Crypto trading styles are personal, what’s yours?

You’ve registered for your crypto account, deposited some money, and you’re good to go.

You head over to the trading screen and look at the action.

A chart of Bitcoin looks like an EKG as it bounces around.

The blue and red order book is moving like a thriving ant colony.

You’re filled with anticipation.

But there’s this nagging question in the back of your mind.

What do you do after you buy some BTC or ETH?

Are you a trader or a hodler?

And if you’re going to trade, what kind of trader are you?

Trading is like anything else, it’s personal. And your ability to trade well will depend on how well your approach fits your personality. The faster you figure this out, the quicker you can work towards the results you want.

Why finding your personal trading style so important

I’m sure you can think of times in life where you did things that weren’t natural for you and struggled.

You’re a night owl that had early starts at work. This probably reduced your effectiveness.

Or someone told you to eat a certain type of diet, that turned you into a zombie.

Maybe you chose a career path that held you back, because it just wasn’t the right fit. And the result was struggling until you figured it out.

It’s like trying to write with your left hand when you’re right handed. It’s awkward.

When money is on the line, getting the fit right becomes a necessity. That fit might include not being a trader in the first place. And that’s OK too. You can hodl some crypto instead.

Gamer or hodler?

There is no one way or right or wrong way to trade. Within the bounds of the rules (where they exist), your trading is either profitable or unprofitable, that’s it. It doesn’t matter what approach you use to get there.

The cryptocurrency market has an increasing number of niches for different trading personalities. You might be better suited for day trading Bitcoin than position trading.

You might be more of an Ether swing trader than a scalper.

Maybe you just want to be there, a hodler, making a statement about your belief in the future.

And you don’t have to choose one approach. Different environments might require different trading approaches. But only if that works for you.

The crypto day trader

Some people like action. They are gamers at heart.

A day immersed in the markets is their jam.

You will exploit different intraday chart patterns as they take shape. Then take a profit and move onto the next pattern.

You love to be immersed in various short term indicators.

This is the world of the crypto day trader.

This is a high-intensity approach to trading. It requires ongoing focus and the training of your intuition and market understanding. It’s energy-intensive and physically demanding.

Now, maybe you see yourself as more of a market maker.

As an unofficial market maker, you are focused on working a bid and ask spread. You buy and sell working the volatility spread, with no real commitment to the market’s direction.

Market makers float on an ocean of liquidity as orders move in and out of the market.

Then there are the thinkers.

The crypto swing trader

Day trading might make you queasy. It’s too much work, and you think it’s a mug’s game.

You might be a deep analysis type. Each decision needs to be carefully researched, planned out and executed.

Every trading decision is deliberate, based on some evidence and a carefully constructed thesis.

Your time frames aren’t in minutes or seconds, but weeks. Your focus is on bigger moves over time. Your positioning is larger and more carefully executed. You might scale in and out of the trade or keep a core position and trade the rest.

You don’t mind the movement of the market within your range. But you have a clear risk management approach if something goes sideways.

You may not like day trading Bitcoin, but you value day traders. When you’re ready to buy, you’re happy to take it off the day traders. And when you’re ready to take your profit, you’ll give it back to them.

The day to day is of no interest except in the pursuit of your overall trading plan.

Technical trader versus tape reader

Regardless of your trading style, your approach probably requires some indicators.

In traditional markets, trading approaches include fundamental and technical analysis and some tape reading. Because crypto is still evolving, fundamentals are less well developed for trading purposes. Although they can be helpful in some cases.

More likely, you will be a technician or a tape reader.

Technical analysis uses charts of prices, volumes and indicators to make projections about the future. Technical analysis is a good tool for day trading and longer-term swing trades.

On the other hand you might also be like an old school tape reader. This means watching the action crossing the news or crypto trade feeds.

Eventually, you’ll get a feel for the activity. Combining tape reading with some kind of a trading plan and some trading rules can be used in conjunction with technical analysis. And it can be used in any time frame.

Rules-based crypto trading versus discretionary trading

Depending on how you think, you might find you are more comfortable with either discretionary or rules-based trading.

Rules-based traders sometimes use black-box trading systems or bots. Their trading is otherwise mechanical. This trading approach is designed to stick to probabilities and pre-defined rules. Traders can also be rules-based in their trading approach without using bots or algos.

Rules-based crypto trading works well in a variety of time frames. For the data-driven individual that relies on facts, the rules-based approach might be ideal.

Not you? You want the mosh pit version?

That’s called discretionary trading.

Discretionary trading means a high degree of flexibility and openness in your activity. This form of trading takes a long time to excel at, but it can be done. It’s a mix of trading plan and intuition. You have to be disciplined as a discretionary trader. It relies on your judgment of activity and the ability to change on the fly. So this is usually associated with day traders.

It doesn’t matter which version you aspire to, but creating a trading plan is a great place to start.

Chart your own trading path

You can combine trading styles as long as they work for you.

You want to trade actively using short-term chart indicators with a loose system approach? Good.

Prefer a more passive analytical style where trades last weeks using a set of indicators you find successful? Excellent.

Want to get in there and mix it up all day in the middle using an active, purely discretionary approach like a market maker? Right on!

Now take your trading style and combine it with a defined approach to manage your trading risk.

Now you are moving towards a net positive trading experience.

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Bitvo is a fast, secure, easy to use cryptocurrency trading platform for Canadians.

Originally published at https://bitvo.com on January 27, 2021.