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Short term trading strategy is a technique that involves opening and closing trades in a short time frame. While it can be quite lucrative for lots of traders, there is a huge risk involved.
Trading over a shorter time frame means that you are not exposing yourself to long term external factors which might impact the market to a point that exceeds your risk appetite.
Crypto is known for its volatility and in a shorter time frame this volatility is a double-edged sword. Knowing how to benefit from the volatility can end up being extremely profitable for you. This article is going to highlight some of the most famous short-term trading strategies. Implementing these strategies in your trades can help you become a better and a much more profitable trader.
However, before we move on to these strategies, let’s give an overview of spot trading to those who are just starting out. If you have been trading for quite some time, you can skip this part and move over to the strategies section. Without further ado, let’s begin.
What is Spot Trading? Is It Profitable?
Spot trading is a type of trading where you can directly buy, hold and sell the underlying cryptocurrency. When you buy something on spot, you own those coins. If the value of those coins goes up, your profit goes up and if the price of those coins goes down, you are in loss.
However, it is essential to note that you are neither in profit nor in loss unless and until you sell the coins you are holding. So, technically you can hold your crypto as long as you want to.
Spot trading is the best market to trade for beginners as it doesn’t involve the complexities associated with futures or margin trading. You don’t have to worry about liquidation price, interest fees, leverage and margin requirement as you can just buy and sell anything at the current market price.
There is one downside of doing spot trading and that is the fact that you can only trade one side of the market. As mentioned before, profit in spot trading refers to the difference in price of the coin at which you bought them and at which you are selling them. For example, if you bought a coin at $1 and sold it at $5, you make a profit of $4.
You can only make money if the market goes up (called as longing), you can’t short the market and benefit from the downside movement of the market. However, if you plan your trades the right way and buy the right coins, the potential for making money is unlimited.
What Cryptocurrencies Should I Buy for Short Term Profit?
A common question that a lot of people ask, or wonder is what cryptocurrencies are best for making money. There is no definite answer for this question as crypto markets work in cycle. Instead of focusing on what coins to buy, you need to keep yourself updated with market trends and figure out which sector is gaining the most hype online.
Market cycles move pretty quickly and if you want to make the most of them, you have to hop on the train as soon as possible. Where it is AI, Gaming, L1, L2, AI Agents, or any other sector that’s booming, you need to constantly check social media platforms and communities to judge what people are talking about the most.
Once you have an idea about the sector, you need to narrow down some famous coins in those sectors. There are thousands of cryptocurrencies in each category so you must note down the top five cryptocurrencies you want to buy. In order to do that, you must do some research into the coin, its liquidity, how volatile it is and where you want to trade it.
Once you are trading the right coins from the right categories, your chances of making money increase tenfold.
5 Best Short-Term Trading Strategies for Spot Crypto
Now that you know which coins you want to trade, another step before you start trading them is knowing how to trade them. Trading cryptocurrency is a PvP market. It means that you will be trading against other people. Your loss is going to be someone else’s profit, and your profit is going to be someone else’s loss.
If you want to maximize your profit and get better than everyone else, you need to have an edge. Most traders often stick to a certain strategy and learn it from their heart. It helps them visualize the market in a much better way and play to their strengths.
Here are some famous strategies that you can incorporate.
- Scalping:
Just as the name suggests, scalping involves getting in and out of the market in a matter of seconds or minutes. In this trading strategy, you focus most on making smaller time frame profits rather than how much profit you make. Scalp traders often carry hundreds of traders every day, each adding a little bit to their profit.
- Day Trading:
Day trading is another short-term trading strategy that involves getting in and out of the market on a daily basis otherwise known as intraday trading.
Many day traders use exchanges like Coinflare to execute multiple trades on a daily basis averaging from ten to twenty trades per day. However, it is important to note that day trading itself is not really a strategy itself.
Traders use setups to execute their trades, while the duration of the trade defines the strategy.
- Swing Trading:
On a surface level, day trading and swing trade may look like similar strategies but there is a difference in the time frame involved. While day trading is done within a 24-hour period, swing traders tend to leverage daily, weekly, and biweekly trends of the market to make money.
Swing trading gives a trade much more time to study how the market is moving and take advantage of market fluctuations and swings. It is important to note that you need to identify the right period. As a swing trade you need to have a plan regarding when to enter and exit the market.
- Moving Average Strategy:
Moving averages are momentum indicators that make it easier for a trade to cut out the noise and have a better idea about the direction in which the market is moving. There are several indicators that are based on moving averages like MACD oscillator, Bollinger band indicators etc.
These indicators are usually used by traders to help them figure out what is the right time to buy and sell an asset. However, it is important to note that these indicators only highlight established trends and can’t predict the future. You must view them as tools to help you give confirmation about your analysis rather than using them as something to do your analysis.
Frequently Asked Questions (FAQs):
Is short-term spot trading profitable?
When done in the right way, short-term spot trading tends to be extremely profitable as you are not exposed to the market for a long period of time. However, you must realize that it involves watching the market 24/7, which can tend to be highly tasking. In order to be a successful short-term trader, you must allow yourself some time away from the market and not let it get into your head too much.
How to do scalping in spot trading?
Scaling is known as benefiting from short term price movements. Each trader has his own setup on how to scalp trade. It is usually a better idea to find top 10 crypto coins that are in a clear trend and benefit from their higher frame trend on a shorter time frame.
Is spot trading good for the short term?
Spot trading is the best way for a beginner to make money. It is much easier than derivatives trading as you don’t have to worry about leverage and liquidation price. If you do it carefully and responsibly, you have lots of chances to be profitable.
Where is the best place to hold your crypto for the short term?
If you are looking to hold your crypto for the short term, it is a better idea to do it on a crypto exchange like Coinflare where there is enough liquidity. You can easily sell your assets whenever you want without having to worry about anything.
