As cryptocurrencies start to gain traction in financial markets, Bitcoin trading, much like forex trading, has become a go-to strategy for earning profits and risk management by traders. Moreover, with governments and financial market regulators starting to get more interested in cryptocurrencies, it is only expected for more individuals to join the market and take advantage of its price volatility.
However, the big question is what type of trading style you should practice. There are several Bitcoin trading strategies, with most cropping from the already established forex trading industry. Scalping in forex trading, for instance, has become a go-to method, especially for traders looking to make quick profits in the forex market.
However, it is not a strategy that’s just useful in forex trading. This strategy has since spilled over to the cryptocurrency trading markets and has become one of the trading styles a trader should not miss out on.
Scalp trade or scalping is a style of trading that involves making numerous quick trades within a short period for profits. For example, scalpers try to take advantage of quick changes in the Bitcoin prices during intraday trading by buying and reselling their Bitcoin within a short span.
This makes scalping a volatile trading strategy, especially for a beginner. It requires constant analysis of trading volumes, past trends, Bitcoin trends, and the overall cryptocurrency markets. As a scalper, you must have the right information for making instant decisions to make a trade.
There are several scalping strategies a Bitcoin trader can incorporate. For instance, scalping on the news means taking advantage of news releases, economic data, publications, and such to make a profit. Traders can either make the trade before or after the news release. Another scalping strategy is on technical strategies, including intuitive scalping, scalping on several time frames, and scalping based on cryptocurrency pairings.
Day trading is one of the most common trading strategies in the cryptocurrency market. While scalping focuses on making profits from each trade during the day, day trading involves holding your position as you wait for the best opportunity to make a trade.
Day traders open their positions in the morning and close them before the end of the trading day. This way, you will not have Bitcoin exposure when the market closes for the day. Day trading provides some advantages, like the fact that not holding any positions overnight saves you overnight funding charges. It also allows you to make the most of Bitcoin’s price volatility by waiting for the perfect opportunity to strike.
Day trading is an ideal trading style if you are looking to make profits from short-term price movements of Bitcoin without the hassle of constant trading like scalping.
Unlike scalping and day trading, where traders close their positions by the end of the trading day, swing trading allows one to leave their positions open for a few days or months. The strategy involves picking a price entry point and target and holding your position until Bitcoin prices hit that target or meet other conditions you have in place.
Swing traders will mark an entry point when the Bitcoin price is at the local bottom or the lowest traded or published price. This will be the support position the trader aims to HODL (hold) until the price hits a local top or the resistance they are comfortable with.
Considering the volatility in Bitcoin prices, swing trading requires patience and great technical analysis skills for one to pick the local bottom and ride the volatility of the market till the prices hit the local top position.
Bitcoin trading provides traders with an excellent opportunity to hedge risks and profit from price movement in the cryptocurrency market. However, knowing what Bitcoin trading style to settle can provide you with a great head start.
There are several trading styles to choose from. Scalping, day trading, and swing trading are the top Bitcoin trading styles a trader should not miss out on. That said, you should choose the best trading style and stick with it.