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HomeUltimate Crypto Trading Guide-Chapter 3-Trading Strategies

Ultimate Crypto Trading Guide-Chapter 3-Trading Strategies

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Andrew MacGill

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Trading Strategies

What is a trading strategy?

A trading strategy is simply a plan you follow when executing trades. There’s no single correct approach to trading, so each strategy will largely depend on the trader’s profile and preferences.

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Regardless of your approach to trading, establishing a plan is crucial – it outlines clear goals and can prevent you from going off course due to emotion. Typically, you’ll want to decide what you’re trading, how you’re going to trade it, and the points at which you’ll enter and exit.

What is day trading?

Day trading is a strategy that involves entering and exiting positions within the same day. The term comes from legacy markets, referencing the fact that they’re only open for set periods during the day. Outside of those periods, day traders are not expected to keep any of their positions open.

Cryptocurrency markets, as you probably know, are not subject to opening or closing times. You can trade around the clock every day of the year. Still, day trading in the context of cryptocurrency tends to refer to a trading style where the trader enters and exits positions within 24 hours.
In day trading, you’ll often rely on technical analysis to determine which assets to trade. Because profits in such a short period can be minimal, you may opt to trade across a wide range of assets to try and maximize your returns. That said, some might exclusively trade the same pair for years.
This style is obviously a very active trading strategy. It can be highly profitable, but it carries with it a significant amount of risk. As such, day trading is generally better suited to experienced traders.



What is swing trading?

Swing trading is a style of trading that attempts to capture short- to medium-term gains in a stock (or any financial instrument) over a period of a few days to several weeks. Swing traders primarily use technical analysis to look for trading opportunities. These traders may utilize fundamental analysis in addition to analyzing price trends and patterns.

  • Swing trading involves taking trades that last a couple of days up to several months in order to profit from an anticipated price move.
  • Swing trading exposes a trader to overnight and weekend risk, where the price could gap and open the following session at a substantially different price.
  • Swing traders can take profits utilizing an established risk/reward ratio based on a stop loss and profit target, or they can take profits or losses based on a technical indicator or price action movements.

 

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Swing Trading In Urdu/Hindi




What is scalping?

Of all of the strategies discussed, scalping takes place across the smallest time frames. Scalpers attempt to game small fluctuations in price, often entering and exiting positions within minutes (or even seconds).
Due to the short time frames, scalping trades often give a small percentage of profits – usually lower than 1%. But scalping is a numbers game, so repeated small profits can add up over time.
Scalping is by no means a beginner’s strategy. An in-depth understanding of the markets, the platforms you’re trading on, and technical analysis are vital to success. That said, for traders that know what they’re doing, identifying the right patterns and taking advantage of short-term fluctuations can be highly profitable.

What is buy and hold?

The “buy and hold” strategy, perhaps unsurprisingly, involves buying and holding an asset. It’s a long-term passive play where investors purchase the asset and then leave it alone, regardless of market conditions. A good example of this in the crypto space is Holding, which typically refers to investors that prefer to buy and hold for years instead of actively trading.
This can be an advantageous approach for those that prefer “hands-off” investing as they don’t need to worry about short-term fluctuations or capital gains taxes. On the other hand, it requires patience on the investor’s part and assumes that the asset won’t end up totally worthless.

What is paper trading?

A paper trade is a simulated trade that allows an investor to practice buying and selling without risking real money. The term dates back to a time when (before the proliferation of online trading platforms) aspiring traders would practice on paper before risking money in live markets.

  • Paper trading is simulated trading that allows investors to practice buying and selling securities.
  • Paper trading can test a new investment strategy before employing it in a live account.
  • Many online brokers offer clients paper trade accounts.
  • Paper trades teach novices how to navigate platforms and make trades, but may not represent the true emotions that occur during real market condition.

 

Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.

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Andrew MacGill
Andrew MacGill

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