3 Styles for Trading in the Crypto Market Cryptocurrency Trading
The wild price fluctuations of Bitcoin have always attracted a lot of attention to the crypto market. With this, we are now seeing an increased interest in the crypto market by traders who are looking to generate a consistent return in the crypto market. Now, these traders approach trading in different ways based on what is working for them. For new traders, there are a few styles that you can take to be successful in the market. Let’s take a look at the more popular styles.
This trading style is a popular one and is often presented as ‘HODLing’ in the crypto space. This style is best suited for traders who have a long time investment horizon. So, they are looking to hold crypto for quite a few years. Because of this, long-term traders want to hold assets that will still be around for years to come. Now, it’s hard to determine which cryptocurrencies will fall in this category, but long-term traders will essentially have an educated guess by looking at the fundamentals of a cryptocurrency. For example:
- The quality of the development team
- The dollar value of the industry the cryptocurrency is disrupting
- The partnerships formed by the team
These are all useful indicators that suggest that cryptocurrencies which tick the above boxes will be around for years to come, and thus should go into a long-term trader’s portfolio.
The long-term investment horizon that is required for the above trading style is not always appealing to everyone, and instead a middle ground is preferred. Medium-term traders will use both fundamentals and technical analysis in identifying which cryptocurrencies to trade. These analytical tools often include:
- Momentum & Trend Analysis
- Support & Resistance
- Chart Patterns
Unlike long-term traders, medium-term traders will make more frequent use of their trading chart, to spot potential trading opportunities. The timeframe of choice is often the weekly timeframe. They will combine chart patterns with technical analysis to determine optimal entry and exit price points. Some traders also like to use trading bots and signals (e.g. free crypto signals) when gearing up to trade in the crypto market.
Now, probably the most adopted trading style for trading in the crypto market is trading for the short term. Unlike the previous two styles, the short-term trader places much less weight on fundamentals, and focusses almost entirely on price action. As a result, short-term traders rely heavily on technical analysis to set-up their trades. They will use technical analysis to identify and trade profitable opportunities. However, being a short-term trader is extremely time intensive and requires constant attention to trading charts. Some traders will also often use leverage as way to maximise their returns, often using leverage of up to 100x
We have taken a look at just a few trading styles that are used in the market. What’s important is finding a style that works best for you and is reliable in its ability to generate consistent market returns. It’s also important to note that there is no such thing as a perfect trading style, traders are always tweaking their trading approach based on what is working and what is not.