Millions of merchants join the cryptocurrency world with a common goal of maximizing profits. As such, investors must grasp several trading strategies to become successful in the decentralized economy.
Today, there exist many types of traders within the digital asset market. What separates these investors is the long-term or short-term trading route they take. Long-term trading involves holding digital assets for extended periods. Traders under the long-term method usually believe that specific digital coins may turn out as profitable in the future.
Investors perform trades for shorter periods in a short-term setup, ranging between hours, days, or weeks. This piece uncovers why short-term traders have an advantage over long-term traders.
Why Short Term Generates More Income Than Long Term Trading
A lot can happen in the digital asset market, depending on the set timeline. Thus, durations play a significant role in determining the outcome of an investor’s trading strategy. Bearing that in mind, here’s why short-term trading is more profitable than long-term trading:
It Leverages Recent Trends
Short-term investments heavily rely on the recent events taking place in the crypto market. Here, users watch the market and make sound trading decisions based on their findings. For instance, influential figures such as Elon Musk embracing Bitcoin payments is positive news that can accumulate profits for users.
However, the mogul declined to use Bitcoin because of the environmental harm it causes during the mining process. As such, leveraging occurrences cannot be applicable for long-term trading since trends tend to change over time.
Requires Less Capital
In long-term trading, users make heavy investments because they are optimistic about a crypto asset’s future. However, the volatility rates of cryptocurrencies do not guarantee that investors can save their capital. Investors in the short-term trading field can make profits out of a small amount of capital.
It removes the pressure of requiring a bigger capital just to accumulate profits. As time goes by, short-term traders can continue upgrading their capital depending on their budgets.
The Market is Active
The cryptocurrency industry is a highly active market that operates around the clock. Being a broad and dynamic market, short-term investors vigorously make trading decisions that can uplift their incomes. So, short-term crypto investments are reliable for anyone at any given time.
Investors using short-term methods can make immediate reinvestments from what they gain. Long-term strategies such as staking hold the investors’ assets and, in most cases, lock their holdings in digital wallets.
It, therefore, limits users from reinvesting in their growing coins. Short-term trading eliminates such barriers and enables investors to make an extra investment after making profits.
Limits the Hassle of Researching
Finding out more about a platform’s offerings is part and parcel of any investment journey. Nevertheless, short-term trading methods require less research time than long-term trading strategies. Short-term investors only need to grasp basic information and carry on with their trading activities.
Long-term tactics take a more comprehensive approach since users will commit their holdings for a longer time. In the end, long-term investors may experience losses even after dedicating their time to research.
Short Term Strategies Investors Can Use
Crypto traders can use the following types of short term strategies to secure adequate profits:
Scalping involves making trades using a digital currency’s price movements. Under this strategy, traders act upon price shifts taking place within seconds or minutes. Experienced scalpers earn incomes by looking for time-sensitive opportunities. Thus, Scalpers develop consistency and chart reading skills as they gather continuous profits.
Arbitrage trading operates as a short-term strategy that relies on different market offerings. Investors buy digital assets from one exchange and sell them in another exchange, offering higher prices. The speed of an investor is what matters a lot in arbitrage trading. Another option is triangular arbitrage which uses the values of three assets on one exchange. Arbitrageurs make use of the price differences between exchanges to realize profits.
In leveraged trading, crypto exchanges allow investors to borrow funds and use that position to generate profits. Traders with smaller holdings can increase their buying power using the exchange’s long-short positions.
Trend lines allow users to analyze the crypto’s momentum and enter into a trading position. On some occasions, traders hold the same positions for more extended periods. Nonetheless, the general idea behind trend lines is to watch for any upward or downward shift and speculate the asset’s next movement.
The most common trend indicators used include relative strength index, moving averages, and the moving average convergence divergence (MACD)
Short-term trading allows investors to exploit the current market movements and accumulate gains. More importantly, short-term trade caters to budget-sensitive traders who wish to stick to their plans.
Through short-term trades, investors can receive updates on what is happening in the digital asset market. In the long run, investors gain more experience in handling and executing different types of trades.
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