The intense price changes of Bitcoin are bringing a lot of attention to the crypto market. We are now seeing an increased interest in the crypto market by traders who are looking to enter this dynamic market. Individual traders approach trading in different ways based on their goals and experience. Let’s take a look at three basic styles to trade Bitcoin and examine the main differences.
This trading style is popular in the crypto space among traders, who like to “hold” on to their assets for a longer period. This style is best suited for traders who have a long-time investment horizon. So, they are looking to hold crypto 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
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.
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 opportunities and execute trades. However, being a short-term trader is extremely time intensive and requires constant attention to trading charts.
After reviewing these trading styles used in the market, it is important to find a style that works best for you. 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 performing and what is not.