If you can take more risks, you can make more gains; this is a thumb rule for investing. And the crypto market is no different. So, if you wish to make profits in a short-term period, you should have a high risk appetite and be ready to lose money. Sometimes the loss may be even more than what you invested because the crypto market is highly volatile. Short-term trading is referred to as aggressive trading simply because you deliberately take greater risks for making greater profits. But investments, long-term or short-term, need a continuous balancing between rewards and risks.
Different types of short-term trading:
Short-term trades can be categorized according to their duration and how fast you can earn profits. So, they can be over days, hours, and weeks. The shorter the duration, the higher are the risks involved. Here is a brief explanation of the 3 types of short-term crypto investing time frames:
- Crypto investing aimed at profits within hours: This is more or less what day trading is all about. It is an aggressive form of short-term crypto trading where your aim is to buy and sell coins within a single trading day itself. Unlike traditional stock markets where a trade day typically ends in the evening, the crypto market never sleeps. So, you must define trading hours according to what suits your schedule. You cannot juggle between office work and day trading; the end result can be disastrous both for your career and trades. Day trading cryptocurrencies is not the same as day trading fiat currencies. With fiat currencies and traditional assets like stocks or Forex, there are tried-and-tested rules.
- Cryptocurrency investing aimed at profits within days: This is a good option for those who are keen for short-term trading but cannot be glued to the computer day and night. Traders sticking to positions overnight are usually called swing traders. For them, the most popular strategy is range trading where you focus on cryptos whose prices have been fluctuating within two levels. You must purchase the asset at the bottom and then sell it at the top to make profits. This is a straightforward strategy, except that ranges are hard to identify. It demands proficiency in technical analysis. Using a broker may be useful when swing trading.
- Cryptocurrency investing aimed at profits within weeks: This time-frame is akin to position trading because it is longer than day trading but shorter than long-term investing. It may be least risky of the lot, but it does not eliminate risks altogether. To engage in this short-term investing, you must identify market trends. You have to ride a trend upward or downward until the prices hit resistance/support levels. The resistance is a barrier preventing prices from climbing further while support is the level below which prices cannot dip further. For doing position trading, you must hold onto your coins in a wallet, but that can be risky. Using a broker instead for price speculation purposes may be better as you won’t have to own the coins in that case.
These are different time-frames for short-term trading which you can consider. Each has its advantages and shortcomings. But the bottom line is that you must conduct strict risk-assessment to make sure you earn high profits.