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Penny cryptocurrency is tradable for several pennies or lower than the $5 for each unit, similar to the penny stocks. At the same time, penny cryptocurrency is associated with higher risk due to a small market cap. However, the penny crypto that includes potential for increasing value is the finest. If the value does not increase over time, it becomes irrational.
Furthermore, numerous aspects stimulate the penny crypto potential. These aspects may be the fundamental worth of the investment or the technology, the team or community of the project, or the trifling publicity. In terms of penny cryptocurrency, getting these kinds of tokens and crypto is possible that are obligated for value increment gradually as a consequence of their present potential.
In the coming section, we will have a look at the top five penny cryptos that you can trade and make easy money in 2022.
What is penny crypto?
Crypto or token whose market price is below $1 is called penny cryptocurrency. Penny cryptocurrencies are distinguishable in four classifications:
- Newly minted penny cryptos
- Fallen penny cryptos
- Plentiful penny cryptos
- Stagnant cryptos
The freshly minted penny crypto means the new coins of the market. In most cases, these coins are not widely famous. Plentiful penny cryptos are the same as their name, and they have plenty of supplies.
On the other hand, fallen penny cryptocurrencies are the cryptos that had been worthwhile beforehand but encountered price fall because of the market shifts. Lastly, the stagnant penny cryptos have existed in the market for a long time, but their price got frozen means neither moved upwards nor downwards.
As these are the diverse classifications of penny cryptos, therefore they must get treated individually. Typically, penny stocks are the same as penny stocks in terms of manipulation and extreme level of volatility.
How to trade using penny crypto in trading strategy?
Trading penny cryptocurrency has become a very in-demand enterprise throughout the world in the past several years. Regardless of its popularity, there are some associated risks in penny crypto trading. In the crypto market space, it is significant to possess a full-grown and substantiated technique throughout the time of trading penny cryptocurrencies.
Let’s check the best penny crypto trading strategies in two types: long-term and short-term trading. Both are substantiated as successful trading along with exceptional risk management and profit ratio.
Moreover, according to your target and risk tolerance, you choose the best-suited strategy with your trading goal and style. It entirely depends on correct anticipation of market price fluctuations whether you will be able to generate profit or not through penny crypto trading. However, setting up unbending rules and theories may be a lifesaver.
A short-term trading strategy
This short term trading strategy has developed based on the MACD indicator and the 20 EMA indicator. We are going to use the MACD lines crossover as a trading signal. Besides, the 20 EMA will be used for trade confirmation. Moreover, we will apply this short term trading strategy on the 15 time frame.
Bullish trade scenario
First, you have to add the MACD indicator and the 20 EMA indicator to the chart. Then, look for the price to break above the 20 EMA with an impulsive bullish candle. Also, look for the MACD lines having bullish crossover above the 0.00 level.
Short-term bullish trade scenario
Entry
After an impulsive bullish candle close above the 20 EMA, you can enter a buy trade.
Stop loss
Place the stop loss order below the last swing level with at least a 5-10 pips buffer.
Take profit
Take the profit by calculating at least a 1:3 risk/reward ratio. Otherwise, you can take the profit when the price breaks below the dynamic level of 20 EMA.
Bearish trade scenario
First, you have to add the MACD indicator and the 20 EMA indicator to the chart. Then, look for the price to break below the 20 EMA with an impulsive bearish candle. Also, look for the MACD lines having bearish crossover below the 0.00 level.
Short-term bearish trade scenario
Entry
You can enter a sell trade after an impulsive bearish candle closes below the 20 EMA.
Stop loss
Place the stop-loss order above the last swing level with at least a 5-10 pips buffer.
Take profit
Take the profit by calculating at least a 1:3 risk/reward ratio. Otherwise, you can take the profit when the price breaks above the dynamic level of 20 EMA.
A long-term trading strategy
This long-term trading strategy has developed based on the 50 EMA indicator and the market structure. In this long term trading strategy, we will add the 50 EMA indicator for understanding the market momentum. Moreover, we will apply this long term trading strategy on the D1 time frame.
Bullish trade scenario
In the long-term bullish trading scenario, you have to identify the price to make higher highs and higher lows. Then you have to add the 50 period EMA on the chart to identify the market momentum. If the 50 EMA takes place underneath the price, it confirms a valid bullish momentum.
Long-term bullish trade scenario
Entry
Enter a buy trade when the price had an impulsive bullish candle close after retracing back to the 50 EMA and make a new higher low.
Stop loss
The stop-loss order should be placed below the swing level with at least a 10-15 pips buffer.
Take profit
The best way to take the profit is by calculating the 1:3 risk/reward ratio. Otherwise, you can ride the trend by targeting the next resistance level.
Bearish trade scenario
In the long-term bearish trading scenario, you have to identify the price to make lower lows and lower highs. Then you have to add the 50 period EMA on the chart to identify the market momentum. If the 50 EMA takes place above the price, it confirms a valid bearish momentum.
Long-term bearish trade scenario
Entry
Enter a sell trade when the price had an impulsive bearish candle close after retracing back to the 50 EMA and make a new lower high.
Stop loss
The stop-loss order should be placed above the swing level with at least a 10-15 pips buffer.
Take profit
The best way to take the profit is by calculating the 1:3 risk/reward ratio. Otherwise, you can ride the trend by targeting the next support level.
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Final thoughts
Finally, if you are planning to invest in penny cryptocurrency of any kind, always crucially keep in mind that a cryptocurrency market is a severely volatile place. In the cryptocurrency market, the price fluctuates at any time, and in most cases, there is no certainty for these fluctuations leading to a lot of shorts at losses.
However, you may make an effort to lessen the risk by having a proper risk management strategy based on both fundamental and technical analysis. It is significant to use stop-loss as your risk management method. Also, do your research and in-depth assessment of cryptocurrencies to robustly support the risk management strategy and to earn a handsome income by dodging the existing risk.
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