For the last twenty months I’ve been trading crypto-currencies (BTC, ETH, XMR, GNT…). I’ve made quite good results as a beginner but also did a bunch of mistakes that today cost me several hundreds bucks. To cut my loss and maximize my profit, I decided to gather as much information as possible, by reading documentation, listening to podcasts, etc… And I elaborated a simple yet accurate strategy to properly trade Bitcoin & altcoins as a beginner.
DISCLAIMER: I do not pretend to have found THE strategy that will make you a millionaire. This article is neither a financial advice nor an incentive to buy any altcoins. The reader takes full responsibility of his actions.
Feel free to comment down below your thoughts about this strategy.
This is a very straightforward threefold plan. First fold is for the long-run, second for the mid-run, third is for the short-run.
NOTE: I will publish the mid-run and short-run strategy soon. The links will be available in this article.
The main idea is to diversify your investments, by pre-defining some rules that will guide your choice in the future. Not only is it a plan that helps you choose you currency but it’s also a plan that predefines the maximum amount of money you will put in an investment (for the beginner, theses notions are risk management and position sizing). This will help you to limit your loss and maximize your profit by having a proper plan to exit a trade.
Investing in the long run means great returns. The main idea is to invest in solid projects that will soar in the next few months. You can find these coins/projects mainly on Cryptopia. Beware that many coins are shitcoins (roughly 70%, they can soar up too though but you don’t want to invest in them).
Capital allocated
First of all, you have to allocate a certain percentage of your portfolio to the long-run trading. Personally, I roughly allocate 33% of my total portfolio to invest in the long run. Feel free to set it on your own. Remember that this number shouldn’t be too large since the capital invested won’t move for several months, but at the same time keep in mind that the capital allocated must be consequent enough to allow you great returns.
Finding good setups
To find a solid project, check whether the developer team is active and keeps developing the project. If not, go away as the price could plummet. Then, check their roadmap/whitelist. They should have a well-defined path to implement their technology. However, keep in mind that even if they have all this information you must only invest in projects you think one day will be useful in the real world. More importantly, if you think it will have real-world application then it is likely that other people will find it useful too. Indeed, that’s probably the most capital thing you may want to understand: whether the project will have one day real-world application, what matters is whether or not people think the project will have an application. If so, the coin will soar. Think about the market’s psychology.
Position sizing & risk management
Once you have found a great project, you must define how much you will place on this project and define your exit plan. Out of the amount of capital you dedicated to long-term trading, you should not exceed 30% of capital placed in one single trade. I think it is a great compromise between great returns and management risks. This also means that you will engage roughly 1/10 of your total capital to a long-term investment.
As for exiting the trade, I won’t place a sell order. The main idea is to hold no matter what happens. Just leave the money apart on a cold wallet and wait months until the project is developed. However, to exit successfully the trade and maximize your profit, I recommend you this strategy:
• 30% of the capital allocated is sold after a 60% profit
• Another 30% of the capital allocated is sold after a 80% profit
• The last 40% sold after a 100% profit
Remember: the main problem with beginners is that they are too greedy. Don’t fall in that trap. Even if you think it can go far beyond your take profit order, always retire a part of your capital. Once you see that the price is declining, sell. You will be less frustrated if you miss an opportunity than if you lose your profit.