When entering crypto I was using all of the knowledge I had accumulated from traditional economics and trading techniques. Now being 7 months down the crypto rabbit hole I have had a complete paradigm shift.
My strategy started out as lucky trading by by just looking at charts, understanding what the coin offered, the team that was behind it, and where the ATH had been prior. Since crypto does not have a viable way of shorting a lot of the trades I made trades early on that turned to be very profitable. I attribute this this to the “high tides raise all ships” effect.
Then came my first bear market and I was left naked on the shore bag holding. A Lot of the bags that i was holding recovered, but after I sold them. After these first months of menial success I realized that the crypto market is much different from what I was prepared for.
How I look at the crypto markets is like high school versus professional; professional being the traditional markets. The crypto market (minds of participants) is mainly affected by the news. Then “traders” listen to the various crypto gurus who might use TA as their reasoning behind buying a coin. This will not remain.
Institutions are already moving in therefore traps are being set. Bigger balance sheets are wiping the small guys out by playing the spread. Because of this i have devised a strategy to minimize my risk to the best of my ability while still making good returns.
MY STRATEGY
My strategy is 50% ICO's, 25% lending, 20% resting profits, 5% trading.
ICO's have the lowest risk with the highest returns, ranging from 50%-1200% returns, that is why it holds the majority of my fund. I have not lost anything from ICOs other than the mistake I made last week that I talked about at the meet-up.
Lending has the lowest risk altogether. I lend bitcoin at a 6% a year interest in terms of Bitcoin. I do Proof of Stake(PoS) mining for other coins that have intrinsic value: Decred and NEO. Neo earns 15% a year in terms of NEO. Decred earns 33% in terms of Decred. This means if the coins go up in terms of FIAT currency then you add the % change to the % interest. Ex. Bitcoin moves from $1-$2 therefore 100% change but I earned 6% from lending it for the year so I get a total return of 106%.
The resting profits are accumulated from ICO returns, trading returns, and lending returns. I only move this portion of the fund when times of FUD occur. China news, Hard fork, etc... These events crashed the market and coins with intrinsic value crashed lower than they should have therefore the whole portion was deployed and all of the profits made from the oversold coins remain in the resting profits. This part of the fund has had more returns than losses but after each down period I have made more and more so I am getting better and better at understanding intrinsic coin value and psychological behavior in the form of chart movements.
My last 5% is devoted to trading. The trading has been the highest risk with the lowest return. Most of the TA that I used to trade with on Ctrader and Metatrader has no relevance in crypto so I have just decided to trade my 5% based on news events.
I would like to hear what you think, critiques welcome.