4 Different Cryptocurrency Trading Strategies
In trading, there are multiple styles to implement that all cater to different kinds of people.
In this article, I’ll explain the 4 different ones that I use that keep me in line with myself and the market.
I’ll discuss day trading, swing trading, investing, and taking advantage of DeFi.
Let’s start with day trading and swing trading.
Day trading is a more active style of trading where traders look for short term positions to take advantage of intraday volatility. It’s based on moving averages, RSI, MACD and other indicators on lower timeframes, sometimes up to the 5 minute charts.
Positions are rarely held for longer than a couple of hours, and the general goal is to just make a profit that day.
It’s a more aggressive trading style that bears more risk, and often includes leverage. It’s only suitable for people that have the time to watch the charts during the day, and that’s something that I often do.
Swing trading is the opposite. It focuses on longer timeframes, sometimes up to the weekly and monthly. Traders are searching for larger percentage gains over a longer period. The goal is to sit through intraday volatility, remaining patient and being hands-off.
For both intraday trading and swing trading people can either go long (betting that the market goes up) or short (betting that the market goes down) and in many cases, leverage is used to increase the position size.
I use both strategies, I’ll have my swingtrades going on while also being active during the day with intraday daytrades. Besides giving me a broader look on the market, it also gives me the option to take advantage of intraday volatility. An added benefit for me, and this isn’t for everyone the case, is that I have something to play around with and keep me active. Patience is not my strongest point, but by having a stack to actively trade with, keeps me from overtrading my broader swingtrade ideas and overtrading.
With daytrading, often I don’t use a stoploss, it’s mostly based on price action, news, market sentiment and in a large part a gut feeling.
With swingtrading my stoploss and take profit levels are set, and untouched. Action is based mostly on important levels on the chart, and news and gut feeling have little to no impact after the trade is taken.
Investing is the complete opposite of trading. Investing is done with a multiple-year to sometimes even decades timeframe. Dollar-cost averaging in companies, indices, or in my case, Bitcoin and other altcoins are done with the intention just to hold the position and forget about it.
It’s perfect for people that want to have some stake in a market or company but don’t have the time or interest to be active in the markets. For some countries, it also has some tax benefits but I won’t dive into that here.
In my case, as I mentioned, I routinely increase my position in BTC, and a small number of other coins. The timeline is long, with Bitcoin serving as part of my pension.
The last stack, unlike in traditional finance, is my DeFi stack. With this stack I’m actively and passively searching for the best possibilities with the highest Yield and APR.
There are so many projects popping up left and right, often at the start with incredibly high APRs. Essentially, it’s similar to receiving dividends, but a lot more volatile. Added benefits are the ability to receive a yield on stablecoins in case the market may go down. On top of that, we’re seeing more developed products being developed, such as leveraged yield farming, delta-neutral vaults, and more. In the near future, I’ll write a deepdive on some of the more promising DeFi products out there.
At any given time this means that multiple positions are running and that I’m able to optimize my strategy and yields by taking advantage of a plethora of opportunities in cryptoland.
For example, I’ll invest in Bitcoin, put it in cold storage, and never think about it again, at the same time, I may have a long position targeting a larger increase, and giving it months to get there. While having this position, I may open and close trades during the day to take advantage of the intraday volatility, and on top of that, I’ll have some yield farming positions on a BTC/ALT pair, giving me a nice yield – sometimes even in the multiple 100% APRs.
Another added benefit is that I diversify my risk. Not in a sense that that long position would not lose me money on a couple of different stacks, but I won’t blow up my entire trading account, lose it when something as FTX happens or any other black swan. And, again, it helps me deal with my lack of patience and keep my long-term vision separate of my short-term vision.
I hope this was helpful! In a future article, I’ll share how to optimize your returns by implementing both trading and Defi into your overall strategy.
If you want to learn about that, join my newsletter, and you’ll receive the article in your mailbox.
Thanks for making it to the end, and have a great day!