Your cryptocurrency trading style depends on various factors like your available funds, how often you trade, your willingness to take risks, and your financial goals. In the world of crypto trading, there are at least 7 different types of traders, each with their unique strategies.
If you’re curious about which type of crypto trader you might be, you’re in the right place. In this article, we’ll explore several common types of crypto traders in 2023 based on their characteristics. Keep reading to discover which category fits your crypto trading style.
Main Categories of Crypto Traders
Before we delve deeper into the many sorts of traders, we must first understand the different forms of trading. All traders build their strategies on two distinct types of trading: long-term and short-term.
Long-term investors are looking for long-term returns. They are continually hoping to profit from growth in value over time. The majority of long-term trades entail purchasing the coin at some of its lowest prices. Traders then monitor and wait for it throughout the various market periods. They don’t give up, no matter what the market conditions are. They only sell when the coin or token is at its highest value.
Short-term trading, on the other hand, is all about making quick money. It entails looking for market changes in the least amount of time. It might happen over minutes or hours. A trader may simply purchase and sell the asset numerous times in a single day. Short-term trading is ideal for individuals with the time and skills to do analysis. Short-term trading also offers a competitive advantage versus long-term trading. Traders respond quicker to market fluctuations, resulting in lower losses.
Now, let us delve into the distinct subcategories within these groups of cryptocurrency traders.
- Scalp Trader
A scalp trader makes a modest profit by buying and selling cryptocurrency numerous times per day. This is usually done as soon as the trader gets into a profitable trade. Scalpers are traders who employ this method of trading and can perform as many as 100 transactions in a single day in order to achieve even the slightest profit. Scalping draws traders since it exposes them to minimal risk and provides them with more trading options. Furthermore, traders are able to combat greed since they typically aim for a very small profit margin, often as low as 0.1% to 0.5%.
- Position Trader
A position trader is a sort of trader who maintains a long-term stake in an asset. The waiting phase might last anything from a few weeks to several years. It has the longest holding duration of any trading method except “buy and hold” and the long-term performance of a cryptocurrency is the most important to these position traders. Position traders make 1-2 trades per month on average and tend to aim for substantial long-term gains, roughly 50% to 100% in terms of annual returns.
- Day Trader
A day trader is a sort of trader who makes a massive number of short and long deals in order to profit from intraday market price movement. Profiting from extremely short-term price changes is the aim. Day traders can use leverage to boost their profits, but it can also increase their losses. Technical analysis is frequently used in day trading, which necessitates a great deal of self-discipline and impartiality. While day trading may be profitable, it also carries a high level of risk and unpredictability.
- Swing Trader
A swing trader behaves quite similarly to a day trader, but a swing trader usually performs a faster-paced kind of trading that includes making transactions over a span of days, weeks, or months. They execute about 2-3 trades per week, on average. As a result, swing trading generates earnings and losses at a slower pace than day trading. Some swing traders, nonetheless, can still incur large gains or losses in a short period of time. The ultimate objective is to profit from changes in market patterns in the short to medium term. Swing trading, in comparison to other types of trading, might take up substantially less active trading time.
- Range Trader
A range trader trades the range and sets limits; it doesn’t concern them if they’re trading the range at its all-time high or at its bottom since they’re just buying the range’s bottom with a limit and dumping the range’s top. Cryptocurrency trading makes sense when there is a range since there is definite support and resistance. They concentrate on making successful and consistent trades in the present range while others trade at the peak of the crash. The idea is to trade within the range, not to buy into or sell after an upswing or slump. Successful range trading requires patience and discipline. Traders must resist the temptation to chase price movements outside of the established range and stick to predetermined strategy.
- Diversified Trader
Rather than just betting on a price gain, a diversified trader’s purpose is usually to diversify an existing crypto portfolio. They aim for asset classes with low or negative correlations to construct a diversified portfolio because if one falls, the other rises to compensate. They usually diversify across 10 or more different cryptocurrencies. Diversification tactics will not only secure their funds but will also expose them to more crypto assets in the long run. Another advantage of diversity is that it prevents severe results. If one cryptocurrency crashes and your investment plummets to zero, they may still be able to profit from other crypto investments.
- HODLer – Holding Trader
“Hold on for Dear Lifers” are crypto enthusiasts who believe in the concept of cryptocurrency trading for its own sake. They often hold crypto assets for a lengthy period, even when they undergo substantial fluctuation, as the name indicates. They follow the “HODL” philosophy, which is a phrase used by cryptocurrency traders who refuse to sell their coins regardless of market fluctuations. It refers to not selling, even when the market is volatile and doing poorly. During a bearish trend, the term is also commonly used when a trader refuses to sell their coins despite the dip.
Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with significant risk of loss due to its high price volatility, and is not suitable for all investors.