Understanding Crypto - Trading Styles
Whenever we talk about Exchanges or Wallets, we always add - choose the one that fits your style. Everyone has their own way to profit from the market and sometimes the profit isn’t even the main thing. A lot of people, especially in the crypto industry, often invest because they believe in the technology and have a common goal.
In this article we will look at the four most well-defined trading styles. Most people use a combination of both and you can use one style when dealing with one asset and a different one when dealing with another. Still, before you change your style, always check if everything is set up accordingly.
There are two things in common when you mention crypto and poker. People always think about that trade or that one game where a person gets thousands of dollars, that one lucky hand. What they tend to forget is what those great poker players do when they are not in a big tournament - they spend all their day in a casino making average profits all day.
That is basically what scalping is. Someone who sits at the exchange most of his day to make small bets with small returns, but if you do it all day, the returns pile up. A scalper buys a coin and sells it after a minute or even earlier. The goal is to make many one-minute or few-second trades to gain profit.
The pros of this are that it is a real way to earn with small investments. If it dips and dips more than you expected, you have not lost much. There is no emotional attachment to any of the assets, they are just little green and red lines you can profit off.
The cons are that this is a full-time job. You start when the markets are more active and constantly buy and sell. And you need to know a lot about the technicalities of the market. When are orders fulfilled, are the markets liquid enough to make a bet, what are the trading fees? If you enter this unprepared, the result won’t be the best.
Most people who make money from crypto daily are day traders. These positions are usually open for an hour or three. They buy assets that are expected to rise in value and then sell them the same day. This is what makes the market liquid - constant stop loss orders and automated systems where one manual trade can trigger three automated orders.
As crypto exchanges do not have opening and closing times like regular stock markets, there is not a real start and end of your workday. A trader chooses the period when most trades are made and the market is most active and joins in. Even so, they need to pay full attention to the market, as they need to predict the direction the market will go.
These are the people who will sell all their assets when good news about the project comes out. The moment a company announces their success, they push the “sell” button. It seems counter-intuitive, but makes a lot of sense. When good news come out, many people will buy the coin to hold it for a long time. And when the demand is high, the day trader sells.
That way they usually do not go to sleep with an open position, so they never wake up realizing that the whole market has crashed during the night. At the end of each working day they see all the money they have earned, put aside the surplus and get ready to invest their “work funds” the next day.
This, of course, means that it is again something similar to a full-time job. If you don’t work that day, you earn nothing. If you make wrong plays, you lose money. If you do not follow the market and can’t predict it, you won’t know where to place the bet. Even if you are pressing the “sell” button just once an hour, the rest of the time is spent reading about everything that is going on in your chosen field.
A more relaxed way of trading that can easily be done as a hobby. Positions are open for days or even weeks. If a swing trader buys a stock on Monday, he doesn’t really care if it dips on Wednesday, he only looks at it on Friday. Sure, he has placed stop loss orders and everything, in case it tanks. Still, small dips and fluctuations don’t bother him.
This is already an “above average” level that not many people are ready for. Sure, you can buy a coin and hold it for a few weeks, but to do it constantly and with success requires a lot of knowledge and finances, as you will not be opening long positions with a few pennies. You have to be ready to invest a considerable sum of money and then forget about it for a week.
Swing trading is best done when you understand the cycle. The economy consists of cycles. Ice creams are best sold in Summer, making it a yearly cycle with 3 active months. Chocolate is best sold on Valentine's day and Christmas, but it does well for the rest of the year too, meaning that it is an average market with two yearly spikes. Pizza? Most ordered on Sunday. Usually at 7 pm. So not only a clear day in the week, but a clear hour too.
All markets, including crypto, also have these sorts of cycles. Many are based on passive things like the general change of optimism to pessimism and back again. That can be seen by browsing various internet forums and seeing what people talk and expect. There are also active things that influence the price like marketing campaigns, new rulings from governments and the like. A swing trader buys “the rumor”, meaning that he buys when folk suspect that great things will happen. And then sells “the news”, when the official statement is released and everyone reads it and wants to buy. Then the swing trader waits for the excitement to die down and buys back in again.
As an individual you can not really spread your funds to many markets. No way can you amass enough knowledge to predict several companies, nor can you follow them all. Only bigger companies swing trade daily - opening positions for a month every day in different companies. If you want to swing trade, find coins that soon will get a predictable boost, buy them and return in a month.
This is the long term. The “hodlers”, the investors, the visionaries. Only for the patient, as this is not exactly trading at all, as you buy and just leave for months or even years. This is done exclusively by believers and dreamers. Folks who believe in the basics of the coin, the technology behind it and the service they offer.
These traders do not care for any short-term troubles, dips, panics, or sell-offs. They know that their investment is sound and everything is going to be fine. There are many stories about people who have actually forgotten that they have bought some coins and remember just years after. As you can understand, this can be only done with disposable income.
A lot of times these traders clash with swing traders, as they can be like two different people. The holders envision a better future with the technology, while someone near them just constantly asks when there will be a profit. Imagine enjoying a great seaside view while someone keeps asking you how much are the shells worth and where can they sell them.
When you see that clash in forums, don’t think that one is right and the other isn’t. They are just different traders. Different traders that do not like to be in the same room with each other, but that is where we are. Without the dreamers there would be no one to carry projects through trouble, but without the day traders there would be no liquidity, no “buzz”.
So there is no right or wrong way to approach trading, as long as you do not invest more than you can lose. The only thing you have to do is set all your things in order for the style that is yours. If you want to scalp, choose an exchange with low fees, good interface and no downtimes. If you want to hold, send all coins to a hardware wallet and go enjoy the sun. They’ll be there when you return.
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