Cryptocurrencies, just like other securities and assets, should be traded with caution if you wish to make money. Each trader has a preferred trading system, but all traders can be categorized into 3 categories. This article will review the different categories of traders and identify their strengths and shortcomings for cryptocurrency traders to learn from.
Top 3 Types Of Cryptocurrency Traders In The Industry
Type 1: Traders Who Operate Based On News
There are two types of news: the known and unknown. The known news is essentially public information that is aired on mainstream media and other news outlets. Unknown news, on the other hand, is essentially insider information. It is information known only to a few people, commonly people working within the company and high-profile investors with insider sources.
The known news is not useful for trading as everyone already knows it. The unknown news is what this category of traders usually look for. It puts them at an advantage over other traders so that they can get in on future trends before they begin or pick up momentum. It comes in handy depending on timing and, of course, accuracy.
Shortcomings Of News Traders
There are two main shortcomings of news traders. First, access to inside information is not easy for the average trader. Second, markets may react differently to news blasts and upset trades. To this end, this category comprises most of the unsuccessful traders and is not recommended for the average trader.
Type 2: Traders Who Operate Based On Fundamental Analysis
This category of traders is officially known as fundamental traders. It is composed of traders who make their analysis off solid facts such as a company’s earnings, dividends, and other statistics. They hope to predict the future trend of a certain stock’s or security asset’s performance based on its current performance. This demands a lot of experience and a better-than-average understanding of principles such as mathematics and economics.
Shortcomings Of Fundamental Traders
Fundamental traders are much more successful than news traders. However, they too suffer losses from time to time. This is because their analysis, regardless of how accurate, may not always pan out considering that markets are influenced by a wide range of factors, most of which are unpredictable.
Type 3: Traders Who Operate Based On Supply And Demand
Traders who trade based on supply and demand levels are officially referred to as technical traders. They do not rely on what other people are saying, unlike news traders. What’s more, their analysis is based on technical factors, most of which are available within the charts, instead of fundamental information regarding the companies and securities themselves.
Like other traders, technical traders also undergo losses and have their shortcomings. However, they are much more successful, but success depends on factors such as speed and responsiveness, accuracy in judgment, and emotional maturity, among others.
There is a lot of money to be made in cryptocurrencies but it will take well-executed trades to do it. Considering that cryptocurrencies are volatile like all other security assets, trading should be done with caution. Of the three types of traders, technical traders are most suited for trading cryptocurrencies.