I've been both mining and trading crypto currencies since the start of 2018 with rather mixed results. I seemed to get into the space just as the market reached saturation and started to fall. Despite how far Bitcoin has dropped in that time I am only about 20% down overall on my investment and I fully expect the market to make a rapid recovery.
)Image from news.bitcoin.com
There are different trading / investing strategies when it comes to cryptocurrencies (and also stocks) which can be summarised as follows:
- Investing - Buying and Holding coins (also called HODL'ing)
- Day Trading - Buying and then reselling stocks within minutes or hours
- Swing Trading - Buying and holding stocks for days or weeks and then selling
Initially, having read lots of Warren Buffet books on investing, I only invested in crypto to HODL it long term. I read lots of blogs, journals and white-papers to learn about the currencies in the top 100 list on coinmarketcap.com and also about new and upcoming projects. I am a developer by day so I also spent time learning about the fascinating world of blockchain technology. Buying currencies based on research and knowledge is known as Fundamental Analysis.
I've spent the last month learning about Technical Analysis which is practice of using past price performance to predict future market movement based on various indicators and graphs. It traditionally requires no underlying knowledge of the stock or cryptocurrency and is entirely price and indicator based.
Day Trading isn't really for me, It requires the most TA skill and also plenty of available time to study the markets in order to buy and sell positions rapidly. I work for a large IT company 4 days a week, run my own software and 3D printing company and have a young family, so time isn't something I have copious amounts of. That left me with Swing Trading which requires similar skills to day trading but doesn't require the same investment in time.
I watched lots of YouTube videos on the subject of Technical Analysis (TA) as many tubers cautined not to pay for something that was freely available. After spending weeks trying to learn from these videos I came across the following free video from ReadySetCrypto on YouTube which covered all the the important subjects but at a surface level. It wasn't about looking about specific candle patterns and graphs but instead looked at risk management, pull-backs, breakouts, signals, indicators, volume, momentum, oscillators and trading bots (more on this soon).
Having absorbed up all the information in that video feeling like I had finally learned something about TA, I paid for their Introduction to Technical Analysis course available at ReadySetCrypto.com (not an affiliate link). This is an excellent course that goes into not only what all the different graphs mean (many I'd never heard of) but how to use them and how to combine them to produce stronger buy and sell signals. If you enjoy the free video and have an interested in TA I can't recommend this course highly enough, it is excellent.
Now armed with a reasonably good understanding of Technical Analysis and an idea of what strategy I would like to use I still found myself making emotional decision when buying and selling coins based upon my previous investments. I'd find myself hanging onto coins even when they swung from strong profits to losses. I knew that didn't make a lot of sense, because even if I believe strongly in the fundamentals of the coins, it makes sense to sell near the top of a swing then buy back near the bottom in order to maximise profits.
That's when I started to look at utilising trading bots to make the trades for me but using the rules that I have defined. These bots will make unemotional calls and will not get caught up in the market.
Image from news.bitcoin.com
In part 2 of this series, I will I will talk about some of the common options available and then look at which one I selected and why. I will then produce further articles as I go along showing my profits and losses, so you can come with me and learn from my mistakes rather than making your own.
Stay tuned.
For now, I'll just watch how you do at this. I'm really a HODL'er too and havent dipped my toe much into this area.
I was too, until I realised it made more sense to ride the dips down and back up again.