Those new to investing might think that professional traders spend the majority of their time staring at screens day and night in order to analyze the markets and pick the best trades but this could not be farther away from the truth.
Having a good eye isnt what differentiates top traders from average ones, its the application of tried and tested strategies that give pro traders the ability to stay net positive over long periods of time. Today we will discuss how the futures carry trade, funding rate, and use of trailing stops are used by top traders.
Each of these simple strategies do not involve proprietary trading bots or a substantial margin deposit, meaning an investor does not need a massive trading balance to generate profits.
The crypto markets are known for their whipsaw price action which involves many assets rising or falling by double to triple digits within a 1 hour to 24 hour period.
Investors are drawn to the possibility of capturing stellar returns so it might sound crazy to suggest seeking just a 2% monthly gain on cryptocurrencies.
Why would an investor engage in such a low yield strategy? The answer is compound interest. If a trader can achieve 2% per month, their yearly gain equals 27%.
Few traders would be able to match this return consistently by trying to guess market tops and bottoms. Thus, having more reliable gains relieves one from the stress of potential losses and the almost impossible task of trying to time the market.
One great strategy called the carry trade consists of buying a cryptocurrency on traditional markets and selling its fixed-month calendar futures.
This rate can be measured by analyzing the basis indicator, a metric also referred to as the futures markets annualized premium.
ETH futures contracts basis. Source: Skew
This is not a permanent trade as the basis indicator oscillates depending on how bullish investors are. Usually, there is a stronger opportunity in altcoins as there is less competition for those.
Viewing the chart above, take notice of how Ethers (ETH ...
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