Finding your crypto trading style
There are many crypto traders around the world using different techniques and approaches. Over time, a crypto trader will usually specialize a specific style utilizing the same set of indicators looking for patterns in the charts. At the highest level, there are two trading approaches: automated and manual.
Automated crypto trading
For advanced crypto traders, automated trading holds a significant advantage of manual trading because it takes emotion out of the equation. The way they do this is by setting up trading bots, algorithms that follow instructions based on a set of trading signals and indicators. After setting up the bot, traders only need to monitor the implementation of the set strategy. But before you put your crypto portfolio on autopilot, you need to learn how to fly.
For that, only manual trading will do.
Three main crypto trading approaches
Despite the convenience of trading bots, many traders still enjoy going through the trading process, from preparation to execution of the trade and it is strongly advised that you do the same before you enter bot territory.
There are many trading styles, but in the context of time frame, there are three different trading approaches: scalping, swing trading and long-term trading.
Scalping is a popular strategy where crypto traders execute a higher number of quick trades, focused on smaller profits. Many of the traders that use this method believe that a trade should be closed as soon as it enters positive territory - excluding trade costs. Due to the small gains, scalpers aim to take as many small profits as possible.
Scalping is usually applied on smaller time frames (1-min to 15-min). The trades are quite short in their lifespan as traders aim smaller gains. These types of traders also believe that a brief exposure to the market decreases the exposure to risk and volatile moves. Scalping is mostly used during horizontal markets when the market is undecided.
Technical traders use basic indicators such as trend lines, Fibonacci retracements and extensions and moving averages to identify scalping opportunities.
The swing trading approach is focused on trading movements in price direction, with trades being open from a day to a few days/weeks. For this reason, swing trading is regarded as an medium-term approach. As such, the purpose of this trading approach is to take advantage of volatile markets.
Certain fundamental factors may push the price in a certain direction, which swing traders may use to “ride the trend” until the price reaches a certain point where they think a reversal is in the cards.
Unlike scalpers, swing traders are much more exposed as they tend to keep their positions open until a certain move is completed. For instance, traders may use the key 61.8% Fibonacci retracement as their entry position to open a buy trade and ride it until the price returns to the previous Fibonacci level - 50%. The presence of technical analysis in this trading approach is higher than in scalping as traders aim to capitalize on certain patterns and formations, identified by technical analysis.
Long-term trading is a crypto trading style adopted mainly by financial institutions and banks that base their trades on long-term fundamental data. Positions are open for at least a few months, with some of these tradse being active for years. Due to their nature, the number of opened trades is limited. Overall, most of the long-term trades can also be seen as an investment as the traders of this type look at fundamentals and the value of the underlying asset.
This type of trading is not so popular with everyday retail traders as the vast majority of them don’t have sufficient knowledge or experience to apply macroeconomic views to global markets. In the crypto world, investors may see the intrinsic value of the project behind the specific digital coin and decide to invest and hold. This type of trader is usually not bothered by daily swings in the cryptocurrency market as they tend to focus their sights on the multi-year outlook of the digital asset and the associated project.
Each investor should analyze the different trading approaches and use the one that fits his or her personality the best.
Scalping will require your presence in front of the screen almost the entire day as you need to identify multiple trading opportunities. Swing trading is for traders looking to capture upcoming swings in the price direction, ranging from one day to a few weeks in duration. Lastly, long-term trading assumes a completely “hands-off” trading approach, due to its focus on the value of the underlying asset in the long run.
Are you ready to put your skills to the test?
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