With the bullish trend of the crypto market in the past few days, investors are starting to flock again after they have temporarily exited the market during a series of consecutive crashes. But now they are back and starting to pour their money either as traders or as investors for startup blockchain projects. There are different styles of trading cryptocurrencies. These include scalping, day trading, range trading, intra-day trading, swing trading, position trading, and investing. But in this particular article, we will focus on the top popular styles among crypto traders namely scalping, day trading, and position trading. What makes them different from each other? Let’s discuss them one by one and determine what best suits you.
Top Trading Styles for Crypto Traders
Here are the top three trading styles among traders today. If you are a new trader, it’s best to know which of these styles matches your goals. Or you can also mix one style with the other depending on your preference.
Scalping is about making quick trades that aim for quick profits regardless of the amount. You take profits quickly and cut losses quickly as well. It can be done every minute or several times a day. You can scalp by spot buying and selling digital assets. Spot pertains to the price of an asset for immediate delivery or the value of an asset at any exact given time. In this case, traders take advantage of the small differences in prices that happen in limited time frames. First, they buy a digital asset in a centralized or decentralized exchange of their choice. After buying, they can choose whether to set a specified price immediately after conducting a careful technical analysis. If their analysis indicates it’s an upward trend, they take profit from the top. But if it’s the opposite, they exit their entry and sell their assets even on break-even.
- Day Trading
Day trading is very similar to scalping but as the word indicates, instead of making quick trades, you make them over the course of the day. It can be done by performing several types of trading in a day with the goal to earn more profit. Day traders can enter positions through scalping or range or short-term position trades in a single day.
Also, day traders typically have more tolerance for volatility and might let some of their positions run. If you are one, you can use different trading tools as guides in making the right trades. One of these is the money flow index indicator. It is a simple technical indicator that monitors the influx of investor’s money and is highly reliable. You may opt to choose digital assets that have high volatility and liquidity.
- Position Trading
Position trading can be compared to that investing. Here a trader may enter a long or short position and stick to it for a period of time which may take weeks, months, and even years. In the crypto world today, position traders can be referred to as “hodlers”. Whether the price of the cryptocurrency plummets or even surges, they continue to hold on to their positions with the end goal of making a killing based on overarching trends.
Though this trading style is very simple, it takes a lot of perseverance and discipline as well, especially with the current BTC (bitcoin) price swings. Though cryptocurrencies have been characterized by their volatility, the crazy price swings of the most dominant digital asset, BTC (bitcoin) made them more volatile. To simply put it, as a position trader, you had to close your eyes during those events and wait for the proper time to make a killing.
Other Factors to Consider for Traders
Choosing the right crypto trading pair for you is also very important as it helps to determine how much profit you can make. The most popular trading pairs today include the top cryptocurrencies like BTC (bitcoin), ETH (ethereum), BNB (Binance Coin), DOGE (dogecoin) that are usually paired with a stablecoin like USDT (tether).
Do you lose money in trading? Given the volatility of digital assets, losing money can become inevitable. An upward trend means profit for traders but a downward is the exact opposite. So, whenever you decide to invest in crypto, invest only what you can afford to lose. Don’t risk all your hard-earned money or your retirement plans. Diversifying your portfolio works in any investment. What does this mean? Some spot traders invest all their money on a single asset only. So, when the price of that crypto asset plummets, they suffer huge losses. To avoid this, you may invest in different virtual assets.
Also, crypto traders should not rely on their emotions when opening or exiting a position. Stick to your chart. It’s best to keep a trading journal to monitor your trades. Here you can review your previous positions and learn from bad ones. It will help you not to commit a trading mistake twice. When you are equipped with the right knowledge and use the right trading tools, you can avoid incurring losses by staying focused and not being swayed by FOMO and FUD. Unfortunately for some, they even had to sell-off if they have not performed the proper technical analysis and simply relied on their emotions.
Trading cryptocurrencies is definitely one of the most lucrative investments in the crypto industry today. But just like any other investment, you have to be wise. Do your research before you delve in. Always weigh the pros and cons. Only invest money that you can afford to lose.