attribute of high volatility is that it fulfills all the conditions that are necessary to make profit during crypto trading.

However, there is also a significant downside of it since it increases the risks of making large losses as well is not eliminated completely.

Bitcoin will be one of the best crypto coins to trade with if you want a coin with a reasonably high market cap but offers low volatility as compared to other altcoins.

3. Availability

When it comes to availability and accessibility of crypto coins, nothing seems to be better than Bitcoin.

In fact, traders can access this digital currency ideally in any given cryptocurrency trading platform.

Availability of the coin to trade with is a vital factor to consider because of two specific reasons such as:

  • When you trade with a crypto coin that is more available and easily accessible, you will be able to use more platforms to trade.
  • You will also have more trading tools and features at your disposal to help you with your trade.

This is specifically useful for the day traders and swing traders since they need to use a few additional tools and features.

This helps them to make all the necessary crypto technical analysis, use some of the best technical indicators and stop loss.

It also helps them to limit trades and in making margin trading apart from other significant advantages to enjoy.

However, when you choose a platform to trade with a crypto coin that is more available and easily accessible, just make sure that it offers all the specific trading features that you desire it to have.

Best coin to go with? Once again, it is Bitcoin.

4. Spread and Fees

Different crypto trading platforms may charge different amounts of fees for making a transaction using their service.

Technically, it is called the spread. This is actually the difference between a buy order and order. Specific crypto trading platforms may charge this as their only ‘fee’ but the amount can vary from one platform to another.

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If you make trades quite frequently, this fee will play a significant role in determining the amount of profit you make eventually.

The higher the number of trades you make in a day, the amount of fee paid for them will sum up to quite a significant total and will burn a major part of your trading profits.

However, if you trade less frequently or are a long-term investor, the spread and fees will not affect the eventual profit amount very much.

If the spreads are ‘tight,’ as it is in case of Bitcoin, it will increase the trading margin and will also reduce the cost at the same time.

5. Potential

Typically, small investors want to become rich fast and look to make trades that are worth a million.

It is a common belief that trading with coins that have a very high potential will enable them to make a huge amount of money quickly.

It is true but in parts. Ideally, you should always weigh the risks involved in a trade along with the potential for making profit in order to do so. This will make your trading strategies more profitable.

Therefore, make sure that you conduct a thorough research on the coins that you want to deal with to know about its potential, especially if you are dealing with any other altcoin other than Bitcoin which has a lower potential.

This will save you from falling into the trap of ICO scams or and other projects that promise high returns, which, eventually and surely will fail to deliver.

6. Market

You should also know the crypto market well to know about the volatility before you execute your trading strategy.

There are a lot of different factors that may affect the crypto market just as it may affect its price. These are:

  • The supply rate of the coins
  • The perception of the public to the price of the coin
  • Negative news
  • The changes in regulations
  • Incidents of security hacks
  • Macroeconomic conditions and more.

Therefore, be better off by going through different news sites that inform you about the crypto market.

7. Trading method

You may choose different trading methods of cryptocurrencies according to your preference. The method of trade will surely affect the results.

You may choose to buy a coin outright, hold them in a digital wallet and then sell it off at a higher price to make profit.

However, this process will take quite a lot of time if you do not have an account with the crypto coin exchange already.

Opening a new account with most of these exchanges is quite a lengthy and time-consuming process.

On the other hand, you may choose to simply speculate on the price of the crypto coin with derivatives to wait for the right time to trade.

These derivatives include CFDs and safe bets and in this method you do not need to own the crypto coins or store them in your crypto wallet.

All you will need to do is open an account with the exchange and look at the rise and fall in value of the coin.

8. Plan

Make sure that you have a proper plan in place to trade your crypto assets successfully. Ideally, you should build your plan even before you build your crypto trading strategy.

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If you have a plan and follow it with discipline it will be less likely for you to fall prey to greed, fear, and other emotions while trading your crypto assets.

9. Set proper goals

You should not choose a crypto trading strategy just because it seems good or too many people follow it.

Instead, you should make sure that your strategy helps you to achieve your investment goals.

Therefore, set your crypto investment goals properly and have a clear idea of it. This will make it easy for you to work towards achieving it.

Most importantly, do not set any goal for yourself that is hard to achieve or measure, if not impossible.

10. Risk Management

Finally, it comes to risk management. This is an important aspect of crypto trading and needs to be discussed in detail.

The success of your crypto trading strategy will also largely depend on your attitude towards the risks involved in it.

Be careful about the risk profile that may be different for different crypto coins. This profile should include:

  • The amount of capital available with you to trade with
  • The level of risk that you can take on for every trade you make and much more.

Then comes managing your risk which is as important as knowing them. For example, if you want volatility then make sure you also know the significant risks that it comes with.

This will allow you to manage your risks much more effectively and efficiently.

When you set up your crypto trading risk management plan, it should include two specific aspects such as:

  • The stop-loss orders and
  • The limit-close orders.

You should set each of them based on your needs and also on the specific parameters of your trade that you have set out.

When you set the limit-close order, it will ensure that you lock in profits since it will automatically close your positions when the market moves in your favor by a specific amount.

On the other hand, the stop-loss orders will close your position automatically when the market moves against your favor so that you do not incur a loss that is not acceptable for you.

However, if you are taking help of the derivative products, you will be better off when you fix a guaranteed stop to your position.

This will ensure that your trade is protected automatically if and when it moves against you.


Irrespective of the specific crypto trading strategy you follow, you should know about the different factors that may affect it.

This will help you to select the best and most productive strategy. Hope this article will help you a lot in this regard.