Scalping is one of the main crypto trading strategies which involves gaining profit from small price movements.
Compared to Day Trading, scalping places more emphasis on technical analysis than fundamental techniques.
Therefore, it’s very common for scalpers to be dependent on candlestick chart patterns, support and resistance levels, as well as other technical indicators like Bollinger Bands.
There are two types of scalpers: Discretionary and Systematic.
The Discretionary trader doesn’t typically plan ahead when trading. Instead, they make decisions on the fly and adapt to the changes in the market.
Although they may or may not have a set of requirements that they follow when entering or exiting positions, their moves are based on the current conditions.
As for Systematic traders, they will enter or exit a trade according to a well-defined trading system. This makes Systematic trading more data-driven than Discretionary trading — relying more on data and algorithm versus Systematic’s gut-based approach.
If you have been poking around the crypto trading bot scene, I’m willing to bet that you’ve come across the term “hodl”.
In December 2013, a Bitcointalk forum user posted “I AM HODLING” — which contains a rant about his rusty trading skills and determination to hold his Bitcoin.
An hour later, “HODL” quickly became a widespread meme and is treated as a mantra by some crypto enthusiasts to “Hold On for Dear Life”.
HODLers are likely to ignore even large price swings in favour of asset holding. Even in situations when selling is a more profitable move.
The maximalist traders generally believe that cryptocurrencies will eventually replace fiat currencies. Once this happens, the exchange rates between fiat currency and cryptocurrency will mean nothing to crypto traders.
Last but not least, Cost Averaging.
To be honest, it’s hard work trying to time the market in order to ensure that you get the best price when purchasing.
Maybe you’d like to take away that complexity and just trade. At the same time, you’re not willing to risk losing money either.
This is where Cost Averaging comes into play. The trader would regularly invest equal amounts of money, regardless of the asset’s price.
For example, you have decided to invest a total of $30,000 into Bitcoin for 12 months. So, this means that you’d always be buying $2,500 worth of Bitcoin each month — no matter how much the Bitcoin’s current price is.
This trading approach aims to lower the overall impact of volatility on the asset’s price, as well as avoiding poorly-timed lump-sum investment.
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