What type of Trader are you?
There are multiple different styles of trading, most people find a style, stick with it, get good at it, refine it and stick to what they know, others jump around from style to style but you will probably find that its easier to adjust your current style when its not working rather than jumping to a completely different style.
There is nothing that will kill your portfolio quicker than turning into an investor at a high or turning into a day trader at a low (because you are effectively buying high / selling low in those cases).
The main types of Trading Styles are (ordered in shortest to longest term trades)
- Day Trading
- Range Trading
- Intra-day trading
- Swing Trading
- Position Trading
Scalping is about making quick trades, your objective being to make consistent profit regardless whether it’s large or small profit.
One of the best things about Scalping is that you can fit it in around your own lifestyle, meaning you can make quick trades whenever you have time available. This could mean your doing multiple trades every few minutes, once an hour, once every few hours, once a day.
In a perfect world we’d all have the option to go long or short on all our favourite exchanges, alas this isn’t a perfect world so if you don’t have the Long and Short options available to you then you’ll be limited to buying low, selling higher.
Example if you can Long & Short:
You buy ETH (Ethereum) (LONG)@ $100, Take profit @ $110, wait for price reversal then SHORT from $109.5, Take profit @ $105, wait for price reversal and go LONG again, this means you make profit going up, and profit coming down.
Example if you don’t have Long & Short option:
You buy ETH (Ethereum) @ $100, sell at $110, rebuy when it drops to $102 and resell @ $107. This means your only profiting when going up.
Other things to take into account when scalping, use tight stop-losses as sometimes quick moves can ruin your position quickly.
Scalping can be high risk, usually resulting in small quick gains if your well practiced but possible significant losses if your trade turns bad and your stop loss isn’t in place. Set yourself a small, reasonable % profit target and take profit wherever possible, scaling your trade down so that your guaranteeing overall profit.
2. Day Trading,
Day trading – the clue is in the name.
It’s very similar to Scalping but over a longer period of time – but always within the Day.
Now the Day Trading name originally meant that all trades were closed before the Market closed (end of day), now with crypto being 24/7 there is no end of day. Still Day Trading means upto 1 Day.
It works the same way as scalping in the use of stop-losses and scaling in and out of position, the only other difference (apart from timescale) is that a Day Trader is likely to be looking for a larger % profit.
3. Range Trading
Cryptocurrencies generally trade in defined ranges, usually this range will be a type of consolidation where the price fluctuates between lower support and upper resistance.
A Ranger trader looks to buy the bottom of the range and sell towards the higher end of the range. It’s similar to day trading but with stops and profits at pre defined levels.
Simple – or so it sounds.
4. Intra-day Trading
This is Day Trading but over a slightly longer period as the crypto market never closes. Instead of closing all your day trades at the end of your day you can leave them open, adjust stops or even use bots/software to manage the trades for you.
5. Swing Trading
Swing trading is like oversized range trading. You can go straight in or scale into your position at your idea of “bottom” then you Hold (HODL) all the way up, scaling out of your position right to the top of the swing before it starts dropping again.
Timescales on swing trades can vary from days to weeks, remember its not just going to go straight up to your target area (we’d all love that) it will go up in waves, correcting itself as it goes.
This can be quite a relaxed way to trade as your not having to watch each trade constantly, just ensure you have stop –losses in place (although looser stop losses are generally used in swing trades) and you can move them up a little at a time always ensuring that if your trade starts to fall then your still going to be in profit.
TA is quite important in swing trading, analysing patterns and finding likely support and resistance zones, if your comfortable with your skills then this can be a useful trading style reaping decent rewards with less effort than other styles, although as with any style it can be risky.
6. Position Trading
Position Trading is like a larger version of Swing Trading, or realistically it’s trading an investment (investment being the longest holding). Your looking to take a position low (if LONGING) or high (if SHORTING) and holding that position for weeks, months or even longer.
It’s probably the simplest form of “trading” and requires good judgement, calm nerves and pure discipline.
Imagine being in BTC SHORT from $16k, down to todays value. Nice thought!
It’s a long term style, no doubt about that, You can scale in and out and still reach your final goal if you believe you know where a coin is headed.
Could you stay calm through all that the crypto world throws at you, Good news, bad news, Bear markets?
Investing – the purest form of holding (HODLing), I see investing as holding an asset as a store of value, seeing the potential of something at an early stage, putting your money into it and hoping for an increase in value over time – most likely years.We all wish we’d bought BTC when it was born!
It’s not so much a trading style but has a to get a mention as ultimately buys and sells are made.
An investor isn’t likely to be using stop-losses or even watching the market that closely, this is LONG TERM, they’ll usually keep their investment until the reason they bought it in the first place no longer applies (superseded technology for example).