Types of Cryptocurrency Trading

Types of Cryptocurrency Trading

Cryptocurrency trading – a process by which an individual trades one type of cryptocurrency for another – can be a complicated topic for many, but it does not have to be. Trading cryptocurrencies for profit through following trends in the market or by shorting cryptocurrencies that are falling in value is the main goal of an investor.

It can be tempting to invest in coins that are showing huge gains, but it’s important to remember that past performance doesn’t predict future results and there’s no guarantee of success. The best way to make money trading cryptocurrency is through careful research and analysis, by understanding the dynamics of the market and knowing when to buy or sell.

There are many types of cryptocurrency trading, and it’s important for investors to know what they’re getting into before investing their hard-earned cash. Let’s look at the different types of cryptocurrency trading that exist today and how to trade them.

Types of Cryptocurrency Trading

There are two major types of cryptocurrencies trading. 

  • Long-term cryptocurrency trading 
  • Short-term cryptocurrency trading 

Long-Term Cryptocurrency Trading

In long-term cryptocurrency trading, an investor buys a virtual currency at a cheap price, holds it till the price is hiked, and eventually sells it. Long-term crypto traders benefit from the increase in cryptocurrency value that they hold over a longer period.

Short-Term Cryptocurrency Trading

Short-term crypto traders overcome advantages of long-term cryptocurrency trading when market experience surge, losses will not be as great as long-term trading. Likewise, when cryptocurrencies grow significantly over time, short-term traders don’t have as many benefits

Long and short-term cryptocurrency transactions are further divided into five types. These are:

  1. Hodling
  2. Scalping
  3. Day Trading
  4. Range Trading
  5. Intraday Trading
  6. Swing Trading
  7. Position Trading

Hodling

Hodling is a type of long-term cryptocurrency transaction where investors buy cryptocurrency and benefit from long-term value appreciation. Traders are more vigilant in this trading by buying at low and selling at a high price. This type of trading saves you during a bear market when prices of the virtual currency follow a downward trend. To be involved in buy and sell crypto trading one must be able to overcome his sentiments and try to remain patient and not sell his assets when the market shows a declining trend in prices.

Scalping

Scalping requires investors to be able to make the decision under pressure because it is all about making quick trades. It involves selling assets in a very short time period before the price drops. The aim is to make continuous profits even if they are low. One needs to be active to monitor the market and benefits from every little change in the market. Gains in scalping are usually low but it is a secure type of short-term trading as compared to losses of long-term trading.

Day Trading

As the name suggests, in this type of trading investors make trade over the course of the day. The decision in this transaction is achieved within a time span of half an hour to 3 hours. It is ideal for people who have no other commitments and can easily devote their time to observing market conditions without any hassle. Because such transactions involve risks and require quick action. So, you are a 24/7 trader without any intrusion because a price spike can occur at any point of the day, and one needs to practice a hands-on approach.

Range Trading

In this type of trading, investors identify a range at which they will buy and sell cryptocurrency over a short period of time. For instance, a virtual currency is trading at $40 and you think it can be increased to $45, then trade in a range between $40 and $45 over the next several weeks. It proves handiest when there is an absence of direction in the market, and no obvious long-term trend is apparent.

Intraday Trading

Intraday trading is about buying and selling cryptocurrencies within the same trading day. It is a day trading but allows you to hold a cryptocurrency for more than one day. Since there is no end to a trading day in crypto so the market never closes.

Swing Trading

Swing trading involves holding cryptocurrency for a couple of days up to several months in order to gain profit from price changes in the market. It is the most popular type of trading. Swing traders who have had previous knowledge and experience of trading can better comprehend the market fluctuations. They are able to not fall prey to quick price depreciation in the market.

Position Trading

Position trading is the opposite of day trading. Position traders buy an investment for the long term with the hope that it will increase in value. Their holding period is usually months to years. They are not concerned with the short-term price fluctuation in the market. Position traders are those who are not making their livelihood from cryptocurrency, unlike day traders.

Final Notes

All the above-mentioned trading styles require a lot of patience. Find the style which fits best for you and stick to it. Do not change the style just because it does not work for you. Refine it, stick to it until you are successful. Understand the distinction between bull and bear market. Refrain trade like a bear in a bull market and vice versa. Lastly, success in any type of trading hinged on one’s level of exposure to trading in the past because you cannot implement a style based on a few results in a brief period.