Basket trading is one of the most popular and profitable ways to trade on any financial market, including the cryptocurrency market.
By selecting several promising assets included in one common position for trading both intra-day and long-term positions, users get a number of advantages that single trading does not have.
All assets, even of the same type, always differ in the degree of return. At the same time, the asset, which yesterday showed an increase of 20%, can bring a yield of no more than 5% the next day, while the adjacent asset, which grew in the previous period by 0.5%, can increase its growth to 10%.
And when investments are distributed among assets from one basket, users can always count on the average return on the overall dynamics of the selected market sector.
Besides the fact that basket trading is able to improve the results of trading in the right direction, it also reduces the risks, averaging losses.
On the cryptocurrency market, even during the period of the strongest dump, there are always several coins, the price of which shows growth. It is difficult to know in advance what cryptocurrency will grow in the conditions of general decline. While in the context of the inclusion of a number of cryptocurrencies in the sectoral basket, traders are more likely to be able to fix the profit from such growth, thereby reducing the risks during the overall drawdown.
Differences from portfolio investments
At its core, basket trading is somewhat similar to portfolio investment, because it is a process of simultaneous placement of funds in several investment assets. But this is only at first glance.
Basket trading has one significant difference from portfolio investment. When an investor or trader makes an investment portfolio, it includes assets based on the prospects of profitability, risk, correlation, and from different sectors of the market. For example, the investment portfolio may include cryptocurrencies related to the SHA256 Bitcoin token type, the ERC20 Ethereum smart contract standard, as well as the Waves, Nem and interblock cryptocurrencies such as Qtum.
Basket trading includes only the same type of assets that belong to the same sector of the market. For example, only cryptocurrencies that are created on ERC20 smart contracts.
By creating a sectoral basket, traders increase the chances of getting the maximum benefit from investing in one, a certain sector of the market. But they do not limit themselves to the possibilities of only one cryptocurrency, thereby increasing the potential for profit.