Different Types of Crypto Trading Styles – 2022 Edition

Different Types of Crypto Trading Styles – 2022 Edition

The crypto trading environment is changing fast, and anyone who tells you trading cryptocurrencies is easy isn’t dealing in reality. Nobody can accurately predict the market's movements with 100% success. So how do some traders always seem to come out on top? 

To answer that question, take a look at some of the different types of crypto trading styles employed today. From day traders to large trading groups, there are infinite ways to trade digital assets. As such, it only takes a short amount of time to find a trading style that suits your overall investment strategy.

The general rule of thumb, regardless of your trading style, is the more you know about the projects, tokens, and overall market, the better your chances of success. Here are some different types of trading styles you can use to take your strategy up a notch and secure some extra Satoshis in 2022.

Technical Traders

The technical trader uses charting tools to inform strategy. They are typically experienced traders or have at least spent some time researching how to read technical indicators to make predictions. Most exchanges provide a variety of trading charts and indicators to help you gauge market momentum.

If done correctly, technical trading is one of the most effective ways to secure returns. However, it’s not an easy process. You will need to take some time to learn about the various charts and tools used by these traders – including candlestick charts, Bollinger bands, and many more. The great news is that technical trading skills can be applied to all markets which can make you an overall better investor when mastered.

Technical Trader Risks

One of the biggest things to remember as you get into technical trading is that these are simply tools to help you make an educated guess as to the market movements. As such, they are not 100% accurate by any means. You should combine these tools with other methods of project assessment to find the gems you want to trade. 

Social Media Traders

Another style of trader is the social media trader. This trader is similar to technical traders in that they monitor network activity to determine if the value of a project will rise or fall. However, unlike technical traders, these traders monitor social media chatter. They look at things like user engagement, penetration, upcoming events, promotions, and news coverage.

Social media traders gauge a project's momentum based on how much activity the network has online. The best social media traders will monitor a huge variety of platforms ranging from Twitter to more technical channels like GitHub. Together, they utilize the amount of overall network activity to decide if the project is still active and if it’s growing.

Social Trader Risks

One of the biggest risks social media traders must take into account is misinformation. Information garnered from these networks must be scrubbed and verified before sharing or utilizing it to make any investment decision. Getting this confirmation process down to a science can help you to take timely information and use it to your advantage. Also, be wary of FOMO (fear of missing out) as social media can operate as an echo chamber to hype underperforming projects.

Day Traders

Day traders are investors who conduct numerous exchanges daily. Day traders require different services than less active traders because they need ready access to their digital assets regularly throughout the day. A day trader will look to secure a small profit on each trade, which will accumulate over several trades.

Day traders seek out platforms that provide discounted rates based on trading activity. There are exchanges that offer lower fees if certain trading volume requirements are met. There are even DeFi protocols that reward users in cryptocurrency for every trade they make like the Apollo X DEX. These networks empower day traders to secure higher returns with less effort.

Passive traders

Passive traders conduct trades a couple times a month or a few times a year. They look for projects that have long term potential with the goal to sell their tokens at some milestone. For example, a passive trader could invest in the ICO (initial coin offering) of a project with the goal to sell their tokens following the mainnet launch six months later. 

Passive traders make up the largest majority of regular traders in the market. They don’t need to access their crypto daily, but they do want to have access to their coins without having to go through a bunch of security protocols like HODLers (long term investors). As such, these traders will often utilize mobile wallets to ensure they can conduct trades from their mobile device.

Bot traders

Bots are another type of trader that has had a growing influence on the market. Trading bots are preset protocols that execute trades once certain requirements are met. These systems are extremely popular with professional traders because they remove emotions from the process and provide better market monitoring capabilities. 

There are a variety of different trading bots available to users today. You will need to figure out what exchange and type of cryptocurrency you want to trade in order to find the best bot for your approach. The best bots are easy to program and enable you to set up trading parameters for multiple cryptocurrencies across multiple exchanges. 

Where You Trade Matters

Where you trade your crypto makes a difference in how you can trade it. CEXs (centralized exchanges) offer a more familiar user experience. These exchanges have charts and features such as limit orders that are not available on most of their decentralized counterparts. The top CEXs meet regulatory standards making them ideal for use by institutional investment firms. The downsides of trading on CEXs include higher fees, less privacy, and more risk of theft. 

DEXs (decentralized exchanges) provide a better alternative for the average user. These protocols operate in a non-custodial manner, meaning you conduct trades with your crypto safely in your wallet. They also don’t require you to provide personal information to utilize their services, which protects you from data theft risks in the future.

Depending on your overall trading goals, a DEX can save you on fees and help you remain private. These networks provide a variety of wealth generation features such as staking protocols. These features enable traders to secure passive rewards without giving up ownership of their original assets. The downside of DEXs is that they have a learning curve. They also feature fewer options, charting tools, and regulatory oversight.

Find the Trading Style That Meets Your Needs

Now that you have some insight into a few of the most popular trading styles in 2022, you're ready to create your own. The main thing to remember is that no two traders are the same. You can combine skills to improve your ROIs. In most instances, a combination of all of the trading strategies above can be the best option.