7 Successful Strategies of Crypto Traders

Let me pull back the curtain. To get a pulse of how traders think about the current crypto landscape, it’s instructive to see how this very article has evolved. Originally I intended it to be called, “How Traders Find Edge in Crypto Winter.”

Except traders had another message for me: It’s not crypto winter anymore. “Bitcoin not up +130% for 10 straight months in bear markets,” trader Adrian Zduńczyk told me on Twitter/X DM. Zduńczyk believes the early phase of a bull market began in January 2023. “Many projects still mistakenly refer to it as crypto winter or bear market,” says Zduńczyk, “when they mean a slow economy.”

This post is part of Consensus Magazine’s Trade Week, sponsored by CME.

The question is more than academic. For many traders, understanding the macro environment is essential to planning even short-term moves. It’s one of the oldest saws in business: The trend is your friend. In a climate where prices tend to rise, you are “long biased” and can draw shorting blood. Conversely in a bear market.

Some traders have embraced what could be a Crypto spring, while others are still shy and scarred by the bear market. “It is difficult for traders. We’re human, we’re emotional,” said Christopher Inks, who runs the trading group Texas West Capital. Inks says that for many traders who were so used to the sluggish price action of 2022, “there is a recency bias, and it can be hard to get the idea that the bottom is in.” Inks, like Zduńczyk, is a believer in a new bull market because “the fact is we’ve been rallying for about a year now.”

And then there are other traders who are indifferent to the direction the wind is blowing — they will happily go long or short. “From my perspective, it’s always a bull market. Always. We don’t care about which direction the market is going,” says Paweł Łaskarzewski, who manages the hedge fund Nomad Fulcrum. “Depending on the sentiment, we use different strategies, and maybe go short more than long.”

So this is the first of two disclaimers: Not all traders trade the same way, have the same strategies, or view the market through the same lens. If they did, there would be no trades by definition – every buyer needs a seller.

And the second disclaimer is one you should spot a mile away: None of this is financial advice. Please do not buy or sell anything based on a quote you read in an article. Do your own research. Eat vegetables. Wear sunscreen. Call your parents on their birthdays.

With all that said, here are seven strategies that crypto traders are currently using to find that most elusive and coveted term – Edge.

Adrian Zduńczyk, who runs a trading group called The Birb Nest, has a certain set of rules and signals he uses to enter trades, which are often breakouts. Those signals are the same in bear or bull markets, but what changes are now, they “lighten” more than in 2022. “I buy when there is a confirmed price breakout,” Zduńczyk says.

Often these trades fail, as Zduńczyk says his win rate is only 30%. “I lose money for a living,” he says with a laugh. But he keeps a tight stop loss (the maximum he can lose for each trade) and lets the winners run, so his 30% winners make up more than the 70% losers. That math is the same in crypto winter or in crypto spring, but now he spends more time on trades than sitting on the sidelines.

This one is courtesy of Wendy O, former CoinDesker and host of The O Show. If a project she invested in starts to “moon”, she starts taking profits and then recovers her initial investment. “Whatever I have left is my moonbag. I own it free and clear,” says Wendy. Then she sometimes picks that bag on a staking platform (if available), so she can earn passive income while she waits for it to moon.

Paweł Łaskarzewski, who is indifferent to bull or bear markets, shares an example of two assets that are correlated in price action. “Tesla is going in the same direction as NASDAQ,” he says. You can then draw two price curves – one for Tesla and one for NASDAQ. “If the spread between them grows, we can make money on the spread. We don’t care if it goes up or down.” The same principle can be used for the forex market (like the spread between the US dollar and the euro) or in crypto, like the spread between Bitcoin and something like Solana or BNB.

Over 100 years ago, a financial technician named Richard Wyckoff developed a theory that the market moves in cycles, and that understanding these cycles would provide signals about when to buy and sell. They are still used by traders and are known as the Wyckoff market cycle. Christopher Inks studies the charts and uses these cycles to guide his compositions. “My edge is actually this understanding of market psychology,” says Inks. “Being able to read price action and volume.” Inks says these cycles occur on both the longer horizons (weeks and months) and even on the shorter time frames (minutes). It helps clarify the direction of a trend, says Inks, “and one of the best things traders can do is trade in the direction of the trend.”

Many crypto traders are also stock traders and forex traders, looking for the best setups wherever they may appear. “Why limit yourself?” says Łaskarzewski. “Why limit yourself to only the crypto market when you can also earn money elsewhere?” Łaskarzewski’s firm regularly moves capital from crypto to oil to Tesla to gold and back to crypto, and yes, the tokenization of RWAs is part of that larger strategy. “The role of tokenization is 100% important,” says Łaskarzewski, adding that his firm will launch its own RWA token in January, which will allow more investors to buy into the fund.

Wendy O emphasized several times in our call that none of this is financial advice – so I’ll repeat that message here – and added that she doesn’t personally use much leverage. “If I do, something like 2X or 3X, max,” says Wendy. Łaskarzewski agrees, noting that excessive leverage is one of the ways newbie traders get crushed. “They do a 1-to-100 leverage and the market moves 1% in the wrong direction and they lose everything,” says Łaskarzewski.

An oldie but a goodie, and an important part of Nomad Fulcurm’s toolkit. “We have night scalpers and day scalpers who work on different time frames,” says Łaskarzewski. “Hours, minutes and quarters.” The basic principle: You identify a range where the price is a yo-yo — let’s say it tends to bounce up when it hits $15 and then “reject” (move lower) when it hits $20. There are a bunch of sophisticated metrics (often focusing on volume) that help refine the criteria, but the idea is that you buy at $15 and then sell at $20, rinse and repeat.

Simple in theory, difficult in practice. I know from personal experience because I spent nearly two years trying to scalp US stocks every morning. how did it go Let me put it this way. If it was easy and profitable, do you think I would write this article? Or that’s another way of saying, proceed with caution.