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Surely you've heard such terms as swing trading, day-trading and scalping, but what does it all mean? Today we're going to find out.
Beware! Lots of text
Day Trading
Day-trading is one of the most common trading strategies. Day traders are active in most financial markets such as stocks, Forex, commodities and, cryptocurrency markets.
What is Day Trading?
Day trading, or day trading, is a trading strategy involving entering and exiting positions within a single day. Since trading takes place over the course of a single day, this strategy can also be referred to as intraday trading. The goal of day traders is to use intraday trading strategies to profit from changes in the price of a financial instrument.
The term "day trader" comes from the stock market, where trading is only open on weekdays. In this sense, day traders do not leave positions open overnight and seek to profit from intraday price movements.
How do Day Traders make money?
Successful dey-traders have a deep understanding of the market and a lot of experience. Usually, they use technical analysis (TA). They use indicators such as trading volume, price action, chart patterns and technical indicators to determine entry and exit points. As with any trading strategy, risk management is essential to success in day trading.
Because it takes a long time to track long-term financial processes, day traders may not resort to fundamental analysis (FA). Nevertheless, some day traders use the strategy of "trading on the news". This strategy involves looking for assets with high trading volume triggered by announcements or news and taking advantage of a temporary spike in trading activity.
Day traders seek to profit from market volatility. Thus, trading volume and liquidity are crucial for day trading. Day traders need good liquidity for fast and efficient trades. This is especially true when exiting a position. A large slippage on just one trade can have devastating consequences on a day-trader's trading account. That's why day traders usually trade highly liquid market pairs.
Summary
Day trading is a common strategy for trading stocks and cryptocurrencies. Day traders use intraday trading strategies in an effort to capitalize on market volatility, and usually do not stay in positions for more than one day.
Day-traders use technical analysis, chart patterns and technical indicators to determine trading setups.
Swing Trading
Swing-traiding is a common trading strategy, which can be ideal for beginners. It allows for a leisurely assessment of changes in the market due to the relatively long time frame. Swing traders operate in most financial markets such as stocks, forex and cryptocurrency markets.
How Swing Traders Make Money?
Swing traders try to catch price fluctuations and hold a position for several days or several weeks. Thus, the time range of swing traders is much larger than that of day traders, but smaller than that of hodlers.
Swing traders use technical analysis to generate trading ideas, but not to the same extent as day traders. Since fundamental events can affect markets for several weeks, swing traders can also use fundamental analysis in their strategies.
They often use candlestick charts, support and resistance levels and technical indicators to determine trading positions. The most common indicators for swing traders include: moving averages, relative strength index (RSI), Bollinger lines and Fibonacci lines.
Swing traders usually rely on medium to long term charts because strong uptrends or downtrends must be confirmed over a longer time frame. However, they can also use intraday charts, such as hourly, 4-hour or 12-hour charts, to determine entry and exit points. These points could be, for example, a breakout or pullback on a smaller time frame.
The difference between action trading and swing trading
Day traders seek to capitalize on short-term price movements, whereas swing traders are interested in more serious changes. Day trading is a more active strategy in which traders need to monitor the market and not leave positions open for more than one day.
Swing traders, on the other hand, take a more passive approach. They may have less time to monitor their positions because their goal is to make a profit from price movements over a longer time frame. Since these are usually fairly significant moves, swing traders can make large profits from even a couple of successful trades.
Day traders mostly use technical analysis. Swing traders, on the other hand, typically use a combination of technical and fundamental analysis with an emphasis on technical aspects.
Summary
Swing trading is a common strategy for trading stocks and cryptocurrencies. Swing traders usually hold positions for several days or weeks, depending on the individual plan.
Scalping
Scalping is a trading strategy, which implies earning income from relatively small price fluctuations. Scalpers don't aim to make big profits at once. Instead, they strive to get a constant income from small price changes.
Thus, scalpers make many trades in a short period in search of small price movements and inefficiencies in the market. The idea is that by adding up the small returns from each trade, the final return will be very significant.
Since trading is done on short timeframes, scalpers rely primarily on technical analysis to generate trading ideas. And this is understandable. Most of the significant global events take place over a long period of time, and therefore, the fundamental analysis is hardly useful. Nevertheless, fundamental analysis is very important when deciding which asset to trade. Stocks or coins with heightened interest amidst any news or fundamental events will usually have high trading volume and good liquidity, at least for a certain period. During these periods, scalpers come in and profit from the increased volatility.
How do scalpers make money?
What technical factors do scalpers consider? The most commonly used characteristics to determine trading positions are trading volume, price action, support and resistance levels, and candlestick chart patterns.
The most common technical indicators are moving averages, relative strength index (RSI), Bollinger lines, VWAP and Fibonacci retracement levels.
Many scalpers also analyze real-time order book, volume profile, open interest and other sophisticated indicators. Some create their own indicators to have an advantage in the market. As with any trading strategy, finding a unique advantage in the market plays a major role in success.
Scalping is all about finding small opportunities in the market and taking advantage of them. Any strategy can easily become unprofitable as soon as it is publicly known. That is why scalping traders prefer not to spread about their individual trading tools. And that is why it is important to create and test your own trading strategy.
As we said, scalpers usually trade on small timeframes. These are intraday charts - hourly, fifteen-minute, five-minute or even minute charts. Some scalp traders may study timeframes lasting even less than a minute.
Summary
Scalping is a widespread short-term trading strategy that involves profiting from small price fluctuations. This trading technique requires great discipline, knowledge of the market and quick decision making.
HODL
HODL, or "buy and forget," is one of the passive investing strategies in which traders buy assets and hold them for long periods of time, regardless of fluctuations in the market.
This strategy is used in long-term investment portfolios, where the idea is to simply enter the market without regard to the holding period of the assets. The idea behind this strategy is that over a long enough holding period, timing and entry price will not matter much.
The buy and hold strategy is almost always based on fundamental analysis and generally does not involve technical indicators or periodic monitoring of portfolio performance, except occasionally.
While bitcoin and other cryptocurrencies have been around for a little over a decade, cryptocurrencies are nevertheless an extremely risky and volatile asset class, and while bitcoin holding is a well-known strategy, the same cannot be said for other cryptocurrencies.
Summary
HODL is the simplest trading strategy out of all of the above, it is a strategy that involves buying for an indefinite period of time, does not require any supernatural abilities, lightning-fast reaction and other things.
In conclusion I would like to say
Yes, this article is not a small, but informative, I hope I haven't overloaded you with excessive information, but now you can surely find your place on the crypto market;)
Keep your nose in the wind and know that Fortune, Fortune and Success always favor you,
when you're with us!
Always yours C.J.
All the above is not financial advice, but only a subjective opinion of the author. If you doubt something, do your own research and double-check the information yourself.
