Finding A Style of Cryptocurrency Trading that Works for You
Below I’ll describe the different styles and try to offer some insight.
Scalping, Day Trading, Range Trading, Intra-Day Trading, Swing Trading, Position Trading, and Investing
Although there are different ways to denote the styles of trading, I would denote them as: scalping, day trading, intra-day trading, range trading, Intra-day trading, swing trading, position trading, and investing.
Scalping aims to make very quick moves, day trading is as the name implies aiming to make good trades during the trading day, range trading speaks to trading the current range, intra-day is just a term I’m using to describe a type of day trading that happens over the course of days, position trading is trading over the long term, and investing speaks to building a long term position in an asset or asset class (it is HODLing in its true form).
Some of those styles overlap, but generally the concept is we are going from the most rapid trading type, scalping, to the longest term type, investing.
One can choose a style that suits them, or one can mix and match styles based on the asset or their goals.
The best way to understand what styles work best for you is to try them out and to be honest with yourself about how effective you are at the style and how the style effects your emotional and logical balance.
Simply put, if a style is throwing you off your game and off balance, then it probably isn’t the right style for you (and if you are constantly taking losses, it also probably isn’t the style for you).
In a way, the quicker you make moves, the less risk you’ll have with each trade on paper, but the more hands on your trading will be. Meanwhile, because you’ll make a lot of moves, you’ll end up inviting in more complexity.
Given the above, position trading and investing are generally the best choices for a new or casual trader. However, those trading / investing types come with added stress in crypto… because the market is volatile.
Meanwhile, any trading style that has you hold positions over night is going to come with stress, because crypto is a 24/7 global market, and it is not uncommon for corrections to set in at night while one is sleeping.
NOTE: One might refer to the styles on this page as cryptocurrency investing styles. However, that is really a different topic. These are styles of cryptocurrency trading. To me investing styles would be more like dollar cost averaging, value averaging, etc (ways to build long term positions in assets). These are ways to build positions with the goal of taking profits, not ways to build a position in an asset as a long term investment (although, as you’ll see, there is crossover and investing is covered a bit here).
Different Styles of Crypto Trading Defined
With the above introduction covered, here are some detailed descriptions of trading styles (all of which are common to all types of trading, but which we will discuss in the context of crypto):
Scalping is all about make very quick trades, the whole of the goal is to make constant profits (even if the profits are very small). You might make a trade every few minutes. Ideally you’d want to be able to go long and short (and would thus need to margin trade, even at 1x leverage, so you can short). However, you can scalp by spot buying and selling (buying and selling crypto).
This type might have you buy Ether at $700, then sell at $705, then buy at $702, and sell at $705. In those cases you might place a tight stop at say $698. Or you might have a rule that you scale out of your position by hand if the trade goes against you.
This requires constant focus. However, if you are good at it, you can make quick money.
This requires risk management and considerable luck or skill, but on paper you can make constant small gains, and those gains can add up quickly.
Day trading is just what it sounds like, it is like scalping, but instead of making trades over the course of minutes, you make them over the course of the day.
You still use stop losses and scale in and out of positions, but you are looking for a little more profit on each trade than a scalper.
Cryptos will constantly define a range they are trading in. Generally this range will be a type of consolidation (either accumulation, big players getting more coins for the next leg up, or distribution, selling coins at a high before the big players let the market drop).
A range trader trades the range and sets stops, they don’t really care if they are trading the range at the all time high, or trading the range at the local bottom, as they are simply buying the bottom of the range with a stop, and then selling the top of it (or scaling out toward the top).
It is a type of day trading, but the goal is to trade the range, not to buy into an uptrend, or buy after a downtrend, etc.
This is day trading, but a style of day trading that allows for holding positions over more than one day. Simple as that. The reality is traders do this and there is no rule that it can’t be successful. In crypto the market never closes, so there is no end of a trading day. With software you can automate positions and in this respect there is not specifically a reason to close a short term position just because the clock strikes 4pm or whatever.
Swing trading is like trading a very large range. Here you will open a position (sometimes gradually) at what you calculate to be the local bottom, then you will aim to HODL your position all the way to what you believe to be the local top (generally gradually scaling out of your position to lock in profits). Obviously, it is the reverse logic for shorting, you aim to short the top of the forming trend to the bottom.
Swing trading is generally done over the course of days or weeks. That means you’ll be taking a position, sleeping on it, watching it go up and down in waves, etc… all without panicking.
If you can get a good sense of TA, for example if you feel like you can analyze patterns and detect likely support and resistance levels, it can make a ton of sense to focus on swing trading.
Crypto goes up and down in waves, swing trading is all about finding the bottom of the wave and riding it to the top (with long positions; it is the opposite with short positions).
Those who effectively swing trade using long and short positions tend to do very well and do very little work. That said, detecting the pattern, staying calm, and being willing to use loose stops takes some guts.
Position trading is like a zoomed out version of swing trading or like the trading version of investing. Here you’ll try to build / take a long position low or short position high and then stick with that position for weeks, months, or even years.
This is the simplest form of trading, but it also takes a lot of discipline. Consider someone who has been long on Bitcoin since $5k or short since $12k (the price of BTC is currently $8.3k). Bitcoin has gone to the high $5ks from $20k, and to the high $11ks from that high $5ks low. A disciplined position trader likely sat through both of those events (although they perhaps scaled out of some of their position or reopened positions).
Position trading is a lot like investing, in that it is long term, but it isn’t purely investing, as the end goal is to make a killer longer term trade based on overarching trends.
In crypto, you’ll need to hold through the crazy ups and downs, the bear and bull markets, the good and bad news, and keep your eye on the ball.
I don’t consider investing and trading to be the same thing. Trading is all about taking a position and aiming to take profit. Investing is all about having ownership of an asset as a store of value with a very general goal of increasing that value over time.
Warren Buffet is an investor. He considers buying stock like owning part of a company. If you own a fortune 500, you aren’t looking to take profits when its value goes up, you are looking to see more growth.
Investors are more likely to sell their position because they don’t like the direction of the asset then they are to sell their position due to its current dollar value.
An investor isn’t necessarily going to set a stop loss. Instead, they will build a position in the asset and stick with their investment for as long as the reason they made the investment in the first place is true.
An investor is a true HODLer, they really don’t need to look at prices and charts unless they are looking to add to their position at a good price.
Investing is not trading, but ultimately buys and sell are made, and it is important to understand that this style will suit some.
NOTE: In any of the above styles you can take a full position at once or ease in. Some people will run accumulation bots and buy very small amounts of coin all day long, some people will enter a position incrementally with a few buys, some will go into the full position in one swing. Doesn’t matter which style you pick, just as long as it works for you and you have some way to manage risk.
TIP: All the above styles require patience. There is nothing more common than seeing a string of losses in a row when day trading or immediately seeing a downtrend after opening a well researched long position (or uptrend after a short position). What can go wrong, often will. You need to bear through the fails to see if a style is statically working over time, you cannot judge a style or an implementation of a style based on a few results in a short window of time. The goal is to be right more often then you are wrong, not to be right every time. Once you find a style, it will take work to refine, and your tactics will likely need to be tweaked based on the current market and coin you are focused on.
How to Pick the Right Style for You
The right style for a person depends on the person. There is some general advice to offer however:
Find a style that works for you, stick with it, get good at it, refine it, and keep at it until you are profitable. Don’t switch up your style if it stops working, just calibrate your style to the current environment (for example, take 5% of your holdings and range trade if we are stuck in a range; don’t just turn from a position trader to a range trader because of what happened this week as a rule of thumb).
There is nothing that will kill your portfolio quicker than turning into an investor at a high or turning into a day trader at a low (because you are effectively buying high / selling low in those cases).
Actually, there is one thing worse than that, that is not practicing risk management. Each style requires a different style of risk management (the more trades you make, the smaller the positions and the tighter the stops should be). Even though all styles require different risk management tactics, in all cases the idea is to limit your downside and to give the asset enough room to run. Going all in with 100x leverage on one play is essentially never the right move, not setting stops when day trading is essentially never the right move (unless you are at your computer and will exit trades by hand nimbly, thus acting as your own stop).
Trading cryptocurrency is a rather high level sport. I’m not sure there is a more difficult past time when it comes to trading. Most people are going to fall on their face over and over for months on end (if not years). Worse, if you come into crypto in a bull market, you are likely to not fall on your face at first, and then will be ill prepared for the bad times (and will start falling on your face later into your game).
Expect pain and try to learn some lessons, if it feels easy, it is likely that you are in a bull market and you should brace yourself for difficultly ahead (it never stays easy for long).
Try to make your lessons affordable by using risk management and by avoiding switching up a style that has been working because it stops working for a few trades (for example, avoid the thing where you suddenly become a day trader at the bottom or an investor at the top; also avoid the thing where you hit a few stops, and then don’t take the next trade because you are scared, as that next trade is usually the winner).
My Personal Style (A Personal Story to Augment the Facts Above; if it Helps)
To understand what styles worked for me, I tried every one and managed to mess things up six ways from Sunday over and over. One thing I learned was that I am not a great trader. Knowing this, I follow traders who are better than me, use automated trading software, use software to tell me what coins are hot or not, and stick with styles that focus on longer term trading for the bulk of my investments.
In sum, I have built a strategy around the fact that I’m smart, knowledgeable about crypto and to some extent crypto trends, want to be in crypto, and like crypto… but am not a good trader in-practice, especially when it comes to day trading (I would say that sort of self awareness is vital, because it helps me hedge against myself and stops me from following my gut when the data says otherwise).
NOTE: What I mean is that in terms of logic and knowledge, I have a solid grasp of crypto and the crypto markets (consider, I research and write about crypto and its markets all the time being the head author of this site). However, as a human with emotions, and especially as someone who has a bullish bias toward crypto, I am not great at responding properly in the heat of the moment. I’ve learned over time that I’m better suited to medium and long term trading and conveying knowledge, and not well suited to actually executing short term trades by hand. It is an odd position to be in, to make good calls and to understand well what is likely to come next (something I get better at every day, wasn’t as great at before, and will likely be better at as time moves along), but then to shoot myself in the foot due to emotion in the moment… but I accept it and strategize around it (and for me, that has been key).
Ultimately, in my opinion each trading type has its pros and cons, and while some can work well together, I can confirm the common wisdom that swapping between styles, because a style stopped working for a moment, is a recipe for disaster in my experience.
Essentially what I do today is invest some, position trade some, swing trade some, and day trade / intra-day trade a little (mostly to have fun, remain aware, and level up my skills). I always have crypto, but I scale out of positions when it goes up, build positions when it goes down, scale out when I think things are really bearish, and do some day trading / intra-day trading on the side for fun when I have the time (or when my trading bots do this on their own). Further, I don’t trade based on whims, I trade based on my own TA.
I personally don’t base my trading style on how much profit I can make in the short term (or even long term really), I base it on what fits my personality and lifestyle. I get nervous when I don’t have crypto, and I get nervous when I don’t have cash on hand. I get nervous because my original goal was to take X amount of money and commit it to crypto for the long term (I had to tweak that goal a bit, because the markets are insanely volatile and I didn’t suspect we would get pumped all the way to $20k BTC, which forced me to become comfortable with selling, as the high was clearly unsustainable). The bottom line is, when I am weighted too much in either direction, I lose flexibility and the emotions I already know get in my way start kicking in (with too much cash, I feel pressure to buy high, with too much crypto, I feel pressure to sell low, when I have a balance, my head clears and I can execute my logic based strategies much more effectively; that is me personally, based on my goals and tastes).
By being invested, I always have some long (so if I mistime the top and sell the bulk of my position and it keeps going up, I can suck it up and wait). By being willing to take profits, I don’t have to sit through bear markets knowing I passed up the all time high only to wait for the next one (instead, I have cash on hand to try to time the bottom of the market or the local bottom after a big bad drop). By doing some day trading, I can once in a while catch some epic runs and I constantly level up a skill-set I know is lacking.
Doing those in tandem has worked well enough for me (to protect my capital in general, despite my many speed bumps), however as I noted above, swapping styles works very poorly in my experience (I can’t stress that enough, essentially 90% of my bad plays are from this, the other 10% are hitting stops over and over trying to scalp alts in a downtrend).
Really, almost all the worst moves I made in crypto involved selling too much of my long positions in a downtrend, and then switching to day trading while I wait out the downtrend, and then not building enough of a position low or, selling too much on the way up, then going back into long term trade mode at a high (the selling part was smart in theory, it was driven by logic… but the reluctance to go long and the bottom and to scale out too quickly on the recovery, in each instance, was in retrospect clearly driven by FEAR).
You would think that scale out at $9k after it just went down from $20k, day trade until the recovery, and then buy back in would be wise and feasible. And on paper it is and was. However, this has never really worked out that way for me in practice (not at $5k, not at $7k, not at $20k, etc), because recovery tends to happen very quickly, the downtrends don’t tend to last that long, and I never manage to fully enter my old position lower than I sold (stop-buys can help, but you have to fight against psychology, not just logic, and this is what trips me up; it is hard to go-all in when everyone is calling the end of crypto and you are trying to protect your capital… it seems reasonable at the time, I know it is logical, but over-all I know it was not profitable for me as a trader / investor, because I get tripped out every time).
One could argue pulling out on the downtrend, day trading in the interim, and then re-entering the market gradually is a form of risk management, and one can argue it is the right move for many… heck, I would argue this. However, I would argue that for me as a person, it was just a matter of learning a harsh lesson about my trading style (a harsh lesson I’ve learned more than once by doing this more than once). <—- there is a big disconnect between what you know to be logically true and reacting the right way in the heat of the moment in a 24/7 volatile market full of FUD and FOMO. My logic was solid, but my tactic was ill suited for me as a person (and this is my point, a person may find a sudden switch up of tactics to work against them, despite it being wise; and in fact, from talking to others this seems to be a common problem; moving to cash only works if you will move back to crypto and not just watch the your potential profits pass you by like a slow moving train as you freeze in horror).
NOTE: I think this is common in all markets. For example, in stocks, people pull out during a bear market, but then are reluctant to re-enter, end up missing a good part of the uptrend, then buy high, then get stuck in a cycle if a bear market re-emerges. If you would do that, then trying to sell the top and buy the bottom with all your funds is, to my point, likely not the right style for you. In fact, since it seems common, I would conclude that it is not the right style for many. Hence my personal choice to not not that with 100% of my funds.
If you are going to switch styles mid stream, I actually suggest the opposite of what I did. Go into invest mode at recent lows, and go into day trade mode if you scale out too much too early and it keeps running up (I’ve had success doing this personally, unlike with the inverse; of course, everyone is different).
No one ever buys as much as they want at the bottom or sells as much as they want at the top (aside from maybe some pros and lucky people), but ideally you do want to be buying at the bottom and selling at the top in general and not vice versa.
Better yet, learn what you can from my personal journey, but more so just find the style or styles that work for you and stick with it as I noted above. For you it might be the exact opposite of me, we are of course different people! Meanwhile, if a style feels like it isn’t working in the moment, but it is the style you think should work for you in general, you are likely just a few trades away from it working again (in my experience). Lastly, if a style truly isn’t working for you, don’t be afraid to keep trying new tactics and mixes until you find a style that does.
You might be great at everything I’m not, that logically makes sense many would be. My point isn’t to emulate me (clearly you don’t want to do that exactly, as I just told you a story about making mistakes and not being great at a few important things), my point is that in my experience I have concluded that if you don’t heed a few basic rules, get honest with yourself, and stick to a style that works for you once you find it, things can and probably will go wrong. 🙂
Traders tend to do poorly, because most people aren’t good traders. Simple as that.
It takes some crazy skills and a cold and calculating mindset to trade.
However, despite this, many will find themselves trading crypto anyway… especially when they first start, and almost always without practicing proper risk management or without understanding which style of investing suits them.
The main problem in my mind is that people tend to come into crypto in a bull market, and therefore think they are better than they are, and are thus more likely to take risks, and then they get rekt in bear markets because trading is hard (HODLers get rekt short term, day traders have a way harder time and can get rekt if they don’t set stops, etc).
Given this, it makes sense to actively try to find and refine a style or set of styles that works for you so you can make it from point A to point B with minimal losses and ideally profits regardless of the current mood of the market.
It just takes a few bad trades for it all to go wrong, however, a few good life choices up front can help ensure smooth sailing.
When in doubt, INVEST gradually over time and don’t trade (or at least, trade only a small portion of your stack until things become more clear for you).
In the meantime, until you level up your skills, if you know the style you like or would like to try, find some analysts who practice that style and ride their coattails.
For example, check out Dan from Chart Guys if you are looking to day trade the major cryptos, or check out TradeDevil if you are going to swing trade (he does EW which is very useful for swing trades). Meanwhile, if you are going to invest, stick with people like Warren Buffet (who says he doesn’t buy something he won’t be willing to HODL for 10 years essentially… and says Bitcoin is rat poison, but that isn’t the point here, we are talking about his investing style, not his position on BTC).
Be very careful about following an analyst who doesn’t match your style!
For example, if you are investing, don’t panic when a day trader or swing trader starts calling the local bottom or top. If you tell yourself you are Buffet, and then you end up putting your whole stack on MPC’s analyses for the day in the heat of the moment, you are playing with fire.
A trader like MPC isn’t long in crypto, he is looking for short term plays and clear set-ups, if that is what you are looking for, great, if not… don’t mistake his #1 status in general for being #1 for you (see what I’m getting at here, the top pros come in many different flavors, and if you mismatch their analysis and your style, their analyses will very likely work against you).
Not only are even the best analysts wrong sometimes, but they often won’t qualify their analyses by saying, “this is aimed at day traders, or this is aimed at swing traders” (you have to glean this by understanding them and listening closely).
A site like TradingView.com (TV) can be very helpful, but only if you take the time to know yourself first. Meanwhile, TV can really mess up your day if you mistake the wisdom of a Chart Guy, Tradedevil, MPC, or Buffet as good advice for you necessarily!
This is something that you will rarely be told, and instead people will tend to shout their opinions without qualifying the timeframe and style to which their opinions apply.
Point being, find a style that works for, use proper risk management, and then analyze the market (with the help of some top analysts) in a way that reflects your trading style. If you are Buffet, IGNORE the current trends. If you are TradeDevil, you must make use of stops (or scale into a position and know when to scale out if the trade turns against you). If you are MPC, you better be in other markets and be ready and willing to short Bitcoin, because you won’t be making a ton of plays and you’ll rarely be long in crypto. Crypto investing and trading isn’t just about what works and who does the best, it is about what works for you and who is the best in respect to your style. That is rarely said, but now that I’ve said it a few times over, hopefully that helps make up for it.
- Get Tips on Choosing a Trading Style. thebalance.com.
- How to Start Trading: Trading Styles. investopedia.com.