In that case, they may even sell the position and go short to capitalize on the downward trend. Unlike swing traders, position traders prefer to identify a trend and place a trade alongside the trend as opposed to trying to catch a proverbial falling knife by predicting a reversal. Position traders typically trade over the course of weeks or even months-in fact, position traders are often confused with investors due to their lengthy time horizons! For example, a position trader may see that Bitcoin has been trending higher with a rising Relative Strength Index (RSI) reading and a rising price channel.

The perfect rationalization of Crypto Trade I’ve ever heard

Cryptocurrencies have transitioned from an obscure technical proof of concept to a multi-billion-dollar asset class over the past decade. Let’s take a look at the five different types of crypto traders. How to know where you fit into the market. What Is Trading In Crypto? Rising interest and prices have drawn the interest of short-term traders, while investors have been drawn to the long-term potential to disrupt multiple markets as well as the potential benefits of diversification.

For example, an investor might purchase crypto assets in order to diversify equity risks. Since crypto tends to have a weak or negative correlation with equities, they can be used in a portfolio to offset the risk of a significant decline in equity values. “Hold on for Dear Lifers” are strong believers in crypto for its own sake. Crypto assets may also offer significant upside potential in their own right.

Cryptocurrency Traders: Which Trading Style Suits You? If you hold a crypto asset for less than a year, you must typically pay short-term capital gains tax rates that are equivalent to your ordinary income tax rate. Many studies have also shown that active traders tend to lose more than buy-and-hold investors. It’s worth noting that active trading may also result in higher risk and tax liability. Choosing the right trading style is an important part of becoming successful in the crypto markets. When choosing between different types of trader options, it’s important to take into account your financial and employment situation (e.g., do you have the time or capital to commit to full-time day trading or position trading) and your long-term goals (e.g., retirement vs.

Swing traders have a typical trading style of a few days or a week. Unlike day traders, they don’t typically use a lot of leverage and almost always position overnight. For example, a swing trader may identify an inverse Head and Shoulders chart pattern that predicts a reversal in a downtrend. After the price breaks the neckline, the swing trader may enter into a long position and stay in the position until there’s a sign of a reversal lower. Most swing traders use technical analysis strategies to predict trend reversals-or the swing in price from low to high or high to low-to capture the maximum gain from a price movement.