Improve your Trading Strategy: How to identify the best crypto pairs

If you want to start your crypto trading journey, you need to know that you will embark on a rollercoaster ride with many ups and downs. This is why you must be smart with your approach and opt for the right crypto pairs, which will really impact your trading journey. If you pick the right crypto pairs, you will have a better experience that will help you maximize your profits. 

Crypto pairs contain two types of assets. One of the most popular crypto trading pairs is the ETH/BTC pair, which shows the price ratio of ETH to BTC. This crypto pair allows you to see the exact dynamics between the crypto market leaders, represented by Bitcoin and Ethereum. 

In this article, we will explore crypto pairs and how to identify the best options for you. 

What exactly are crypto trading pairs? 

Crypto trading pairs are an asset combination found on exchanges where you can trade one type of digital coin for another. In this case, there are two assets involved: the base currency and the quote currency. The base currency is the first currency of the combination, and it is the coin you want to buy or sell. On the other hand, the quote currency is the second asset of the pair. 

There are many kinds of trading pairs you can consider. Some of them include: 

• Fiat pairs: In these examples, cryptocurrencies are connected with fiat money. Fiat money represents traditional currencies, government-issued money. With the help of this trading pair, you can convert digital currencies for fiat money. ETH/USD, BTC/USD, and BTC/EUR are examples of this kind. 
• Stablecoins pair: In this type of pair, users trade their digital coin for price-stable assets whose value is pegged to fiat currencies like the Euro or Dollar. Tether (USDT) is a very common stablecoin used in crypto trading pairs like ETH/USDT and BTC/USDT. 
• Crypto-to-crypto pairs: These pairs involve a direct exchange between cryptocurrencies. The ETH/BTC trading pair is an example of this kind. 

Identifying crypto pairs: The best approach to consider

Take a look at market trends

Market trends are very important when you want to identify the best crypto pair for you. So, keep a constant track of the price changes of the crypto pairs you are interested in. In this regard, it is a good idea to consider both short-term and long-term patterns to make a better decision for yourself. You can use special tools to better identify market trends, such as moving averages and relative strength index (RSI). With the help of these tools, you can see what happens in the market and have a better understanding of the time when an asset could reach a certain price level. 

Fundamental analysis

Fundamental analysis is also essential when choosing crypto pairs, as it allows you to examine specific details about a cryptocurrency. Some of them include adoption, project development, and network activity. Fundamental analysis also consists of a cryptocurrency’s use cases, the team and technology behind it, tokenomics, partnerships, and roadmap. 

However, keep in mind that the crypto space is volatile, and because of this, some factors can influence fundamental analysis. Some of them include interest rates, regulatory developments, and global financial trends. Fundamental analysis can help you make better decisions and increase the chances of a successful and happy outcome. 

Know your preferred strategy

When you are choosing a crypto trading pair, you also need to know certain details that impact your trading journey, such as your risk appetite and trading objectives. After discovering them, you can then better find the crypto trading pairs that apply the most to your approach. 

Other factors to consider when choosing a crypto trading pair: 

• Liquidity: It is better to choose cryptocurrencies with high liquidity in a crypto trading pair, as they ensure they sell more quickly. This feature allows you to consider entry and exit deals. 
• Trading volume: The trading volume is also important, as it shows the digital currencies that are traded the most and are the most popular in the crypto space. 
• Volatility: All cryptocurrencies carry a certain level of volatility, which means that you are exposed to various risks that can impact your chances of success. As a rule, it is essential to consider crypto pairs that match your risk tolerance. If you don’t have that much experience with crypto pairs, then it can be a good idea to be cautious at first and not go for jumpy pairs all of a sudden. 

How to reduce risks when trading crypto pairs

Keep a consistent track of market movements

To reduce risks when trading crypto pairs, it is essential to monitor market movements constantly to see what will happen next. As cryptocurrencies are volatile, their price can be impacted by news or other important events. 

Build a diversified portfolio

It is always a good idea to consider versification in the crypto space, as this can help you reduce some of the associated risks. This is why it can be better to spread your funds in more assets and crypto pairs. 

Consider stop-losses

Stop-losses can help you a lot when identifying crypto pairs, as they can protect you better against volatility. With this approach, you can secure your profits better and reduce the chances of experiencing losses. 

Conclusion

When you try to identify a crypto trading pair, you must consider volatility, liquidity, and market trends, among other things. There are many types of crypto pairs to consider, each with its own advantages. For example, stablecoins offer better stability, only crypto pairs provide diversification, and fiat pairs combine digital space with traditional finance. 

So, what you prefer the most depends on your needs and desires. However, it is essential to stay informed and adjust your strategies when needed, as this can help you a lot in your trading journey.