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Long Term Investing vs. Short Term Trading

 

Short Term Trading

 

  • Go short to take small gains now – they flitter back and forth between their fiat currency and cryptocurrency. They go short as part of a short-term strategy.
  • Go short in order to stay long – they are really in a long position, but hedge in a fiat or “stable” cryptocurrency. They go short as part of a long-term strategy.
  • Going short to add to your long position – they are trading as part of a strategy to add to their long positions and accumulate more coins.

 

To trade based on short-term fluctuations can be shortsighted based on your mindset. But just because it’s short-sighed doesn’t mean it is wrong. It just means that you will need to have:

  1. Discipline & Patience
  2. Mental & Emotional Stability to handle the Emotional Stress
  3. A strong strategy
  4. An ability to take losses as part of your strategy
  5. A community of like-minded stable traders (as trading is lonely)
  6. The ability to hold yourself accountable
  7. The ability to withstand a lack of security

The trick is that during the day you buy at the day’s low, and you sell at the day’s high. If you do this consistently you will earn consistent profits.

If you’re day trading you have to follow the one single rule:

  • Never hold your position overnight. Every night hedge your coin in fiat or other cryptocurrency, then start again the next day.

Short-term trading can be emotionally stressful; to reduce that stress:

  1. Understand yourself
  2. Practice Mindfulness
  3. Trade Less Capital

 

Position Traders or Long Term Investing

Long-term traders are not concerned with short-term fluctuations because they believe they believe that their long-term investment horizons will smooth these out. – Investopedia

Investors, Position Traders, Buy and Hold strategy, these are all common terms to describe this type of trader. Such a trader can hold for months or even years. During Market Corrections, many traders will either sell-off or hold. If they’re the 90% group they sell off in response to a fear-based response without a strategy. If on the other hand they are a small group of 10% traders they will if all the indicators are there for the coin, buy and hold and look long.

Corrections are a natural part of the economy. Long term traders don’t really care about them, and may even only make 2-3 Exits per year. Spring and Fall. With Summers and Winters being a common time for accumulations. Coins spend more time accumulating than they do rallying.

Position Traders tend to look for coins that are undervalued and have strong fundamentals.

When I want to amass a lot of coins for the cheapest amount I look for coins that are undervalued and in this price range:

  • Under $0.14 cents
  • Between 0.14 cents and $0.30 cents
  • Under $1.00
  • Under $6.00

I stay within this amount because I can make more from volatile price movements, if the fundamentals are good there’s a promise it could go up, and because it’s great for people who want to invest but don’t have a lot of capital. As an example: You might need $10,000s to make any real profit in a coin that is priced at $5k per coin, but that same 10k can give you many more coins in a lower-priced coin. And while it may never reach 10k, it could reach high enough to help you live comfortably for a few years or more.

I also keep an eye on recently released ICOs (new coins being released or planned on being released) and look for how it performs in its first 3-6 months. Tools like Smith and Crown can help keep track of coins being released; browsing the cryptocurrency forums, is another method.

Position traders have more freedom and flexibility than swing traders. Tend to be analytical, and don’t tend to be glued to their PC on a day to day basis.

How Long Should you Hold a Long Position

Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak and destroy portfolio appreciation for the long run.

If you’re Warren Buffet he believes he states, “If you can’t own a stock for 10 years, you shouldn’t hold it for 10 minutes.”, in altcoin terminology let’s bring that down to 3-5 years. Can you hold your position for 1-3 years?

 

Go Short To Add To your Long Position

For those who like the adventure of trading, short active trades while having a long position is a viable technique. You take the security and position of a long-term trade; while building your skills as a day or swing trader; and even making those profits.

  1. Find an accumulating Coin
  2. Buy & Hold the Coin (invest)
  3. Take a small percentage of the coin (trade)
  4. Trade that small percentage back and forth
  5. Keep a portion of your gains in the coin you are holding (reinvest)
  6. Hedge a portion of your gains in the currency you are using for daily living (spend)
  7. Trade the rest of the gains actively (trade)

 

There’s a market for every Trading Style.

Different markets are good for day trading. Ideally a good market could be in a steady trading range with clear predictable movements up or down;

  • Swing Traders do better with more volatile markets.
  • Day Traders do better with
    more
    stable markets (trading ranges)
  • Momentum Traders do best with rallying coins (they buy mid-high sell high)
  • Position Traders do best with coins that have a clear trend (go with the flow of the trend)

In another article I will go more in depth of how to identify these types of markets, but for now.

Is Short-Term Trading for the “Masters”

Some people believe that trading short-term positions back and forth is for ‘masters’. This is false because there are no Masters. There are traders who have a strategy, routine or algorithim that they follow consistently to make small consistent profits over-time and
there are traders who consistently lose money when they trade. When it comes down to it, the traders who lose money lack self-discipline and control, they tend to be overwhelmed by emotions, anxiety, greed, fear, and are reactive. They chase the trend.

The “Master” appears to be a Master simply because he or she has found a way to calm their mind and manage uncertainty.

Anyone whether they’re new to trading or have been doing this for 10, 15, 25 years can apply the same method of a calm mind and consistently win. Overtime those wins will turn into consistent profits, and as you get better you will be able to scale and grow those profits. Usually with a simple ‘reinvest’ strategy, where you cut underperformers, and rediversify into other places.

That’s the only difference.

If you can’t trade in the short-term you either have too much on the line for it to be actually fun, or you need to pull out, recoup, and switch to a longer term strategy. Ideally if you are going long you buy after a coin has corrected not in the middle of a coin’s rally.