How to Trade Ethereum: Sure-fire Strategies to Get Maximum Profit

AnalIn the Wild West of cryptocurrency, traders need potent strategies to profit from price movements. When it comes to the second largest cryptocurrency, Ethereum, or Ether (ETH), to name it correctly, things are just the same.

Ethereum has gained so much popularity as the leading blockchain platform for building decentralized applications and issuing tokenized assets such as NFTs. This increased usage has caused the price of ETH to increase in the past few years, albeit with significant volatility.

The best way to profit from Ethereum’s high volatility is to learn how to trade ETH on various timeframes. This article shares insight into three different strategies for trading ETH profitably. These include:

  • RSI Trading
  • Moving Average Trading
  • Range Trading

Just in case you’re still new to Ethereum, you can read the next section introducing what Ethereum is. Otherwise, you can jump straight to the heading about ETH trading strategies.

Ethereum

What Is Ethereum and Why Is It So Unique?

Ethereum is a public, distributed network that, just like based on blockchain technology. But what differentiates Ethereum from other platforms and currencies is its potential to do more than handle economic transactions. It takes blockchain technology to the next level, allowing developers to create the so-called dApps – decentralized applications used for various purposes, including DeFi (decentralized finance) apps, marketplaces, and apps.

Ether (ETH) is Ethereum’s native currency and the second-largest digital currency by market capitalization. It is designed to “fuel” the platform by compensating miners for processing computations. Thus, if you are looking forward to investing in Ethereum, find that you need Ether in this regard.

Ethereum’s native cryptocurrency is used to pay charges, also called “gas fees” when navigating the platform. These fees are necessary to ensure Ethereum’s security and develop other cryptocurrency tokens. And, just like other virtual coins, ETH can be traded with fiat money or other digital assets.

What Drives ETH Price?

To execute a successful trade, you need to understand the factors influencing Ethereum’s volatility. Supply will always be on top of the list, as an increased supply will likely decrease the asset’s price, while a supply shortage will jack up its value. A degree in demand is also a critical aspect when it comes to ETH price movements, as the more individuals are interested in this particular token, the higher its price is.

Let us explore together the most influential factors determining today’s ETH value:

  • Market Sentiment

Events in the crypto sphere will further determine Ethereum’s fate. Remember when Elon Musk declared that he would accept Bitcoin as a payment form for his Tesla cars? He changed his mind lately, as he now embraces Dogecoin, but still, such events have the power to influence a digital token in such a manner that it can double its value in no time. Similarly, big news about bankruptcy or hacks will further decrease the value of a particular cryptocurrency exchange.

  • Whales

Some investors and traders purchase and sell large amounts of a digital asset, hence determining its market value. These whales have so much power that they can manipulate the market, influencing the future of a particular cryptocurrency. For a newbie trader, whales represent a kind of pitfall, as the former are unlikely to guess the whales’ next moves.

  • State Regulations

There might be cases when states put restrictions on a particular cryptocurrency. While countries like El Salvador and the Central African Republic have made Bitcoin legal, some states such as Algeria, Bolivia, China, and Colombia currently have some limitations regarding cryptocurrency use. Such decisions undoubtedly influence an asset’s price, as it may move up or down.

Strategies for Trading Ethereum

If you are interested in trading Ethereum, you must weigh your options carefully. Among the most important factors to have in mind before investing are Ethereum price, market value, and, of course, volatility.

Here are the most popular strategies used when trading Ethereum:

  • RSI Trading

The Relative Strength Index (RSI) can determine the market condition at a particular time. It measures the actual price strengths in relation to the former ones and, thus, says whether a market is overbought or oversold. For example, if the orange line in the price chart reads 30, Ethereum is oversold. But when the RSI indicates 50 or 60, it is overbought.

The RSI usually revolves around two extremes: overbought and oversold, but it has proven, in many instances, helpful. If you are an expert trader, you can avoid the situation where the RSI gives false signals due to the sudden sharp ups and downs in prices.

  • Moving Average Trading

Moving Average (MA) is a technical indicator that calculates Ethereum’s average price over a given period based on critical data points. For individuals that are more into trading with a short-term outlook, the most popular periods are somewhere between 20 and 50, while mid to long-term traders use more extended periods, from 50 to 200.

Many analysts use the MA to determine Ethereum price movements, and believe it or not, the MA is a very appreciated strategy that promises to deliver the correct price direction. Nonetheless, it cannot be used by individuals with the bare minimum of knowledge in the field, as it involves a bunch of data.

  • Range Trading

This strategy often determines a trader’s next move in their trading. Range trading is meant to provide traders with pertinent information regarding a crypto’s range over a certain period of time.

For instance, if Ethereum is trending at a specific value and you assume the value will increase to a few more dollars, the trending range would be somewhere between the actual Ethereum value and the price you believe it will surge.

However, the timing has to be exact while range trading. This is because your funds might be at risk if the Ethereum price does not go in the desired direction.

In summary, the key to understanding how to trade ETH is to understand that its volatility can be to your advantage. You can also apply some of the top strategies listed in this article to increase your chances of making profits. 

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