Choosing the right trading style is a vital part of becoming successful in the crypto market. But choosing a suitable style is not an easy task, and we are here to help.
Before learning the trading styles, you need to know there are two main types of trading: long-term and short-term.
The long-term traders are after the long-run gains. They are always looking to gain from the rise in value after some time, monthly or yearly.
Most of the long-term trades involve buying the coin at some of the cheapest values. The traders then wait for it through the different market phases. They won't let go, irrespective of the market circumstances. They only sell when the coin is at its peak.
Short-term trading, however, is all about instant gains. It involves looking for market movements within a short period. It can be as quick as minutes or hours. One can easily buy and sell the asset several times within a day or week.
Short-term trading is a great option if you want to make fast money, but it requires lots of time, knowledge, and experience in trading.
Here we will present the different styles of crypto trading. You can pick a style or many styles that suit your financial goal and situation.
The following list is not listed by the effectiveness but by the length of each trade from Scalping to Investing. Enjoy.
7 Styles of Crypto Traders
Scalping
Scalping is a popular trading strategy in the cryptocurrency market. This trading strategy allows traders to profit from little price movement at frequent intervals. The goal is to make constant profits to generate a substantial amount over time.
Scalpers take profits quickly and will cut losses just as quickly. They often use leverage to open more trades and tight stop losses to manage risk. Scalpers trade using one-minute, 15-minute, and 30-minute time frames. Their trades usually last for a couple of seconds or minutes but typically less than one hour.
This type might have you buy ETH at $1000, then sell at $1020, then buy at $1010, and sell at $1030. In those cases, you might place a tight stop at $990. Or you might have the rule to scale out of your position by hand if the trade goes against you. You will rarely just let your positions run and take profit at any time you wish.
Scalping is time demanding and quite involving. This requires constant focus, and the traders must monitor and understand the impact of every market change. They also have to understand the trading fees. A trade that comes with higher costs than profits doesn't make sense.
Scalpers tend to make low profits. Still, they get to enjoy the security that comes with assured earnings. A great scalper must know how to make proper decisions under pressure. This requires understanding risk management and near-perfect trading skill.
Day Trading
Day trading involves entering and exiting positions on the same day. Day traders aim to capitalize on intraday price movements.
Day traders trade on timeframes higher than that scalpers but still close their positions within a day. The point of day trading cryptocurrency is to profit from tiny market movements and volatile bear and bull market activities.
Day trading strategies are devised using technical analysis. However, like scalping, day trading is a time-consuming and risky strategy more suitable for advanced traders.
Day traders are devoted and have the time to monitor the markets all day. They also have a sentiment about market trends and their impact on the price. They are mostly involved in the market during the most active hours. In most cases, they make a living out of crypto trading.
Day trading, however, requires a bit of caution. The market price changes are swift. The day traders keep safe by having a limit for every stake. It is like scalping, but instead of making trades over the course of minutes, they typically make them over the course of the day. They are looking for a little more profit on each trade than a scalper and typically have more tolerance for volatility.
A day trader might scalp, trade the range, or even take short-term position trades in a single day. They are day trading because they aren't holding their position overnight. And because of that, they might have a good night's sleep.
Intraday Trading
This is day trading, but a style of day trading that allows for holding positions over more than one day. Simple as that. The reality is traders do this and there is no rule that it can't be successful. In crypto, the market never closes, so there is no end to a trading day (the best we get is daily candle closes). With software, you can automate positions and in this respect, there is not specifically a reason to close a short-term position just because the clock strikes 4 pm or whatever.
Range Trading
Cryptos will constantly define a range they are trading in. Generally, this range will be a type of consolidation region (either accumulation, big players getting more coins for the next leg up, or distribution, selling coins at a high before the big players let the market drop).
A range trader trades the range and sets stops, they don't really care if they are trading the range at the all-time high, or trading the range at the local bottom, as they are simply buying the bottom of the range with a stop, and then selling the top of it (or scaling out toward the top).
When you have a range you have clear support and resistance, so trading it makes sense. While others trade the breakout or breakdown, you focus on making profitable and predictable trades in the current range.
This can be a type of day trading or intraday trading, but the goal is to trade the range, not to buy into an uptrend nor buy after a downtrend.
Swing Trading
Swing trading is a short-term trade with a specific target. Unlike scalpers who are ready to jump ship at any time, swing traders are more grounded. They don't react based on market changes as long as they understand their long-term goal.
Swing traders rely on technical analysis. They observe the current and past asset market behavior to determine future prices. They understand that price dips and other changes in between are part of the movement to the ultimate price.
Swing trading is one of the most popular. Most crypto traders rely on market signals and indicators to predict future prices when investing.
Crypto and other financial products usually go up and down in waves, and swing trading is all about finding the bottom of the wave and riding it to the top (with long positions; the opposite with short positions).
Swing traders become better with time. The more one trades, the more conversant they become with the market tools and analysis.
With swing trading you will open a position (sometimes gradually) at what you calculate to be the local bottom AKA support, then you will aim to HODL your position all the way to what you believe to be the local top AKA resistance (generally gradually scaling out of your position to lock in profits). Obviously, it is the reverse logic for shorting, you aim to short the top of the forming trend to the bottom.
Trades executed using this strategy usually span more than a day, but usually not longer than a few weeks or months. As a result, some people refer to this strategy as a medium-term trading strategy because it sits between the day trading and position trading strategies, giving traders more time to consider their decisions.
You won't get to make spontaneous decisions as you would in a shorter-term strategy—you can make trading decisions with less emotion or rationality, which is why this trading style is usually recommended for beginner traders.
Position Trading
Position trading allows traders to hold trading positions for a long time. It could be months or even years. Traders using this strategy usually ignore short-term price movements and focus more on long-term trends. To make this type of trade, traders usually focus on the daily, weekly, and monthly timeframes. Position traders also use fundamental analysis to evaluate potential market price trends and consider other factors such as market trends and historical patterns.
Position traders typically trade over the course of weeks or even months—in fact, position traders are often confused with investors due to their lengthy time horizons! Unlike swing traders, position traders prefer to identify a trend and place a trade alongside the trend as opposed to trying to catch a proverbial falling knife by predicting a reversal.
This is the simplest form of trading, but it also takes a lot of discipline. Consider someone who has been long on Bitcoin since $10k. Bitcoin has gone to the high of $64K, dipped to $29K then rise up to $69K. A disciplined position trader potentially sat through those events without panicking or FOMO-ing (although they perhaps scaled out of some of their position or reopened positions or perhaps they exited completely when the trend turned against them fully after a considerable drawdown from the top).
Position trading is like a zoomed-out version of swing trading or like the trading version of investing. Here you'll try to build/take a long position low or short position high and then stick with that position for weeks, months, or even years.
Investing
I don't consider investing and trading to be the same thing. Trading is all about taking a position and aiming to take a profit. Investing is all about having ownership of an asset as a store of value with a very general goal of increasing that value over time.
Investors are more likely to sell their position because they don't like the direction of the asset's price than they are to sell their position due to its current dollar value.
An investor isn't necessarily going to set a stop loss. Instead, they will build a position in the asset and stick with their investment for as long as the reason they made the investment in the first place is true.
An investor is a true HODLer, they really don't need to look at prices and charts unless they are looking to add to their position at a good price.
Investing is not trading, but ultimately buys and sells are made, and it is important to understand that this style will suit some.
How to Pick the Right Style for You
As said above, choosing the right trading style is a vital part of becoming successful in the crypto market. Your personality and the time frame you choose to trade on will determine your trading style.
Scalping may be a good option if you are comfortable spending the entire day seated in front of your trading chart and entering and exiting multiple trades at regular intervals. On the other hand, you may find that a longer trading strategy, such as swing trading, is better suited to your needs if you intend to trade part-time while also carrying out other activities.
When developing a trading strategy, the amount of time you plan to devote to trading is a very important consideration to take into account. Scalpers seek profits from only a few pip increments on each trade. They trade in high volumes each day, repeatedly entering and exiting the market. On the other hand, swing traders will leave their trades open for a period that can range from a few days to several weeks or even months.
There is no "best" trading strategy that can be generalized to work for everyone because this is something that relies heavily on the individual trader. Rather, the "best" trading style is the one that works for you.
It is not an easy undertaking to develop a crypto trading strategy suitable for both your financial goals and personality type. After going over some of the most popular crypto trading techniques, we hope you will be able to determine which one will work best for you.
Keep a journal where you record the results of your trades to easily determine which ones are truly successful and which ones are not. Follow and keep track of each trading technique you employ. Be careful not to deviate from the predefined rules you establish for yourself to determine which approaches are producing the desired results and which are not.
A famous saying by Bruce Lee: "I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times."
Remember to always manage your risk, and trade with discipline. Have fun.
