There are 4 trading styles of cryptocurrency trading that can be distinguished by means of the time frames within which single trades take place. For instance, you can trade daily such that you collect smaller profits over time or use a long term market movement to enter positions instead of holding.
The particular trading style to select will depend on your personality, how you like to trade, lifestyle, time you can spend on trading and your goals. Again, different trading styles have certain advantages over others.
Trading every day is a good option if you want to see profits and results on a daily basis. Basically, you speculate prices of currencies and buy and sell within the course of a day in order to make profit. It is a good option too if you make a living out of crypto trading or are a person who enjoys trading.
However, this style comes with a number of challenges because, for instance, you need to manually move your stop loss order to the next level in order to avoid loses and to lock highest profit possible until when a trend is reversed.
Again, there are several risks involved inside of crypto day trading with research showing that 80 percent of day traders fail in their first year when starting out because they lack the education, experience, insight and have no risk management systems.
Therefore, capital loss is one of the greatest risks among crypto day traders. Hence you might want to refer to some crypto trading education including the main mistakes possible, charting and charting tools, how to do it, different indicators to use in crypto trading, how to speculate prices and have a risk management plan.
Also, many people start trying out with demo brokerage accounts that allows you to trade in real time and from where you get lots of experience trading cryptocurrency. Besides the shock of losing capital, you can also get psychological addiction out of high wins. But those are not the only risk; you can encounter a lot of false information that can alter your speculation accuracy and land you in losses.
False information and hype, can, for instance make you to buy at the wrong time. That said, Reddit, Medium.com, Twitter, Bitcointalk.org, Steemit and news/analyses websites are the places you can find information and news about the market and which information can be very helpful for a day trader, but also there is exposure to fake news you must manage.
Other challenges include need for high level commitment and high stress as you pay attention to price movements each and every time.
If you never heard about it, coin holding or hodling comes with some disadvantages that may make you switch to some other trading strategies such as intra-day trading and others discussed below. For instance, there is no linear calculation or estimation of what you might get in the specified holding period.
Therefore, while hodling is a very good alternative for an coin hot out of an ICO or rather a coin that has just been bought during the ICO (as well as other specific cases when there is some certainty that the market is to rise), you may want to engage in trading to earn profits. Many do hold and trade at the same time.
The good thing with day trading is that you still can set stop loses etc.
Day trading is a good strategy if you are available for the better part of the day and are not willing to stack large amount of coins in your wallet and wait for a considerable price increase to sell.
Also, this strategy is more suitable for people who are starting out to trade crypto because you will have some time to know how your day went on. It is more preferable for people who like security and feel in control, and as mentioned earlier, those with a lot of time to do trading. However, it won't come out well if you do not like like technical analysis, are an expert trader who makes a living from trading crypto and if you like long-term trading.
That said, it is most recommended for a level between a complete novice and a proficient trader.
This is a type of day trading which is extremely active and which aims at taking profits out of the smallest intra-day price movements but a lot of them. In other words, you are targeting at making smaller profits by doing too many trades. It is a good tactic if the trading fees are low or spread is small. As long as you have a high percentage of trades making profits, you will be successful but this is essential because you are not targeting bigger moves with high profits at once.
Trades usually end in a few seconds to minutes. This is a good strategy to gain experience in trading.
In this case, you can start with a goal, say to generate 1% two times, three, four or even five times a day and in most cases, volatility should work your way looking at majority of the coins. Even if you were trading Bitcoin at worst times, a 15 to 30 minute duration is enough to make profits in day trading.
For scalping, while the price can go up and down within no time, all you need is a good entry (buying) and (selling) position. A good entry position therefore is characterized by, for instance, all the candlesticks that follow each other appearing to be green in a trend chart. That's because even during downward trend periods, there are high margin opportunities for intra-day intervals.
Most traders use indicators such as MACD, EMA, SMA, RSI but although they can work for scalping, never rely on them blindly. All entry positions are about identifying a "low moment" for prices when prices are likely to go up even so momentarily, and then selling at a "high moment" for prices.
The "turn around" strategy, for instance, relies on using 30-minute candlesticks or other lesser intervals for a lower ROI even if it means a 0.5% ROI. Then you can watch for the a “U” or “V” shape in the candlesticks and buy. Better still, you can buy at lowest point (the valley) of the U or V shape although that requires lots of guess work and is not practical to detect.
And of course, there will be several times when you make mistakes and loses. The strategy relies on making sure the percentage of gains is higher than that of losses so you end up with profits.
This type of trading is more suitable for those who prefer quick strategies and outputs, and prefer to react more than analyze, the impulsive, and those who have the time to trade and stable and fast internet connection.
It won't be a good strategy if you are quickly distracted, prefer to analyze than react, do not want to take a a lot of risk, and if you do not like to work under pressure.
This strategy of trading cryptocurrencies targets at trading on a higher time frame ranging from days to weeks. You avoid constant monitoring to concentrate on entering bigger positions and gain huge price margins. This strategy ignores intra-day moves but also relies on stop loss orders. It allows you to focus on the big picture in the market. Most whales rely on this tactic.
This is a good strategy for you if you are a patient trader with some good amount of capital. It can be a good choice if you are sort of busy person and have no time for day trading.
However, swing trading doesn't have to last for long. It can go from hours, 2 – 6 days up to a couple weeks.
For a swing trader, there are many indicators that are of huge interest. Most use candles from 12 hours on-wards with other essential indicators and technical analysis is of great importance. Volume movement and capitalization are on top of the list because this kind of a trader is looking at a bigger picture. Such trends can be afforded by using Fibonacci Regressions, Gann forks, Bollinger, EMAs, etc. although MACD, RSI, Stochastics are most common indicators in this category.
It is a recommended tactic if you have some background in Forex, have some knowledge of statistics and enjoy doing technical analysis or following such bits of advice, do not need profit immediately, are a patient and calculating person, have a wide margin of Stop-Loss and Take-Profit, and are risk averse.
But like many other tactics of cryptocurrency trading, it may not work if you are impulsive, do not like technical analyses, are nervous to leave open trades without being in control of what happens when you sleep, are a Weak-Hander, and if you fall prey to the FOMO and the news.
This is comparable to investing than it is to active trading. Your trades run from a period of months to even years. The most important thing in this case of trading is to identify which tokens are likely to perform well on a long term although technical chart analyses are important.
As a starter, you might be interested in an in-depth study and the common candles used range from 1 day to 1 month.
This is a good strategy if HODLing is your thing, can enter position and maintain it despite the different opinions, are a very patient person, and if you have eyes on the long term and have much deeper expectations. It is more preferable if you do not rely on short term market behavior and instead look at the aspects that influence the market.
Thus, it won't be a good idea if you prefer going with the trend of a market even if you think differently, need the money you invested in crypto, prefer to do technical analysis without having to watch “the big picture,” and if you get too excited at excessive gains or gets too afraid of a possible fall.