Navigating one’s way through the world of cryptocurrency trading can be daunting to the unprepared. More than being a successful trader, it is essential to understand how to not lose one’s capital.
The cryptocurrency market is a very volatile one. It offers traders numerous ways of making huge returns and can also provide many ways of incurring huge losses. One of the most important things to be aware of if one is to be a successful trader is the various ‘trading styles’ available to choose, follow and profit from.
Cryptocurrency Trading Duration/Timing
One of the most important aspects to consider before choosing a trading style is how long you intend to stay in the market.
Deciding the best time to enter the market, how long to hold a trade and when to leave the market is one of the most critical factors in choosing a trading style. Some styles are most effective for hourly profit-taking, while others are most effective if you intend to ‘invest and forget’ as some traders say, or if you want to take profits over a few days, weeks, or even a year.
In choosing the duration for your trades and, therefore, the style to follow after, it is essential to consider
- How much capital you are starting with
- How quickly do you need to make a profit
- How much free time do you have in a single day
What Are Cryptocurrency Trading Styles?
There isn’t just one style of trading cryptocurrencies. There are many. Choosing the right one at the right time and sticking to it might be a key determining factor in whether a trader is a successful or unsuccessful one.
Here are a few trading styles to take note of.
Traders who follow this strategy are called ‘scalpers.’ Scalping refers to a trading style in which a trader aims to make small but quick profits multiple times a day. It involves entering the market and placing an order when the trader spots a favorable setup and exiting a trade after making a small profit.
A good scalper can repeat this process multiple times daily and reap considerable profits. However, this style requires proper execution, risk management, focus, and a lot of the trader’s time.
Day trading means just what its name implies. It refers to a trading style in which the trader opens a trade, takes profit, and closes the trade within a single day. This style is called ‘day’ trading because no trade spills into the next day.
Day trading requires mastery over one’s emotions and a lot of focus from the trader.
Range trading refers to a trading style in which a trader defines the range they intend to trade before opening any trades.
Range traders usually analyze the market for long-term goals, setting well-defined support and resistance zones. They then follow this range, setting trade limits, take-profits, and stop-losses to take advantage of critical zones in the market.
Range trading can either happen within a day, a matter of hours, or over weeks. The key defining factor in range trading is the range a trader sets for themselves.
Swing trading is similar to range trading in that a swing trader identifies critical support and resistance zones like a range trader and then rides the market trend to the next support or resistance zone.
A swing trader differs from a range trader in that a swing trader has no predefined range to follow. Swing traders find resistance levels wherever they may be and take advantage of them.
Position trading is the long-term version of swing trading. A position trader follows the same principles as the swing trader, only that a position trader takes a ‘position,’ opens a trade, and sometimes holds on to that position for days, months, and even years.