Day trading is buying and selling a stock or security within the same day, usually it is done by professional traders in foreign-exchange (forex) markets and the stock market. Since cryptocurrency trading is mostly unregulated, many people are also trying to day trade in the highly volatile cryptocurrency markets.
Many people think trading is easy when they hear stories of people making huge gains quickly. News and media articles also promote this type of trading as a get-rich-quick scheme. The sad truth is that most traders do not make a profit and rather lose quickly and leave the market when things go the opposite way.
Even many professional money managers and financial advisers shy away from day trading, arguing that, in most cases, the reward does not justify the risk. There is of course a higher than 50% chance to win a trade when looking at many market factors, news and watching charts closely all day. However, most traders do not use tight stops, might risk too much and are generally prone to overestimate the success rate and underestimate the downside.
Day traders are typically well-established in the field and have in-depth knowledge of the marketplace. Individuals who attempt to day trade without an understanding of market fundamentals often end up losing money.
Swing trading is an alternative to day trading. While day traders only hold a stock or cryptocurrency for a very short while on a single day, swing traders can hold onto a position for several days or weeks. However, holding for longer periods is usually not a swing trading position, but should rather fall in the investment category (see below).
Unlike day trading, a swing trading position is much more dependent on the current market trend, resistance lines and support, moves against the trades can be ignored to still reach the target of the trade. However, this is coming with a higher risk, if the market moves against your trade, you usually lose a much bigger position. A good idea to minimize the risks is to set stops below support levels for bullish trades or above resistances for bearish trades. Often markets can fake-out traders by moving through a resistance and then reversing (so called stop-hunts), which makes swing trading with tight stops cryptocurrency trading usually not very successful, especially on exchanges or coins with low liquidity.
Investing and long-term holding
Unlike trading on very short time frames, investing is when you hold an asset for months or years. Generally on markets that are moving up you can't really go wrong here, it doesn't matter if you bought at the wrong time, if you wait long enough and don't need the invested money back anytime soon, you will win in the end.
This category has the biggest impact on any stock or cryptocurrency. Traders, institutional investors (companies) and retail investors (anyone else) all hold assets, but for different amount of times. The issue here is anyone can quickly turn the market around, especially if there are not enough buyers on the other side.
Panic sets in and this is where investors lose out way more than day traders, who didn't hold the asset for long time anyways. Even though this repeats on every single crash, investors don't learn and human emotions are in full force here. Things are not as simple as they seem in hindsight as the panic is accelerated during a bear market by more people panicking, tons of bad articles and news come out, traders and even long term investors turn bearish and looking for lower and lower prices.
This is a great article on how to not behave on a downturn, investors shouldn't suddenly become day traders and while it might feel good to sell at 70% loss when the asset drops another 10%, you will look pretty stupid once it recovers up and you sold the bottom.