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Day Trading vs. Trend Trading: Differences and Strategies

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Thu, 08/19/2021 - 15:14
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Heewon Jang
Which trading type is best for you? Which exchange to pick? Let us put this in layman's terms
Day Trading vs. Trend Trading: Differences and Strategies
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Cryptocurrencies have established themselves as profitable investment vehicles. One of the most remarkable features of these digital assets is their high volatility. While volatility can be inconvenient for the day-to-day usage of crypto, it has some benefits. Enthusiasts and investors use different trading strategies to leverage volatility to have profits.

Some traders opt for a short time frame to complete a trade. Others prefer a longer time frame. Which approach is better? The answer is both of them. A beautiful thing about crypto trading is that different strategies have been demonstrated to be effective. Short-term trading like day trading yields profits. But a trading approach with a longer time frame like trend trading can be equally good.

The key to success is having a good understanding of how each strategy works. Also, the type of exchange used for trading plays a crucial role in the outcome. Therefore, in this article, we will discuss some differences between day trading and trend trading. We emphasize the type of exchange that best fits each strategy.

Day Trading

This strategy refers to buying/selling digital coins over a short time. The duration of the trade can go from a few minutes to several hours. Day traders make profits from short-term price fluctuations, which are typical of cryptocurrencies. As the name of this strategy implies, day traders complete most trades within a single day.

Since day traders don’t hold positions overnight, they usually aim at completing as many trades as possible in a single day. Aggressive traders can make as many as twenty trades a day. More cautious traders can make only one. Some traders choose to trade on several markets whereas others stick to a single one. These decisions depend on the character of each person.

To be profitable, you should generate at least one hundred trades per month. However, to have an edge, you need a good understanding of the crypto market. Unfortunately, day trading has been touted as the easiest route to quick riches in the crypto sphere. As a result, many new traders opt for this strategy with little to no knowledge of the basics. They usually end up incurring heavy losses.

Type of Exchange for Day Trading

At first glance, day trading looks very simple: you buy cryptocurrencies at low prices and, after a short time, sell them more expensively for a profit. Then, you repeat the operation several times a day. Yet, this simplistic view could not be further from the truth. Day trading is complicated. Many variables affect the short-term price fluctuations of cryptocurrencies. You simply cannot factor them all.

To increase your chance of success and minimize loss risks, you need, among other things:

  • Well-defined strategies for different scenarios;
  • Analysis of specific indicators;
  • Research sources;
  • Technical analyses;
  • Risk management strategies;
  • Limits for profit and loss tolerance.

Therefore, access to a good deal of information and speed is critical. A custodial exchange like Binance (or similar) is the best option for day trading. Such exchanges provide advanced trading tools, different types of orders, fast off-chain transactions, and other features that will ease your activity. However, you should consider the charged fees before you decide to settle with a specific exchange. It is particularly important if you make many trades a day.

Trend Trading

Trend trading consists of analyzing market data to identify long-term trends of a cryptocurrency price. Traders aim at forecasting whether the said price will go up or down and when this will happen. For this sake, they use various analytical tools to predict price movements over several months or longer. This strategy deliberately ignores short-term price fluctuations. Instead, trend traders focus on patterns in historical data like price and volume.

With this strategy, traders hold positions for months and profit from long-term price movements. As such, the trading frequency is much lower in comparison to day trading. Depending on the number of markets chosen, a trend trader can make between ten and twenty trades a month. Trend trending is usually less time-consuming in comparison to day trading. However, it also carries a high level of stress. More often than not, traders will face wild price swings.

Type of Exchange for Trend Trading

If you want to do trend trading, an instant exchange platform is a better solution than a traditional exchange. Instant exchanges like LetsExchange.io are non-custodial. In other words, the instant exchange doesn’t store your private keys and digital assets. Instead, each trader is responsible to safeguard this sensitive information in a crypto wallet.

Since you need to hold your digital coins for a long time while trend trading, using a wallet is much safer than leaving your coins on the exchange. Moreover, instant exchanges perform on-chain transactions only. Therefore, the risk of losing your assets to hacking is practically nonexistent on an instant exchange platform.

Some additional benefits the LetsExchange platform offers are:

  • Anonymity. You don’t need to register to trade on the platform. The site doesn’t apply any KYC/AML procedures either;
  • User-friendliness. The interface is quite intuitive, which makes all functions accessible to beginners and seasoned traders alike;
  •  No upper limits. Traders can transact as much crypto as they decide;
  • A vast variety of coins. With more than 250 digital coins supported, traders have plenty of trading pairs to choose from.

Moreover, besides its inventory of coins, LetsExchage pulls liquidity from multiple custodial exchanges. Hence, you won’t have a problem completing a trade on this platform.

Conclusion

Trading cryptocurrencies can be a profitable activity if you select the right strategy. Assess your skills, knowledge, and experience with cryptocurrency markets to determine the most suitable strategy. Take into account the tolerance for risk that you possess. After choosing your trading strategy, make sure to use the right exchange platform for your trading activity. Custodial exchanges offer a lot of advanced options for day trading. For trend trading, it’s generally better to opt for an instant cryptocurrency exchange.

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About the author

Heewon Jang is a freelance journalist and the editor of CryptoGags section.
She is responsible for entertaining crypto content and bitcoin humour