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There are a few simple means to earn money with cryptocurrencies, and they tend to be most commonly split into two groups: active and passive. Active methods are characterized by the presence of a large amount of cryptocurrency trades on exchanges that are especially designed for that sort of purpose, known as crypto exchanges. Passive methods include storing cryptocurrencies in reserve for long periods or utilizing them for purposes that generate extra income without actively being involved in the process of trading.
Active strategies
Active methods of making money in cryptocurrencies are based on the "buy cheap, sell expensive" rule. It is that you buy a cryptocurrency when it is being sold at a low price and sell it when it is selling at a high price, taking the difference as profit. Active strategies force you to constantly monitor the market, analyze trends and news, and make quick decisions. Active strategies are also very risky, as the prices of cryptocurrencies can move very far in either direction. Some of the active strategies are:
- Speculation. It is short-term trading of cryptocurrencies for gaining a profit on the price gap. Speculators most often use technical analysis, charts, and indicators in the selection of the optimal entry and trade exit points. Speculation can provide an enormous return, but high discipline, skills, and experience are required.
- Scalping. Speculation concept is to make lots of small trades over a short time (from 2 seconds to 5 minutes). Scalpers try to make money on small price changes, with disregard for the general trend of the market. Scalping requires fast reaction, concentration, and access to low fees and fast execution on a crypto exchange.
- Swing trading. It is one of speculation types, which is transactions for 1 day to one week. They also try to make profit from medium-term price changes on the basis of fundamental and technical analysis and psychology of the market. Swing trading requires a good knowledge in the market, patience and strategic thinking.
- Day trading. It is speculation, meaning that the transactions are made within one day. Day traders try to make money on price movements in a short time by using numerous tools and methods such as news trading, trend trading, countertrend trading, and others. Day trading requires enormous discipline, self-control and adaptability.