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Trading strategies under the spotlight

by | 28 Apr 2020

Before buying crypto currencies, it is recommended that you define your personal investment strategy.

Do you have the intention to sell at the end of the day or to “hodel” for the coming years?

Can you afford to spend the whole day in front of the screen? Or can you only spend a few hours a week or even a month trading?

Do you aim for a return of 10% or more?

Ask yourself these questions before you buy. Because trading requires drastically different approaches depending on your initial strategy. Here are some examples of different approaches:

 

Scalp trading

Scalping describes the exact separation of the smallest profits. Scalp trading is when you open a position for only a few minutes or even a few seconds. The point is to get in and out as quickly as possible and profitably. The trader likes to look at extremely short time frames when identifying entry and exit targets, as the daily, weekly and monthly trend does not affect his strategy. With this approach, many very short trades are made. So it is quite possible that you will have concluded a three-digit number of trades at the end of a trading day.

 

Swing Trading

The advantage of this type of trading, unlike active day trading or scalping, is that you only need to check the portfolio once a day. You do not need a lot of screen time, as you are not dependent on short-term volatility. You benefit from the actual formation of the trend, which does not happen overnight, but can last up to a few days or weeks. Here it is not necessary to know what is happening in very short periods of time, as this does not affect your strategy.

 

Day trading

Is relatively similar to scalp trading, with the only difference that your trade takes a little longer. To maximize his profits, a “daytrader” uses so-called “leverage”, which describe the relationship between his own money and borrowed money. For example, a leverage of 1:10 means that the trader uses only 1/10 of his own money for trading. He borrows the remaining money as a short-term loan from his broker.

The advantage is obvious: If a coin/token increases by only 1%, the trader has made a profit of 10% due to the leverage of 1:10. On the other hand, if the price falls by 1 %, the trader also suffers a 10 % loss. Similar to scalp trading, the weekly and monthly trend will not influence his strategy.

 

Long-term/Hodling

Is by far the most relaxed strategy because you don’t have to check chart formations for weeks, months or years. The purchase is not based on the technical details of the chart, but on the fundamental basis of the project. Because you hope that after a certain time people will be willing to spend much more on this coin/token than you originally did.

 

Summary

As a daytrader and with the scalp strategy you spend practically the whole day behind the screen, while as a long term “hodler” and swing trader you can use this time otherwise. If you have a normal job, the latter two strategies ideally allow you to benefit from two incomes – your salary and the returns from your long-term crypto investments. The total income in these cases may even be higher than that of a short-term trader.