Bulls on Wall Street
What’s the best way to trade crypto? Should you HODL? Should you buy and sell after a few hours? Should you swing the trade?
Cryptocurrency is one of the best assets for momentum traders. It is fluid, has range and constantly delivers clean trends.
The truth is that there is no single strategy for investing in cryptos.
You must consider the following with these two investment styles:
Momentum Trading vs Investing
There are many ways to skin a cat. It also depends on the dealer. Momentum trading is our preferred trading style for bulls on Wall Street. Momentum trading simply refers to day trading and swing trading.
Day trading means buying an asset and selling it within the same trading day. A swing trade buys and sells a few days or weeks later. The basic differences between these two styles:
Let’s get to the advantages and disadvantages of the individual investment styles:
Momentum trading professionals
If momentum trading is done correctly, you can see a huge percentage return in minutes or hours. Crypto has had such a wide reach lately that it is possible to get 5-10% returns in a day with the right inputs and outputs.
You are constantly taking profits as opposed to long term investments and you are creating cash flow weekly. As a momentum trader, we look for cryptos with the greatest reach, liquidity and the best position to make explosive moves.
Momentum Trading Cons
Crypto can do serious harm to your trading account if you don’t have adequate risk management in place. When trading volatile asset classes like cryptocurrencies, you need a trading plan. Always use a tough stop loss.
You also need to take the time to develop a successful cryptocurrency trading system. You have to have an edge or you’re just playing (you can learn some strategies in our free Intro-to-Crypto Trading course here).
It also requires active management of your positions. Some people don’t want to consistently monitor positions. Buy and forget.
Buy and keep professionals
It is the most passive form of investing. You don’t have to check deals every day, and this is why it is the most popular. Bitcoin and the general market have been in a steady upward trend for a year and many believe the fundamentals are in place for further growth in the years to come. It’s the easiest way to invest.
Buy and Hold Cons
Most buy and hold investments typically generate an annual return of 2-6% which is considered very good. Bitcoin, Ethereum, and most of the other cryptos have obviously made much better returns for investors in the past few years.
Volatility is not what most buy and hold investors want and can be a source of stress. Bitcoin can move 10% in a day and fall 10% or more over the same period. It could lead people who are not seasoned investors to sell something rash and panic.
Know what type of dealer you are
Everyone has different amounts of capital, different risk tolerances and different personalities. This means that pretty much everyone has their own trading style. If you are the type who feels the need to check your phone every 5 minutes to see how your bitcoin investment is doing, consider day trading instead of buying and holding.
If you are the kind of person who doesn’t think fast and is stressed by watching every tick, buying and holding may be better for you than day trading. Understanding yourself and what hurts you the most about trading is important. Regardless of your investment style, you need to take the time to develop a trading system that will cause you the least amount of stress.
The bottom line is that momentum trading is clearly the superior option if you can take the risk and execute a strategy profitably. Long term investing = lower risk, lower reward. Momentum trading is more rewarding, and not necessarily high risk, when you know what you are doing.
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