Cryptocurrency trading can be a fun and rewarding hobby. Whether you’re into short-term speculative trades or long-term “hodling,” there is a style of cryptocurrency trading for everyone. In this blog post, we’ll explore some of the basics of different styles of cryptocurrency trading, discuss how to get started with each, and list some popular exchanges where they all take place.
The first, and currently most popular style of trading, is to have a ‘Long’ or ‘Buy & Hold’ approach. This involves buying currencies that you believe are undervalued, holding them for some time until their value increases due to a surge in demand so that you can sell at a profit.
Once the price has risen nicely, your long position would then be closed out by selling the currency. The longer that you leave your position open, the more likely it is that your trade will end up profitable, since if there’s a general upward movement in the market (which there mostly is) then you should be able to make gains this way.
Some currencies are currently proving very popular with long-term traders because they offer high volatility and thus the potential for high returns.
Another trading style is short-term trading or ‘scalping’. This involves buying a currency and selling it again almost immediately at a small profit, then repeating the process over and over again.
Scalpers try to make many trades a day with the aim of increasing their holding by making consistent profits from each trade, which will add up over time. The drawback with this strategy though is that there’s usually less room for error as you’ll need to be right about your trades more often than not, as opposed to long-term trading where you just have to be right once.
The other risk is that if you’re wrong about even one of your short-term trades, then your overall trading amount may suffer since you may lose all of your trades on the bounce back, which is likely to be swift. This kind of trading can prove very profitable if you know what you’re doing. though, and it’s especially good for new traders who are honing their skills.
Trading Chart Patterns is another technique or style widely used by investors. A trader will look at the charts and identify price action that takes place on those charts. For example, bullish candles or bearish candles failed breakout, or double top.
Once they see these patterns and then expect the market to move in a certain way (in accordance with those patterns). For example, if you found a double top pattern on an XRP/ETH chart and expected it to break up because of the double top pattern, you might buy ripple, wait for capitulation, and profit from your trade as soon as the market started going higher again.
Trading chart patterns is one of the most effective trading styles available today, but it does require knowledge of what chart patterns look like and take time to learn, but it’s well worth your time if you want to become a great buy ripple trader.
Taking this last example further, It is common sense that cryptocurrency markets are volatile, meaning price swings of 20-30% in either direction are rather normal. This makes ripple traders buy at the top (when people panic) and sell at the bottom (when people are greedy).
The buy/sell cycle will go on forever until ripple traders drive the market to an equilibrium level or produce new information about the cryptocurrencies which will shift peoples’ preferences. It’s wise for ripple traders to remember this difference between other types of trading (stocks, forex, futures).
This style involves trading based on market conditions or by finding certain currencies that stand out either due to their potential for growth or because they’ve recently plummeted in value.
Selective traders will look at the markets every day and try to find undervalued coins (ones that they think can grow significantly) before buying them up quickly and then waiting for the price to rise again before selling them off.
They’ll often hold some currency long-term too, but overall, this strategy relies more on market conditions and making fast trades based on daily fluctuations.
Finally, there is what’s known as ‘spread trading’ which involves buying one currency and simultaneously selling another. This can be done by either holding both currencies in a trading wallet or using CFD (Contract for Difference) which allows you to speculate on price movements without actually owning the coins themselves.
This way, traders try to take advantage of differences in prices across different exchanges and make small profits with each trade. The risk here obviously is that if the markets move against your position, then you could sustain losses since you are speculating rather than investing long-term.
But spread trading allows you to increase your significantly if done right, especially when combined with the other main styles.
So there you have it. If you’ve ever wondered what each trading style involves and how they work, then hopefully this introduction to the main types of cryptocurrency trading will help.
Of course, there’s much more to understand about each one, and we’ll be covering these topics in detail over time as well as looking at techniques such as TA (Technical Analysis) which can help boost your profits even further.
Ultimately, your cryptocurrency trading style will depend on the type of person you are. If you’re risk-averse and want to minimize losses, then it might be best for you to trade with a longer time horizon in mind.
On the other hand, if you’re looking for faster gains or don’t have much capital to invest, short trades may work better for you. Whatever your approach is, though, remember that there’s no such thing as “safe” investing, even long-term investments can result in major losses when markets shift unexpectedly.
The most important takeaway from this article should be understanding how different people think about their trading styles and knowing which one matches yours so that we can help find ways to improve our portfolio performance!
That just about brings us to the end of this introductory article on different styles of cryptocurrency trading, so we hope that you found it useful and that you’re now a little better informed regarding the different methods involved.