Crypto Investing
25 Jun 2021

Different Ways To Trade In Cryptocurrencies

Nisha Ramesh

In the last few years, the crypto trading segment has evolved a lot and one of the major developments has been, the introduction of crypto derivatives trading. 

This has helped the market to stabilize and attract professional traders to the market, who like to trade in the highly rewarding futures and options segment of the market. 

In this blog, we will discuss the different ways to trade in the cryptocurrency market and make money.

4 Best Ways to Trade in Cryptocurrency

Position Trading

It’s a popular long-term trading strategy, in which you buy and hold cryptocurrencies for a long period of time. The idea of position trading is to identify a cryptocurrency with a large potential up-move and invest in them.

The traders largely focus on the fundamentals and long term trends of the cryptocurrencies to assess their future growth potential. In this trading type, the position trader ignores the short term volatility in the prices of cryptocurrencies and only sells their investments at the peak of the trend. 

Intraday Trading

As the name suggests, intraday trading refers to the trading style, in which you buy and sell cryptocurrencies on the same day, trying to profit from small price fluctuations. The trade duration can range from a few seconds to a few hours and you can enter into a trade as many times you want in the day. 

Here, the trader uses technical analysis to determine the price range and direction, within which the cryptocurrency is expected to move the entire day and place trades accordingly. The primarily technical analysis tools for intraday traders are support and resistance and moving averages. 

This trading style is suitable for active traders and beginners should avoid intraday trading in cryptocurrencies initially.

Swing Trading

This is a speculative trading strategy, in which you aim to capture the short-to-medium term gains in cryptocurrencies. The trading period can range from a few days to months, until the completion of the up-trend in the cryptocurrency. 

The traders primarily focus on using technical analysis to spot trading opportunities in the market. Their primary technical indicators are moving averages, studying Renko and points & figure price charts and analysing the long term support trend lines. 

Swing traders primary objective is to capture the major chunk of price up-move and then move on to the next opportunity.

Margin Trading

Although a new segment in the world of crypto trading, margin trading in cryptocurrencies has been extremely popular among professional traders and has already surpassed the spot market trading volume. 

It refers to the process of buying and selling securities on borrowed capital to increase the rate of return. The trader only needs to pay the initial margin in the trade. For example, if the crypto exchange specifies a margin requirement of 2% for BTC/USD trades, then you can enter into a trade position worth up to 50,000 with a trading capital of just ₹1,000. 

Margin trading is popular in crypto derivatives trading and lets you make quick money in a short interval. However, the risks involved in margin trading are also higher. For example, a wrong trade can eventually erase your trading capital, if the proper risk management features are not used, like stop-loss orders. 

Therefore, to enter the space, learn about margin trading and risk management practices to be successful in margin trading. 

Finding the Right Trading Style for Yourself

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Yes, to be successful in cryptocurrency trading, you need to find the trading style and strategy that suits your personality and risk profile. 

To find the right trading style for yourself, you need to take a holistic view of yourself and understand your risk-taking capabilities. This will help in revealing your trader profile and the trading style that suits your personality. For example, if you are a risk-averse kind of person and generally keep a long term view about the different aspects of life, then for you, positional trading is the best way to trade crypto. 

If the trading strategies and styles are not compatible with your personality, then the chances of success in crypto trading are very low. 

Wrapping Up…

As a beginner in the cryptocurrency market, your priority should be to gain adequate knowledge about the new asset class. It will help you to make an informed decision about the selection of trading style that is suitable for you. 

If you’re still unsure, start with positional trading or long term investing, as the risks are less and it will also help you understand the market well. 

FAQs on Ways to Trade in Cryptocurrency:

What’s the best way to trade in cryptocurrency?

For beginners, the best way to trade in cryptocurrency is through positional trading and carries a huge potential growth, 

Whereas, for active traders, intraday trading, swing trading, margin trading are some of the options to trade in cryptocurrencies and profit. 

How many ways can you trade cryptocurrency?

You can trade cryptocurrency by following the two approaches- fundamental analysis of cryptocurrencies and technical analysis of cryptocurrencies. 

Fundamental analysis is helpful in long term investing, whereas technical analysis is helpful in short term trading, where you aim to profit from the short term price fluctuations in cryptocurrency. 

What are the 3 main types of crypto exchanges?

There are three main types of cryptocurrency exchanges, centralized exchanges, decentralized exchanges, and Hybrids. 

In centralized exchanges, all the exchange operations are governed and managed centrally and are very popular in the crypto market.

The decentralized exchanges rely on on-chain operations and smart contracts to control exchange operations and safe storage of assets. Compared to centralized exchanges, decentralized exchanges are safe but are slow. 

Hybrid exchanges are a mix of both centralized and decentralized exchange types, however, the concept is still new in the market. 

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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Nisha Ramesh

Content Writer

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