Cryptocurrency trading is buying and selling cryptocurrency for other assets through an exchange. There are several ways to profit from cryptocurrency trading. The different techniques provide crypto traders with multiple options to make intelligent investments and reap good dividends.
Crypto bots and portfolio trackers can give you helpful insights before trading. Combine this with a good crypto strategy, and you’re in for a successful trade. So, while you’re exploring EarthWeb to learn about your favorite trackers, you’ll find in this article some crypto techniques you can use to profit. Learning these techniques helps devise your unique trading strategies, and it’s why you should know them.
1. Day Trading
The term ‘day trading’ originates from traditional markets where trading is done during specific day hours. Day trading usually involves entering and exiting positions on the same day.
For crypto traders, day trading refers to a short-term trading technique in which traders enter and exit market patterns within 24 hours. In this technique, you capitalize on price moves within one trading day.
Day traders often deploy price actions and technical analysis to develop trade ideas. They may also utilize many other techniques to spot market inefficiencies. Although the method is profitable, it’s often taxing and may involve high risk. Due to this, it’s adopted chiefly by more advanced traders.
2. Trend Trading
Trend trading can sometimes be referred to as position trading. It’s a technique that involves holding a position for a more extended period, say a few months. Trend traders try to take advantage of directional trends such that during uptrends, they may enter a long position and, during a downtrend, a short position.
Utilizing this technique typically requires fundamental market analysis, but that may not always be the case. Nonetheless, trend traders consider events that may take a long time to play out and take advantage of such moves.
The trend trading technique assumes that the underlying asset will keep going in the direction of the trend. However, the possibility of a reversal is also acknowledged. As such, relevant measures are incorporated into the technique to mitigate financial risks and increase the chance of success. Trend trading is ideal for beginner traders
3. Swing Trading
Swing trading is a long-term technique that involves holding a position longer than a day but not exceeding a few weeks or a month. Somehow, this technique goes in between day and trend trading.
Swing traders often take advantage of volatile waves that take a few days or weeks to play out. They combine technical and fundamental analysis to formulate their trade ideas. This technique may be the most convenient active trading technique for intermediate traders as it naturally may take a longer time to play out.
Nonetheless, it’s short enough to make it not too difficult to track the trade. With this, traders can have a little more time to analyze their decisions and react to how the trade unfolds. Thus, swing trading requires hasty and more rational decisions, which may sometimes not be ideal for beginners.
Scalping is one of the quickest trading techniques available. It’s a technique that doesn’t seek to maximize big moves or existing trends. Instead, it focuses on exploiting small movements repeatedly.
Scalpers profit from bid-ask spreads, gaps in liquidities, and other existing market inefficiencies. You can find scalpers opening and closing positions in a few seconds. This is why this technique is usually related to high-frequency trading (HFT) or high-speed orders.
Furthermore, scalping can be lucrative, mainly if a trader locates a repeatedly occurring market inefficiency to exploit. So, the technique is ideal for a market with high liquidity where positions can be changed smoothly. However, it isn’t recommended for beginning traders because of its complexity. More so, it requires a deep understanding of market dynamics
Buy-and-hold is a passive investment technique whereby traders buy assets to keep them for a long time, regardless of market fluctuations. This technique is usually deployed in long-term investment portfolios where the idea is to penetrate the market without factoring in timing as a significant consideration.
The idea behind this strategy is that the timing or entry price of the asset will no longer matter after a long while. The buy-and-hold technique primarily rests on fundamental analysis rather than technical. While this technique is well-known with Bitcoin, it may not suit other cryptocurrencies.
Having a background in the existing crypto trading techniques can help you design trading strategies that fit your financial goals and personality style. To find out which method is best for you, keep track of the aforementioned techniques and study which suits your goals.