Different trading styles: Which one is right for you?

By  Illia Kramarenko 588 25 Jan 2023
Photo - Different trading styles: Which one is right for you?

One of the most common mistakes new traders make is constantly changing trading strategies in response to minor setbacks. This frequently results in even greater losses.

Day traders, swing traders, and position traders are common categories used by traders to describe themselves. Long-term investors are on the sidelines, looking on with disdain, so we did not include the long-term investment method in our list today.

Although traders can profit from rapid intraday price changes with one strategy, some trading styles necessitate holding an open position for several days or even months. We have examined three of the most useful trading strategies for the cryptocurrency market in this article.

Day Trading

Day trading is appropriate for traders who prefer to open and close a trade in a single day rather than carry it over to the next. Most day traders never trade in the medium term because it is difficult for them to sleep at night knowing that a sharp price movement could wipe out their position. 

It is important to realize that day trading is not a fast track to financial success. This is a high-risk trading strategy, so make sure you understand the market rules and the level of risk.

A substantial deposit is one of the essential requirements for day trading. Since  traders often make numerous trades during a flat market, they require a deposit that would allow them to earn good profits even in the presence of losing trades and low volatility. 

Day traders pay more commissions to the exchange because they close more trades on a daily basis than traders who work with small amounts of orders for long term investments.

Swing Trading

Swing trading is based on the reversal points of the price movement.
A trader using this strategy may leave their trades open for an extended period of time (from several hours to several weeks).

In other words, if you've already entered the market, you want to maximize your profit. A swing trader should be able to analyze the market thoroughly and quickly identify trend reversal points. Furthermore, such trading requires nerves of steel that will help overcome the desire to close a profitable order.

The two most important factors to consider when choosing such a strategy are the order volume and entry point.

Trade volume must be low because the open position must survive during trend-related squeezes and corrections. It is recommended that each transaction not exceed 1-2% of the deposit. 

The best time to enter a trade is when a trend reverses, which is typically brought about by fundamental news. A skilled trader should be able to differentiate between important news and general information noise and determine which of the two has the potential to change the price direction.  

The swing trader's strategy is to hold the position for as long as it is profitable, taking profit in parts, and resetting the stop loss into the profit zone.

Position Trading

Position trading, also known as medium-term trading, focuses on long-term investments lasting from several weeks to several months. This type of trading is best suited to the most patient and cold-blooded individuals. When doing swing trading, it is important to keep the trade open, even if it has gone into a serious loss or is already showing a good profit.

Position traders frequently place a trade as the trend develops or reverses.

Position trading is thought to be one of the simplest trading strategies on exchanges, but it is not always appropriate for beginners because it requires serious endurance and a deep understanding of market mechanisms.