Bitcoin! Litecoin! Ethereum! — excited! perplexed! and what not.
It is all around. Your colleagues discuss it, your friends discuss it, there are news reports of an ecstatic Grandma cause she “got in” to Bitcoin (not lying).
You also feel like jumping on the bandwagon of the mystic world of cryptocurrencies and get your USD, EUR or GBP converted into Bitcoin or Altcoins, which seem to have a better future or future return. 100x? 2200x?Yes please, I’ll take that right away.
Civilized man refused to adapt himself to his environment. Instead, he adapted his environment to suit him.
He built cities, roads, vehicles, machinery. And he put up power lines to run his labor-saving devices. But he somehow didn’t know when or where to stop. The more he improved his surroundings to make life easier the more complicated he made it. Now, his children are sentenced to 10 to 15 years of school, just to learn how to survive in this complex and hazardous habitat they were born into. And civilized man, who refused to adapt to his surroundings, now finds he has to adapt and re-adapt every hour of the day to his self-created environment.
For instance, if the day is called Monday and the number 7:30 comes up, you have to dis-adapt from your domestic surroundings and re-adapt yourself to an entirely different environment. 8:00 means everybody has to look busy. 10:30 says means you can stop looking busy for 15 minutes. And then, you have to look busy again.
Your day is chopped into pieces.
In each segment of time, you adapt to new circumstances.
But in the Crypto world, there are no clocks or calendars tell you to do this or that. It’s always Friday, or Wednesday Night if you like. Or on Sunday.
It is the textbook definition of working where you want, when you want.
What if I told you there is a revolution building out there, much beyond Bitcoin? A revolution happening right under our noses. Billions getting transferred from between latitudes without any government, or central body interference? A market which is open 24*7. No barriers.
A world that’s free of borders and bureaucratic compliances. A world where investments are decided and controlled solely by you, the rightful owner of that amount of money. Never before in history has the transfer of money happened on this level, at this scale that involves the average person.
No complex, confusing terms courtesy of Wall Street anymore. Half of the words they use are made up to make you believe only they can do what they do.
All you need is a basic internet connection, a trading account at a crypto-exchange (Binance is what I use), a small sum of money to start with, blogs and traders whom you could follow and take cues from, and PATIENCE.
Alright. I am ready now. I am ready to throw away my job, trade for 4 hours a day, and go laughing to my bank to cash out.
I google “how to make money in crypto”, I watch YouTube videos that promise me “100x returns from these altcoins”, “or “What is the next bitcoin”.
I get shilled some beautiful sounding coins, with celebrities backing them, promising me a life of work-free living if I somehow buy it. And oh, McAfee just posted about it on Twitter this morning. Let’s say goodbye to my student loans in a few months. I am going to take out a mortgage, max out my credit card, and purchase all these coins. After all, these are the next bitcoins that will make me rich.
At this point, you must mentally remember an image of a red flag.
Trading cryptocurrencies is a brilliant way to make money, however, it isn’t as simple as many portray it to be.
Each type of currency has several different underlying factors which affect the price of it.
Bitcoin has certainly been the most successful one, but that’s mainly because of its wide acceptance. Especially if you go on to shop anything out on the dark web, you’ll wonder if Bitcoin is greater than USD.
So why am I reading this? Where is the secret potion that makes me millions overnight while I vacation in my private yacht anchored off the coast of Fiji Islands?
And the answer is –
There is nothing online, offline, in-person, on call that can tell you where to put your money in, come back a few months later, and wake up to portfolio gains of +742%. Those blogs you read and videos you saw? They know as much about it as you do. Just like a scammy Indian Godman.
You see, we are so lost in finding answers and attaching meaning to random outcomes, that we fail to understand the why.
Causality states that worldly agencies, or phenomena through which one thing (the cause) under certain conditions gives rise to, causes something else (the effect).
What it doesn’t state is that there are a gazillion variables happening all together at the same time, which cause the final effect as it is.
That’s the same with Markets. There are 100 different things that affect every increase in cent of a particular coin or token. Anyone who tells you with a conviction that X coin is going 2x in a month is probably BSing, shilling, being overly optimistic, or driving the price up to dump it all when X reaches a favorable price.
You don’t wanna be THAT guy.
A trader, at least the ones I know and speak with, would never state a particular price or be sure about where X would be in a few days. They know it doesn’t work that way, and even in the most bullish settings, the market is governed by ten other factors each second, which you have no control over, and will drastically affect the outcome.
And when it comes to the Crypto market, these effects are amplified.
Think about it.
You spend a day trading Coin X you picked over the past week. Followed the trends, completed a careful fundamental analysis, and since the market is bullish, invested all your funds into it because it is only going up right?
You pour yourself the finest scotch, snuggled into the Thai silk pajamas, and kiss your wife goodnight. (That last Ripple rally went really well).
Lights off. Goodnight. I am waking up to great returns.
Did I mention the Crypto market runs 24*7*365 ?
While you sleep, a Chinese official decides to ban cryptocurrencies.
You see right there can be various political motivations and anti-monopolistic sentiments and so forth. But what’s at the mercy of this prejudice is your beloved portfolio. One that you forgot to set the stop-losses on.
Hearing this news, the Chinese quickly offload what they can. Someone tweets about this development and the Koreans think the next country to ban crypto is theirs. The FUD spreads. The Ozzies watch the price going south and begin to sell-off, followed by the Indians, the Arabs (not that they need crypto to get rich), and in a few hours, this thing hits Europe. Reddit catches hold and the subreddits go crazy. Hackernoon articles are written. 4chan is busy making memes. Buzzfeed reports that Bitcoin has finally burst, people who didn’t invest further get a point to prove themselves right.
Eight hours later, you wake up to a bloodbath. Your beloved portfolio is red everywhere. The news is awash with crypto obituaries. “Experts” are giving their own opinions on the issue. And you catch yourself asking “What the F just happened ?”
What happened Uncle Sam, is that while you slept, the world wept.
Dejected, and to salvage any remaining profits you can to fund that Thailand trip you thought of in your head, you proceed to sell off your positions at a loss. Why did I even get into this in the first place?
Two days later,a tabloid in China reports the ban is uplifted.
If you think this was hypothetical, I highly suggesting googling “Cryptocurrency crash August 2017″. Except that China didn’t really lift the ban on cryptocurrencies yet.
The point is, such things happen, and no one can tell you where the price of X will be two days, two hours, two minutes later. No One. And hence, you should take such advice with a pinch of salt.
Obviously, it isn’t every day that such news happens, but there are times when a lot of investors are leaving a particular coin, which would hence bring the price down.
With experience and usage of trading indicators, you learned to predetermine when the market is going south and get out of the market safeguarding both your profit and crypto-dignity.
What happens is, that you learn to pick up the fishing rod, attach the bait, and fish for yourself. That way, you definitely know if the fish you caught is high-quality Bluefin Tuna or a sardine.
Like I said before. Each type of currency has several different underlying factors which affect the price of it.
Such news can happen all the time. But instead of losing all of your investment, you set a stop-loss, identify a hedge, and in the event of such a catastrophe, DO NOT end up selling your position.
The market is here to stay and Blockchain is the future. Period.
The most powerful economies identify technology and how it helps them and use it to their advantage to leapfrog in economic growth. It would be ten steps backward for a nation to ban cryptocurrencies, in a time when the tug-of-power is at it’s highest.
It would take a strong stomach to accept losses, but even stronger hands to avoid panic selling.
Not that I advocate the famous “HODLing”, which is not a great strategy to follow when you trade or even invest.
Just like a self-fulfilling prophecy. You Sell. You bring the price down. For no other reason than FUD.
Do you feel scared? Good. Want to feel comforted? YouTube and Tron is probably the answer.
Still reading? Great. Let’s massage those Iron hands and learn to Fish.
We would need a boat.
Starting at the very basic, there are two coins that form the backbone of this market –
Bitcoin. And Ethereum.
Except that they aren’t really competing at all.
Bitcoin is based on a very different fundamental than Etheruem.
It is actually more of this.
Both of them provide different use-cases for the investors, and are essential platforms over which a Token can be built and sold to the public.
Determining the use-case is very, very important for investors to understand before they put their money into anything.
Bitcoin completely bypasses traditional banking institutions. It removes third parties — with all their fees and slowdowns — from the financial system. It broadcasts transactions to the network (the blockchain) in a transparent way.
Ethereum introduced the world to something called as a smart contract. It focuses on running the programming code of any decentralized application.
What are smart contracts? A computer code which facilitates the exchange of money, data, cars, hookers, marijuana, property, planets. ANYTHING. Just like a self-operating machine, a smart contract running on the blockchain will operate when all conditions are met from the specific list the programmer decided to give it. And unlike Bitcoin, the Ethereum platform allows just about anything to run on its systems exactly as programmed, without any possibility of censorship, fraud, or interference.
Bitcoin exchanges value. The Ethereum platform exchanges and executes just about anything.
“Well, now I know these fish aren’t from the same sea.”
And just like Etheruem, we have several other platforms coming up, all with their unique offerings over which a developer can program a decentralized App (dApp), and hence grow the ecosystem.
NEO. QTUM. EOS. Achain. All platforms.
“But how is all of the above helping me?”
Simple, by identifying and investing in a platform, that has a strong roadmap, a strong team, multiple dApps developments lined up, and strong partnerships coming up, you get a chance to purchase it while the coin is still a few hundred, a hundred, a few dollars, or an even a few pennies cheap.
Always research and be on the lookout for valuable information that puts confidence in your investment.
RESEARCH BEFORE BUYING A BOAT.
And that is your first investment. The backbone of your trading portfolio. The backbone you believe in the most which create the path you tread on. It’s your boat.
A strong platform.
I have set sail. Let’s catch some fish.
There are many types of fish in the sea.
Some taste good. Some taste bad. Some are bony and some are poisonous.
Some types have a Million specimens, and some a billion.
And just like our oceanic ecosystem, every specific cryptocurrency can have a million coins, or even a billion.
All this has to be taken into account while investing, after all, the market for Tuna is bigger than sardine, and the market for Alaskan Pollock is bigger than both of Tuna and Sardine.
These coins, called altcoins, are typically what the second part of your investment should be. The part you use to swing trade, i.e making profits on weekly intervals, after identifying price movements and patterns when the market moves.
What’s an altcoin?
Any coin apart from Bitcoin or Ethereum, in the implied sense of the word. However, we look to include platform coins in our main holding, the ship, instead of using them to swing trade. (This part is completely up to you thou, and choose whatever fits your trading strategy and goals the best.)
Nobody would care if you purchased an altcoin or token that has no demand, that serves no customer and does no good to the world. As enticing the crypto news makes returns sound, there are 30 huge losses for each coin that went 10x.
If there is no market for your altcoin, there is no reason to buy it.
So what are the factors I look for before buying an altcoin?
- Is their website functional?
Seriously. Is it a fly-by-night operation or a proper, working, bug-free website? Lookout for obvious red flags.
2. Does it have a strong team?
The success of your coin heavily depends on the quality of team members present in it’s development. You see, Ethereum or any other platform would have a code written over it to work with the blockchain. This means that decentralized applications aren’t faultless. Because the code is written by humans, smart contracts are only as good as the people who write them. Code bugs or oversights can lead to unintended adverse actions being taken. If a mistake in the code gets exploited, there is no efficient way in which an attack or exploitation can be stopped other than obtaining a network consensus and rewriting the underlying code.
A strong technical team prevents all of these issues.
3. What’s the whitepaper like?
This step addresses all your questions, giving you important details of the coin, the problem it solves, how it solves it, and the technology behind the coin.
DO NOT skip this step. After all, your investments in cryptocurrency are focused on technology, before anything else.
4. Say hi to the founders.
Not literally, but virtually. Stalk them like you would stalk an ex. Go through their social media accounts, this really helps with understanding the mindset of every founder. Are they fresh college kids looking to make huge money by hopping on the blockchain train? Or do they come with years of tech experience, and interact with the community with a clear focus on building technology.
Founders are the engine of the company.
Additionally, check out their road map and judge whether have they consistently delivered? Have there been delays which were not due to external factors? Have they abandoned any earlier projects?
5. What does the coin supply look like?
The higher the coin supply, the lesser the price per coin in the future. Simple Economics!
I.e, the reason BTC is priced so high is due to its coin supply of only 21 million coins. If BTC had a supply of 2 billion coins, it’s price would be…..well…. a few pennies.
6. Lastly, check out their community!
Reddit, Telegram, Instagram. The founders and the team keeps in touch with early investors, investors, and just about anyone who joins the channels.
Alright, all good. Should I buy the coin now?
Just a couple of things to ponder about before making that investment. Remember, a lot of Top 100 coins are Vapourware. You wouldn’t want to impulse buy now and get f***ed when the price dips later on.
These are the altcoins we believe in, not the shitcoins we don’t.
Weight the risks one final time before purchase
Buying an Altcoin is an investment. An investment that has too much risk associated with it makes no financial sense if things go wrong, as you could end up losing everything. The amount of risk can be gauged from the above factors and/or a combination of them.
Setting an exit price
Traders spend hours fine-tuning entry strategies but then blow out their accounts taking bad exits. In fact, most of us lack effective exit planning, often getting shaken out at the worst possible price.
We also need to fundamentally determine when to cash out of a coin, instead of hoping for it to go higher. Every coin has a market cap and a limited coin supply, and there is only so much that a coin can grow.
When Ripple (XRP) reached $2.5, I hit the sell button at the earliest. Why? There was a high volume in the coin, the news was bullish, people thought of it as the next bitcoin, the hype was enormous. Everything was in favor for the price to go even further ! But, I had an exit plan to sell at $1.8 even before I bought Ripple, with the intention to use the profits for investing in other alts. It went higher, much higher, and even after I cashed out, it went all the way to $3.70 !
Past Trend for the Altcoin
ln the finance industry, conditions change really fast as the market adjusts to the forces of demand and supply. You should investigate the historical trend of the Altcoin you are buying and expert reviewed forecasts. Doing so will prevent you from getting blindsided with information that you had not considered when acquiring your Altcoins but which will significantly affect their value.
Great, I finally bought my coins. These fish look delicious!
Understanding the Nature of the Crypto Market
The first and most important thing you need to know about bitcoin in particular, and cryptocurrency in general is that “cryptocurrency” is a slight misnomer.
Of course, there are stores and brokers who accept bitcoin and this number is increasing by the day. Houses, cars, and Helicopters have been purchased by bitcoin. Coffee has been bought with Stellar Lumens. Litecoin has been used to purchase products according to some report.
However, 95% of the people do not treat Bitcoin or other coins as a “currency”. Rather, it is more of a financial commodity, an asset that is powered by the technology of the future, and that would a great ROI years down the line.
The value of these crypto-assets hence come from their potential uses.
In fact, most of the altcoins that are traded are not stores-of-value. Instead, they are backed by products and firms which aim to create a dent in the relevant industry.
VeChain (VEN) aims to disrupt the supply chain industry with it’s unique RFID offering that detects counterfeit products.
Genesis Vision (GVT) is a new decentralized platform that aims to bring exchanges, brokers, traders and investors together. This shall be a completely transparent platform to facilitate lending between professional traders and investors.
Icon (ICX) provides unique blockchain solutions to banks, hospitals, and universities. The South Koreans are yet to discover this one — a coin of their own.
0x (ZRX) is a protocol that allows for the decentralized exchange of ERC-20 tokens, basically, any token that runs on the Ethereum blockchain
And just like these, there are 100s of coins out there, backed by solid teams and an industry which they aim to disrupt.
It’s the global stock market of the future.
By understanding this, we move from a temporary, 100x overnight returns mindset to a permanent, slow and steady 2x per month returns mindset.
Investing in solid technologies builds a strong portfolio.
One that has the potential to reach seven figures in a few years.
But like many unknown commodities, crypto-assets are subject to market risks and price volatility. This aspect is seen by some an a HUGE opportunity, while others want to keep as far as they can.
Thus, it is very essential to not throw around money based on what a YouTuber, Instragrammer, or celebrity said. It is likely they have vested interests in those projects, which is why people have heard more about Tron or Bitconnect, instead of a Waltonchain or Loopring.
WAIT ! I usually see graphs and candles and listen various other terms when people talk about trading. Where is all of that ?
We haven’t reached the part of selling our fish yet. At least not the fish we identified to be A-1 material. And we sure as hell aren’t selling the ship !
In every portfolio, it is very essential to keep the majority of it as a trusted investment. One you believe in, one which would sell for a much higher price in the future after demand for that coin increases, and the supply is you.
For this reason, we take a fundamental approach towards analyzing this part of the portfolio. Evaluating a security in an attempt to measure its intrinsic value, by examining related economic, financial and other qualitative and quantitative factors.
Crypto-assets, for the long time to come, will always be an unknown commodity. They simply don’t have the technical indicators of the traditional stock market which are usually used to analyze an asset.
Most stocks or bonds can be analyzed based on some trait of the instrument. Stocks have P/E ratios and dividends, for example, while bonds have return percentages. Crypto-assets have no fundamentals that can be easily measured.
Does this mean we don’t have to see any graphs ?
Of course you will. And now that we have finished this part of the article, and the portfolio, we move on to the number crunching work. The part where we catch hold of market sentiments of a particular coin, and trade using price-action for returns on the investment.
What this does is, it creates two sources of income. One, the income we get from investing, holding and swing trading ground-breaking, technology backed digital assets, and two, the coins that see a lot of price movements, where we reap our profit out from, before identifying and moving on to the next coins where we do the same.
Just like the traditional markets, a few companies become worth Billions, a few become unicorns and fizzle out, while a few show great promise and meet with an end, or a corporate takeover a few years down the line.
Hence, like every stock, we can’t expect every coin to be a constant part of the portfolio permanently.
There’s some fish you hang as a trophy, some you put in your aquarium, and some you sear with olive oil in a pan.
Protecting the Ship.
The sea is obviously not a calm place.
Random changes in the weather, itself a proponent of outside forces, can turn beautiful ocean backdrops in to choppy devilish currents.
But what do the sailors do when such a thing happens ? Do they take every belonging and jump in the ocean hoping for a divine miracle ? Do they call 911 in the middle of the ocean ?
Tell me the last time you heard people jump off or take lifeboats since the Titanic ?
The shipping and trading industry has been around since centuries, it’s the bedrock of the world’s economy.
The experienced sailor knows choppy waters come, choppy waters go. A state of panic only results in an improper judgement, and hasty situations.
The same applies to our world of trading.
In a market governed by various external forces, ample precautionary steps must be taken to avoid huge losses and even loss in potential profits.
One of the most overused but wise phrase is “buy low and sell high”.
There are still some people who never learn because you can see that they do mistakes repeatedly. Check any forum or subreddit, there shall be posts about how they buy at the peak because they are scared of being left by the train and then they panic sell.
This is the easiest and dumbest way to lose money. Afterall, didn’t we spend enough time on a fundamental analysis before the purchase ?
Such bumps in the sound investment, that you believe is viable enough to grow in the future, should not deter you from holding. Especially if you work full-time and have no time to actively trade.
Just like bad weather, a number of occurrences will try to mess with your portfolio, such as —
- Regulation. If a government makes a statement or pushes for a particular regulation that affects cryptocurrencies, you can bet that the price will react to it (sometimes positively, often negatively). When China banned ICOs, the price of Ethereum fell by 41% in 15 days (from US$386.83/ETH to US$228.06).
- Media influence. Just like government regulation, exposure in the media greatly affects a cryptoasset’s price. Whenever a public figure makes a statement regarding cryptocurrencies or a major retailer starts accepting cryptocurrency as a form of payment, you will see the market respond.
- Changes to the technology. When a cryptoasset’s core technology is affected (either via an update or the finding of a flaw), the cryptoasset’s price is also affected.
- Whales. Strictly a crypto thing, these fellows have accumulated so much of BTC or ETH, that they are capable enough of manipulating the market by bulk buying, bulk selling, or placing fake buy/sell walls. ( I shall be explaining a Buy/Sell wall in detail in the next part of this series.)
Thankfully, some quick pre-damage control helps for a good night’s rest.
Have your pricing strategies right
Most of the amateur crypto traders don’t have pricing strategies. Professional traders always deploy their pricing methods to successfully discover trading strategies that works for them. This is indeed difficult because pricing financial securities are difficult than pricing other things (for ex a television or a dentist visit) and it requires constant optimizations to meet dynamic markets. You can learn the basics of crypto pricing here: Cryptocurrency pricing: A foundational perspective.
Pricing further becomes even more difficult in cryptos because of their inherent volatility. When we say buy low sell high it is really using pricing strategies to determine whether the intended security (Cryptos in this case) is under-priced (long) or overpriced (short).
Learn how to manage risk efficiently
People have an appetite of cutting profits faster and taking loss further. Have your risk management strategy in place. Do not trade what does not suit your risk profile. This is discipline. You will not last longer in any sorts of trading (Cryptos or futures or whatever) without proper risk management techniques. Have your target prices for purchase and exits set around multiple favorable prices (like a ladder) and maximize your risk-reward rate.
Know when NOT to trade
This is critical. Professionals develop their senses to a level when they know not to trade. Too often amateur traders wants to ride everything they learn on YouTube. You must know when not to trade. When the market offers you an opportunity that supports your “edge” hop in, when it doesn’t stay put. Don’t forcefully take positions that cannot be complemented by your edge.
Great. Never throw fish out. Never abandon Ship. Never trust fishermen who shill bad fish.
Fortunately, you aren’t alone in the ocean. There’s tons of kind people out there who regularly discuss the catch of season, the weather around the world, the potential of the fish you caught, new ships to upgrade to. It’s a looong list.
Say What ?
Yes ! People. Kind in nature, but holistically loyal to their coins at times, who discuss about the crypto world in terms of coin-tech, announcements, news, commentaries, everything ! A lively ecosystem unlike the traditional markets where only the high-fliers and professionals share valuable stock information, that may or may not impact your portfolio
This is Crypto, Baby !
By sniffing out forums, discord groups, telegram groups, subreddits, GitHub, Slack, and even 4Chan, you shall network with the world’s earliest adopters of this market, this future, this realm which stands to change the financial system as we know it.
This Global ecosystem never sleeps, and you could always look up what people are talking about, trading about, shilling about, or even bitching about.
When a thousand minds discuss a project, there is bound to be a lot of conflicting opinions, thoughts, and analysis. But, do not be dismayed, compare the collective opinion (which would usually sway in one direction) against your own research and ask the community questions. Perhaps even share your own findings !
In fact, two of my hugest ROIs were due to me lurking over different subreddits while scourging for new coins. I happened to see some one mention RaiBlocks, a new payment based currency that is instantaneous and has zero transaction fee.
It did look neat to me but I slept over it for a few days before checking out the RaiBlocks website and whitepaper.
Before I knew it, I was hooked. This was beautiful.
I admit I did not understand the block lattice technology they use, I still don’t. But the sheer real world use case of the coin, along with it’s relatively low coin supply and low market cap attracted me and I put some of my Ethereum profits in to it. It was about $1 at that time.
Two months later. RaiBlocks reached $30 dollars.
All due to a post I stumbled upon on Reddit. I should have tipped the guy 1 XRB, now that I think about it.
These were real money gains all due to the community, the ecosystem that breathes,talks and eats crypto 24*7.
As an Investor, you should make full use of this and spend a few hours per day just listening away to conversations, arguments, and debates about the best and latest coins out there, as well the scams and red flags that the users find out about.
There’s always someone out there who shall smell out shit, and give it out to the community for free, thus protecting a ton of people from bad investments.
USE THE FREE KNOWLEDGE.
There is no way you can be under a rock while investing in Crypto. After all, it is digital for a reason.
Bookmark these out ! —
On Reddit –
r/cryptocurrency r/bitcoin r/cryptomarkets r/finance
( There is a subreddit for almost all coins all there. Use the search bar to enter in the coin name and the first result shall be r/(coinname). For RaiBlocks, it is r/raiblocks. For NEO, it is r/neo. If your coin does not have a subreddit, Well……stay away from it.)
The Coin Websites shall have an official Telegram or Discord link right at the end of the page. This is highly recommended as developers, managers, or even the CEO directly interact with the community there. It is vital to keep track of the business and if the team is delivering as promised. If they aren’t, it’s a red flag !
On GitHub, the teams post code, patches, and fix flaws in real time. This indicates the strong work ethic and vision of the team and positivelyincreases investor confidence. Use the search option to find your investment, to check the progress in terms of software.
On 4chan — /biz/ is the forum for business and finance, and is mostly filled with crypto posts these days. Despite its shady reputation, 4chan users aren’t dumb. A quick read won’t do harm. We aren’t here for investment advice anyway, just reading the general sentiments out to see if any news or rumor shall affect our investment.
For every person who imparts valuable information, five others will be noob amateurs who solely trade based on price and intuitive indicators.
Noobs buy a coin and claim it will be 5x by the end of the month and this isn’t the type of trading that gives sustainable, stable results.
Take with a pinch of salt the advice of anyone who just predicts a coin’s price without any underlying fundamental detail, let alone the technical details of price action (THE way to actually “trade”)
BE SMART DURING A CRASH
If you were the gentleman who chilled in Thai Silk pajamas and resorted to Panic Selling in the morning, a host of strategies are out there for you.
- Holding, or HODLing, isn’t a great strategy, irrespective of what every other people out there tells you.
If you invested $100 in coin X, and the next day there is massive FUD or any of the 1000 factors that affect the market, do you really feel it is wise enough to hold on to your dear investment ?
It’s possible in 2000 BC, having a life threatening disease meant praying to the sun,moon, God, just about anything to cure it. Until one day some dude discovered a mixture of plants and herbs which did much better and saves lives.
I am sure religious beliefs hold great meaning, but outside of the medical field or finance markets.
What if the coin went down to $10, $5, $2 and then a few pennies ? Would you still Hold ?
And since we are talking about a crash here, lets assume you have a sweet portfolio of 10 coins with a $100 dollars invested in each.
HODL doesn’t seem like a viable enough strategy to me.
Enter Margin Selling.
2. Margin Selling, or Short Sales
During an obvious Bear market, you have two options. To Hold and Hope, or to Short that bitch to make profits while everyone else is holding and hoping.
I DO NOT recommend short selling in the daily market, and never during a Bull run. Short Selling is risky and should be only done during a surging market.
I.E If the market continuously has had 5 days of negative, with the red portfolio all around, that is when you short sell before reaching a low.
Let’s say Coin X, is poised for a substantial decline, and we decide to short 100 coins at $50 per coin. (Taking trading pair of X/USD for the sake of simplicity.)
Here is how short selling happens:
- Find a crypto exchange that allows margin trading. Eg — Bitfinex and Bitmex.
- Transfer funds to margin account and place an order for Margin Sell ofCoin X.
- The exchange will “borrow” X either one of the different sources — It’s own inventory, other clients, or another broker.
- Once the shares have been borrowed or “located” by the broker-dealer, they will be sold in the market and the proceeds deposited in your margin account.
Your account will be credited with $7,500 in it — $5,000 from the short sale of 100 coins of X at $50, plus $2,500 (i.e. 50% of $5,000) as your margin deposit.
*Bitfinex offers a 3.3x leverage on the margin calls. Above calculation is an example.
Your call turns out to be correct and in a few days, X is trading at $30. You find a support at this level and the price seems to be going sideways. This is a perfect time to close the short and pocket your profits.
Therefore, you buy the 100 X at $3000. The gross profit is $2000. ( Keeping out the exchange commissions and interest rates, usually very low.)
And that. Is how you profit in a super- bear, red bear market.
Everything isn’t that bright thou. This is the market we are talking about. In case you were wrong on that call, you lose the difference of the surged price, i.e if X surges to $70. Your loss in this case is $2,000 (i.e. $5,000 — $7,000).
A Ship is prone to be attacked at by Pirates in the seas. AND this sea isn’t safe either !
How to protect your cryptocurrency ?
We have some this far and decided to buy into this rapidly expanding market, potentially to trade but, most probably, with the intention of holding an amount of a particular currency long term.
But what good is it in case a hack or computer bug causes you to lose it all ?
Be smart and do the right thing.
You and you alone are responsible for your cryptoassets.
In fact, I am going to link this wonderfully written article by Daniel Jeffries, a full time author and crypto-trader whose work I closely follow and admire. Take a second and read through his wonderful write up on crypto-security. It couldn’t have been better explained than this.
With this, I end the first part of the two part series on Cryptocurrency Trading. I understand the article title borders on Click-bait, but we could surely earn 1 Million Satoshis in a few weeks from this.
Jokes apart, following these steps helped my initial $1000 investment to grow to $27,000 in a few months with minimum time investment. Using ONLY and ONLY these steps. A solid fundamental analysis and periodic trading is all it takes to supplement an income while working full time. I am not advertising my gains or boasting my position, but i guess it counts as some sort of a proof of concept.
This was also before the insane bull market in November and December, so let’s not attribute the profits to that.
Moving on, the next part of our fishing journey features the other side of trading.
A Technical Analysis approach.
Using metaphors and other simple day to day examples, I aim to bring to you –
- Candlesticks and what they mean ?
- Volume Indicators to predict a coin’s rise or fall.
- Trend based trading as popularized by the Turtle Traders handbook.
- Why to trade on Price Action instead of only the price ?
- Importance of a solid Trading System.
- Identifying short term positions for quick profits.
- Trading strategies that I follow.
- Links to traders and groups I follow and admire. These guys are the most trusted and best resources out there.
So Long, Sailor !