So many people claimed to be a long term investor (aka Hodler) last year, but really they were attempting to be short term traders. They were just uneducated traders with FOMO who bought the top and sold the bottom.
Their failure came from a lack of understanding of timing investments, and the lack of a proper trading plan for their investment. The losing traders just bought with the expectation that the cryptocurrency would go up forever.
Before getting involved with investing or trading in the crypto markets, you have to know who you are as a trader. This article will help you figure out what style is best suited for your personality and time commitment:
A true holder is someone who is holding a cryptocurrency for years. These people are also known as long term investors. Hodler’s from 2010 capitalized huge on their BTC positions, if they held until today. That is the kind of time horizon you have if you are a true hodler. You are holding through periods when everything looks terrible in the market. If you truly believe in what you are holding, short term pullbacks should not concern you, and could even be viewed as buying opportunities. You are holding for years. You don’t need to check on the market everyday. You set it and forget it (maybe check on it once a week).
Successful hodlers understand that major market moves take time to occur. Bitcoin does not make 1000% moves overnight. These kind of setups take years to develop, and do not occur without major moves against your position. If you are a current or aspiring hodler, you need to understand the 5 major cryptocurrency market cycles. This will allow you to understand where we stand at the moment, and what will happen in the future. The crypto markets have a history of big pullbacks. These pullbacks do not signify that the asset itself will not be of greater value in the future. Corrections are a healthy for any growing market.
A trader is someone who capitalizes on short term volatility in the market. They usually hold their trades from hours to days. There are two types of traders: Day traders and swing traders. Day traders will usually hold for hours or maybe a couple days. Swing traders will hold their trades for days or weeks, but usually no longer than 2 weeks. Traders are people who can make quick decisions under pressure. They also have the flexibility to be able to check on their positions frequently.
Short-term trading can lead to huge gains in your trading account in a short period of time. The crypto markets have a huge amount of volatility, and they also are open 24/7. There is a ton of opportunity in these markets for day and swing traders. Almost every week, you can find a crypto making a 10%-20% move in either direction. Traders can profit when the market is down-trending through short-selling cryptos as well. This is an example of a trade we took in Ethereum back in early September, where we made 20% in just 3 days.
Always Have A Trading Plan
Whatever type you are, you have to always have a trading plan for any investment you make. You should know these 5 things before you enter any trade:
- What time frame you are investing on
- How much money you will use in the investment
- What price you want to buy at
- What price you want to take profits at
- What price you will exit if your investment goes against you
If you do not know any 1 of these 5 things before you make an investment, you are just a gambler. If you looking to learn more about successfully trading and investing in the crypto markets, you can get a complete education from our comprehensive crypto trading bootcamp. Learn more about the bootcamp here.