Did you know you there are different types of crypto traders? Crypto is volatile in nature and hence, there is a greater chance to make more money compared to trading other assets. In this post, we are going to learn the different ways to trade crypto. After reading this post, you will learn about different crypto trading techniques like Scalp trading, swing trading, day trading, positional crypto trading and swing trading. We have also discussed the differences among the different trading strategies.
Scalp Trading
Scalp trading is a trading strategy which is suitable to be employed for a short term. For multiple times in a day, you keep buying low and sell high. This is also known as scalping. For scalp trading to be successful, the trader should be able to take advantage of the crypto market fluctuations. The major factors that will lead to successful results are consistency and time. The crypto pair chosen by the trader is required to be highly volatile. The movements, changes and fluctuations in the crypto market is key to generating profits.
This trading strategy has less exposure to risk when compared to other trading strategies and provides profit on the spot.
Scalp Trading can be categorized into two:
- Manual: With manual crypto scalp trading, the trader is required to constantly monitor the market. To generate profits, users should open and close trading positions on time.
- Automated: With automated scalp trading, users are needed to create a special program to support their crypto trading strategies.
There are several types of scalp trading strategies such as crypto range trading, bid-ask spread, arbitrage trading and margin trading. 5 minutes to 30 minutes charts are the best suited time frames to execute scalp trading. The three elements which form the basis for scalp trading are consistency, velocity and skills to read as well as interpret charts.
Popular platforms for scalp trading are Bybit, eToro, TradingView, BitMEX and StormGain.
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Swing Trading
Swing Trading is a trading strategy which is speculative in nature. The trader holds a certain amount of crypto assets for a period of time which ranges from a few days to a few weeks.
This trading strategy differs from day or intraday trading, it does not require constant attention or monitoring. It allows better controlling power over market risks due to drastic fluctuations. The strategy is aimed at experienced crypto traders and is suitable for a small or medium period of time.
Traders are required a formulate a functioning trading strategy with skills and knowledge regarding risk management and crypto trading. Crypto Technical Analysis is a must to follow this strategy. The trader must be aware of trends in the market and react quickly to generate profits. They earn profits most of the time, unlike intraday or scalp trading.
Moving averages, MACD, Bollinger bands are some of the most used indicators for swing trading. Ideas involved in this trading strategy include breakouts, chart patterns and trend lines and many more,
Popular crypto trading brokers for swing trading are Binance, Stormgain and Bybit.
Day Trading
Day trading is a trading strategy for an extremely short period of time, where crypto traders hold a certain amount of crypto assets for a few seconds to a few hours only. Day trading means that the trade is made within the end of the day. The two major methods utilized in day trading are:
- Speculation: This method is when a trader speculates or believes that there will be a rise or a fall in the market for a particular crypto.
- Chart Analysis: Here, crypto traders’ study technical charts, interpret and analyze them and trace the price of a crypto throughout the day.
Day trading is comparatively more volatile and does not guarantee huge profits. It requires practice and experience for the trade to be executed properly. Users can set a stop-loss on their trades as well to reduce risks in day trading. To get started with this trading strategy, look for crypto exchanges and trading platform that supports trading 24/7.
Positional Crypto Trading
Position Crypto Trading allows users to hold crypto assets for a longer period of time from a few months to a few years. With this trading strategy, minor and regular movements in the crypto market are not taken into consideration. Traders tend to use a combination of technical analysis and fundamental analysis, when they utilize this strategy. Positional trading may not be a popular strategy for altcoins, but for BTC it is. It is better suited for stocks, commodities, and major indexes.
The best indicators for positional trading are long-term moving averages, long term trading strategies such as breakout trading, support & resistance trading and trend trading, fundamental analysis and more.
Margin Trading
Margin Trading is a type of trading strategy where crypto traders purchase crypto by borrowing loans from a broker or a third party. Traders can leverage their positions to access this trading strategy. This is aimed at experienced users and is comparatively volatile.
Margin Trading is available on various popular crypto exchanges and platforms such as Kraken, Binance, Huobi, Poloniex and more.
Scalp trading vs Swing Trading
Both theses trading strategies are employed for a short term.
Scalp trading or scalping comprises of multiple trades executed in a few seconds or minutes. This requires constant monitoring and observation of the crypto market. 1-minute charts, 5-minute charts, or transaction-based tick charts are some of the charts followed by scalp traders. This type of trading is stressful and is not suitable for beginners.
Swing trading is a trading strategy for crypto traders to observe trends and act on them by executing trades. These traders use technical analysis and chart analysis. Swing trading is a lot more flexible when compared to scalp trading as it does not require attention throughout the day and is comparatively less time consuming. The trades can be executed in a few days or a few weeks. Swing trading can be performed by crypto traders at all levels.
Swing Trading vs Day Trading
In day trading, the trader closes the trading position and executes the crypto day within 24 hours or at the end of the day. In Swing trading, the trader holds the trading position for a few days or weeks, thus it is a long-term trading strategy, comparatively. There are trading minimums set for day trading and multiple trades are executed in a single day, thick requires stringent monitoring of the crypto market. Minor, and day to day market fluctuations do not affect swing trading drastically.
To generate a sufficient amount of profit with day trading, the trader must invest a large amount and is exposed to greater risks. Day trading is stressful, hectic and not suitable for inexperienced crypto traders. Traders who utilize swing trading seek to generate profits in the long run. Hence, it is simpler and not as stressful as day trading.
Day trading vs Positional trading
In Day trading, traders benefit from daily profits by opening and closing trades within 24 hours.
In positional trading, the crypto trader benefits from long term changes and fluctuations in the crypto market by holding their trading position for months or years altogether.
Positional trading vs margin trading
Positional trading and margin trading are trading strategies that are utilized usually over a long period of time. In positional trading, the crypto traders might hold their positions for a few months to a few years. This trading uses fundamental analysis and technical analysis of charts. These charts determine the entrance and exit of a trader in to the market.
Margin Trading is suited for intermediate and advanced crypto traders as it requires knowledge and expertise regarding crypto trading. The trading strategy varies upon the platform the trader chooses, the leverage provided is dependent on the platform as well as the preferred crypto coin for the execution of this trade. Margin traders can make use of the market both ways.
Now that you have learnt about different trading techniques, let us know under comments which trading strategy generates most of the profit for you.
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