We all know that tables can turn at any second in the crypto network as it is a very dynamic world therefore knowing basic investment strategies can be a huge plus to navigate successfully in this world. Many successful investment strategies obviously became famous because of their impact on different investors. Each is tailored according to individual requirements like time commitments, risk tolerances, and most importantly what they aim to achieve.

In this article, we are going to deeply delve into the two most famous strategies i.e., crypto day trading and HODling. The main difference between both of them is the time commitment. Day trading starts and ends on the same day whereas HODling which is actually derived from the ‘holding’ requires individuals to hold on to their investment for a very long period of time. In HODling investors follow this strategy irrespective of the market’s fluctuation. They remain unphased even on the deadliest downturns because they believe that their value will be appreciated over the long run.

On the other hand, day trading requires swift decision making ability and 24/7 monitoring of the market in order to attain quick profits. For some investors, HODling proved successful and some go along best with day trading. It still remains a long debate on which strategy to follow therefore below we will dive deeper into both strategies. We will study the pros and cons of both approaches to find the best fit for you.

A Detailed Overview Of Day Trading

First of all, day trading is best suited for professionals because it requires a lot of experience and quick decision making ability. The investor if going with this strategy will have to sell and purchase the assets on the same day. However, there may be more than one trading involved according to the market situation.

Day traders use various strategies including technical analysis (TA) which indicates entry and exit positions based on different metrics including chart patterns, volume, and price actions. Day trading can be a risky and stressful investment but it can help you gain quick profits like REAL QUICK!

The most technical element is liquidity to execute trades quickly as a more liquid crypto trading pair will have greater chances of success while exiting. Day trading strategy is very intense because it takes advantage of even the smallest movements but it is also very successful because you can spot at least one spiking opportunity within the same day provided if looked with technical eyes.

In day trading, scalping and arbitrage are also famous strategies. In scalping, investors aim to gain profit from the small fluctuations even in the shortest time where the exit position can be minutes away from the entry position.

On the other hand in arbitrage, the sale and purchase of crypto assets are done within minutes but on different platforms.  For instance, if you buy an asset from platform A and sell it within minutes on platform B where its price is higher then you can achieve a considerable profit.

Apart from technical analysis, doing a fundamental analysis is also critical where you have to keep yourself updated with the news that might impact the cryptocurrencies.

A Detailed Overview Of HODling

HODling is the strategy where investors hold their purchased coins for a very long period of time in a very secure wallet. No matter the condition of the market, they remain unaffected by the fluctuations in rates. Even if the market crashes or the opposite, their saved coins become too much in value, they only sell their assets at their strategize time.

HODling is a much safer investment strategy in the sense that the investors are not exposed to short-term volatility which is not something uncommon in crypto. Also, as compared to other strategies, the risk of high buying and cheaper selling can also be avoided because, as it’s a long term investment, the investors do not make hasty decisions. The most common emotions FOMO ( Fear Of Missing Out) and FUD (Uncertainty and Doubt) have no place in this strategy.

DCA(Dollar-Cost Average) is the strategy that is mostly followed in HODling which means to invest in small positions over a long period of time irrespective of the rates of the chosen coin. However, the most important step is to choose the right coin. As of today, the crypto world holds more than thousands of coins, every day many coins form and many die. Therefore, it is necessary to choose a coin in a way that it will be present to trade or cash when your chosen time arrives.

Also, choosing a secure place or wallet to store your investment is also very critical. If you want to adopt the HODling strategy then it is necessary to look at the bigger picture. Also, to avoid selling early, keeping an undivided attention on the long-term chart trends is of utmost importance.

For the sake of simplicity, we have compiled the pros and cons of day trading and HODling.

Pros Of Day Trading

Be Your Own Boss

In day trading, there is no time requirement. You can set your own time for work and be your own boss. For instance, you can set your trading time in the early morning and rest the whole day.

No Overnight Risk

Unlike stock, day trading in crypto does not have any overnight risk because their enter and exit positions are on the same day.

High Potential Of Quick Profits

If you can make quick decisions then you can make significant and quick profits by capitalizing on rapid price changes. There is a possibility of better returns even in bear markets.

Flexible Reinvestment

Since, your capital will not be bound for a long period of time, therefore you will have the opportunity of flexible reinvestment multiple times a day.

Numerous Trading Opportunities

In day trading you can take advantage of the high volatility of the market which allows you to trade numerous times a day.

Cons Of Day Trading

Time Intensive

Day trading can be very time intensive as it requires constant monitoring of the market.

Potential For Significant Loses

There is a very high risk of potential loss because of its fast paced nature.

Emotional Toll

In day trading, you have to make very quick decisions which can increase stress and emotional toll. 

Higher Asset Allocation

In day trading, the allocation for assets is too high therefore it is advisable to never invest too much at once. The golden rule of investment “ only invest what you can afford to lose” is greatly applied here.

Higher Transaction Fees

Day trading involves sales and purchase of crypto assets in a short time which entails higher transaction and brokerage fees.

Pros of HODling

Sit Back And Relax

HODling is a long term investment therefore after investing you can actually sit back and relax. 

No Need For Frequent Market Check

Unlike day trading where you have to constantly monitor the markets, there is no need to check the market so frequently in HODling.

Stress Free Investment 

You will not face any short-term volatility in HODling, where no quick decision making is required. Thus you can enjoy a stress free long- term investment with this strategy.

FOMO And FUD Are Almost None

Again, since it’s a long term investment where no hasty decisions are to be made therefore emotions like fear of missing out and uncertainty and doubt are almost minimized.

High Return

With HODling, you can get massive profits in a span of a few years. For instance, in 2020 spring of 2020, Bitcoin was at ∼$5500, where someone invested, and in 2021 autumn of 2021, if it was sold then the profit was actually 1100%! Such kind of massive profits are not possible in day trading.

Defer The Tax Liability 

In HODling, you can invest more money and at the same time grow your capital provided the chosen crypto is increasing its value. This way you can defer the tax liability.

Cons Of HODling

Rougher Bear Market

In day trading you have the potential to gain big even in a bear market but in HODling, a bear market can be rough. Therefore, no sale should be made in the bear market.

Can Be Risky 

Even though some coins have made their place in the market, their future is still uncertain especially when new rules and regulations keep coming every other day. Therefore, make sure that you choose the right coin!

Long-Term Storage Of Private Keys

The incidents are common where investors have lost their private keys over a long period of time. Therefore, firstly, it’s essential to secure your assets in self custody because of online thefts. Secondly, make sure that you keep your private keys in a place where you will remember to retrieve them.

Missing The Short-Term High Volatile Period 

Since HODling requires long-term strategy and patience therefore holders often miss out on short term high volatility periods.

Closing Remarks

After much discussion, it’s still a long time debate where it all comes down to investors on what kind of strategy they think would be best for them.

After all, it depends on the time they can spend, how much they can invest, whether they can take an emotional toll, and how much risk they can take. However many investors are day traders and hold at the same time to enhance their portfolios.