update 18 August 2021

Looking to Profit From Cryptocurrencies? Here are the Best Trading Styles to Use

Several styles of cryptocurrency trading can be distinguished through the time frames within which single trades take place. For instance, you can trade daily such that you collect smaller profits over time or use a long-term market movement to enter positions instead of holding.

The specific trading style to select will depend on your personality, how you like to trade, lifestyle, the time you can spend on trading, and your goals. That said, different trading styles have certain advantages over others.

There are several proven approaches available by which you can potentially profit from cryptocurrency trading. Here is a look at 4 top crypto trading strategies you can use today.

1. Scalping

This type of trading is extremely active and aims to take profits out of the smallest intraday price movements, but many of them. In other words, you are targeting making smaller profits by making many trades, and it is a good tactic if trading fees are low or the spread is small.

If you have a high percentage of trades making profits, you will be successful, but this is essential because you are not targeting bigger moves with high profits at once. While the price of cryptocurrencies can go up and down within no time, all you need is a good entry (buying) and selling position.

In scalping, you can start with a goal, say to generate 1% 2 to 5 times a day, and in most cases, volatility should work your way considering most digital coins. Even if you were trading Bitcoin during its worst times, a 15 to 30-minute duration is enough to make consistent profits in day trading.

This type of trading is more suitable for those who fancy quick strategies and outputs and prefer to react more impulsively than analyze the markets and those who have ample time to trade and a stable and fast internet connection. Trades usually end in a few seconds to minutes, making this a good strategy to gain trading experience.

Scalping generally will not be a good strategy if you are quickly distracted, prefer to analyze than react, do not want to take a lot of risks, and do not like to work under pressure.

2. Day Trading

Day trading is a short-term trading strategy that consists of opening a few positions at the beginning of the day and closing them at the end. This way, there is a greater range of activities and a quieter operation period, controlling the risks of leaving a trade open for a few days and suffering a change of trends by an unexpected event.

Since day trading decisions are made between 30 minutes to a few hours, it is ideal for traders that are hands-on and always searching the markets, not as impulsive as those involved in scalping. Therefore, day trading is a good idea, especially if the trader decides to live out of their crypto trades fully.

In other words, day trading is suited for a full-time trader, with minimal distractions because cryptocurrency prices fluctuate easily, and values can go to favorable points at any time of the day, and you must apply a hands-on approach. To minimize risks on day trading, it is better to trade with limits on the cryptocurrency exchange.

Day trading is also good for people that want the satisfaction of monitoring their investment and growing it at the end of each day; people that have the time to dedicate to it, and those that can keep their eyes out for market trends.

3. Swing Trading

This is the most common type of trading in the crypto market. Normally, because of altcoins’ significant volatility, traders buy a digital coin and then change it to USD, BTC, or ETH to buy another altcoin and keep up their wave of revenue from this swap action.

For a swing trader, several indicators are super important to consider. Most use candles from 12 hours onwards with other essential indicators and technical analyses such as Fibonacci Regressions, Gann forks, Bollinger, and exponential moving averages (EMAs), also being of great importance. Volume movement and capitalization are also considered because this kind of trader is looking at a bigger picture.

Swing trading is a recommended tactic if you have some Forex background, have some knowledge of statistics, and enjoy the technical analysis. It’s also ideal if you don’t need to acquire profits immediately and that you are a patient and calculating person, have a wide margin of Stop-Loss and Take-Profit, and are risk-averse.

But like many other cryptocurrency trading tactics, it may not work if you are impulsive, do not like technical analyses, or are nervous about leaving open trades without being in control of what happens when you sleep.

4. Position Trading

Position trading consists of opening positions and leaving them for several weeks to years, and it can thus be considered a long-term trade just like buy and hold. Sometimes, position trading is used synonymously with a’ holding’ trading style.

Long-term investors are willing to take a significant amount of risk in favor of the possibility of making a considerable amount of profit. An in-depth study is often necessary to know each move’s reliability, so traders must continuously apply fundamental analysis studies.

Position traders are the ones who ask questions and access the coin’s prospects in the market. This style can be suited for any investor who can take a position and maintain it despite the different opinions that the market may spread circumstantially.

Moreover, the strategy typically fits in with traders who do not expect profits based on market behavior but on the aspects that influence the market. It is not ideal for people who plan to live out of crypto trading and is even considered more as an investment than a trade.

Final Thoughts

Trading crypto doesn’t have to be as daunting or risky as many investors who aren’t familiar with the sector perceive it. Even though every kind of trading activity carries a certain degree of risk, crypto traders can minimize the risks if they stick to the trading right.

In general, there are four types of cryptocurrency traders based on the time they take between the opening and the closing of an operation. You can combine two or more strategies, but the important thing is to know how to distinguish them and the differences in each one.

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Crypto trading involves reading cryptocurrency market charts, understanding them, considering the amount of time at your disposal, and working with the different types of orders on crypto exchanges. To be successful in cryptocurrency trading, you have to understand the market very well, but you must know yourself most of all.

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