7 Best Cryptocurrency Trading Strategies for Bitcoin and Altcoins

cryptocurrency-trading-strategies-for-beginners

Two of the most widely used questions, on the internet, with regard to cryptocurrency trading are “What is the best cryptocurrency to invest in?” and “What are the best trading strategies to use when I invest?”

With so many cryptocurrency coins released and touted as the hottest altcoin to invest in, Bitcoin is getting a run for its money. There are currently 1,200 and counting cryptocurrencies on the market to date. This makes it hard to decipher what currency is actually going to get you that lambo loot everyone keeps talking about or not. Well lucky for you, I’m going to go over 7 of the most best and most effective fundamental cryptocurrency trading strategies in order to get you started within this rather convoluted space.

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So let’s cut through all the BS and get straight to the point.  If time is money your time should be working FOR you!

Trading Strategies to Bring In That Cheese

Let’s talk about investing in ICOs (Initial Coin Offerings)….

ico-initial-coin-offerings-cryptocurrencyWhy is investing in an ICO a smart move? An ICO is at its beginning stages of life, and this means you’re getting in on the ground floor. What does this mean for you? You’re able to purchase a cryptocurrency coin much cheaper than when it’s released to the general public and therefore the potential to generate a huge profit can be significant. Do your research on any of the coins that are of interest to you. Below are a few points to look for before you invest.

  1. First check out some of the newest upcoming ICOs here for a nice selection and review on each one.
  2. What is the utility behind the coin, does it have a large supply and demand?
  3. Who’s the team behind the project? Have they worked on other cryptocurrency coins? What is there entire project mission?
  4. Do you have a continually expanding community of optimistic members (check forums)?
  5. There should be legal framework between the developers and the contributors. The terms and conditions set forth for the ICO should be clear.
  6. ICO funds should be held in an escrow wallet. One of the private keys needs to be held by a neutral third party to ensure all distribution is fair.

You should plan on purchasing several different ICOs , so don’t go putting all your “eggs into one basket”. If you don’t see an initial spike on the coin, upon initial release, wait until you see at least a 50%-100% return before selling.

 

Accumulating At the Lowest Price Action

It’s a smart idea to stick with a coin and accumulate it during its lowest price action as it drops in value. It’s a common practice for traders & investors to withdraw some if not all of their investment, which essentially drives the price down. 

If this is a project you believe in, stick with it and hodl. A smart tip is to buy a coin that has already hit its first dip, as this will sometimes drive the price down to even cheaper than its initial ICO price.

Common reasons for a dip, once the ICO hits an exchange, can usually be linked back to the presale investors, along with the initial team and developers, who typically receive the coins for free. Be aware and cautious of those coins that are being overly dumped.

Taking Advantage of Breakouts

This strategy can provide limited downside if done correctly. It is used by investors who actively trade, and are getting in on the initial stages of a trend. 

You want to invest at a precise entry, where you can identify resistance or support areas that are about to break out in a new direction. The coin either breaks upwards past a resistance (ceiling) or it breaks downwards past a support (base).

trading-pattern-breakout-cryptocurrency

Your best bet is to look for a clear breakout above resistance, and then wait for the bounce off that resistance which would be your new support. As soon as the cryptocurrency starts trading beyond that new support volatility in the market tends to increase which means prices will generally follow through in the breakout direction.

These types of breakouts are important because they set up a new starting point for future volatility, thus increasing price action substantially.

These types of breakouts happen in different market environments. Head and shoulder patterns, flags, and triangles are a few to research when it comes to the most expansive types of breakouts.

The “Dollar Cost Averaging” Strategy

Here’s a strategy that doesn’t take a lot of time or knowledge to participate in. Dollar cost averaging is when you purchase a fixed amount of cryptocurrency at certain intervals while the price action is either moving up or down. 

dollar-cost-averaging-cryptocurrency-trading

What’s happening here is, you’re averaging out all the purchases within those set intervals (usually months) which can be averaged out to one average price. This price typically ends up being a much higher or lower price point then if you were to purchase in one lump sum at a single interval in time.

So for example, you plan on investing $2000 in Bitcoin, however you don’t want to just throw out your entire wad in one sitting.  Instead, you’re going to spend $500 at the 1st of each month for the next 4 months. This would look a little something like this…

– Month 1 – the price of Bitcoin is 9k. You purchase $500 worth. 
– Month 2 – the price of Bitcoin is 7k. You purchase $500 worth. 
– Month 3 – the price of Bitcoin is 8.5k. You purchase $500 worth. 
– Month 4 – the price of Bitcoin is 10k. You purchase $500 worth. 

Your total spend is $2000 at the price action of $8,625

As you can see, you were able to purchase Bitcoin at a much lower price than what you would have purchased at if you purchased in one lump sum on the first month. 

Now, you “always” want to make sure you’re doing your due diligence, by checking charts for proper technical analysis, in order to ensure you have the best chance of averaging down on a coin that will rally back to previous resistance lines (peaks).

Check at least 6-12 months history to ensure the currency has previously recovered, on several different occasions. I highly recommend you do this with a cryptocurrency that has been established over a longer period of time (BTC, ETH, NEO, OMG, LTC to name a few).

What you DO NOT want to do is “catch a falling knife” by dollar cost averaging your way down on a coin that holds no history of ever recovering to previous highs. Please make note of this.

The Balanced Portfolio Strategy

If you need balance in your life this may be the strategy for you. A balanced portfolio strategy includes purchasing various cryptocurrency, for the same amount across the market. 

Say you invest in-

  1. Litecoin
  2. Bitcoin
  3. Monero

You have a budget of $900. You’d invest $300 into each coin distributing your investment evenly. This way you’re spreading the risk across the board.

This is a good way to test different coins, when you’re unsure of which ones will do well for you or not. You’ll quickly find out which coins have the best shot in succeeding. From there you may want to only invest in one or two coins that have given you the lion’s share of profit.

The only downside to this strategy is that, for example, one of the coins produces a 10% gain while the other two lose 5%, you would be stuck with no profits. Of course this would work in reverse as well, so again, you’re essentially spreading out your risk with this strategy.

The Unbalanced Portfolio Strategy

unbalanced-crypto-coin-stack-strategyThis is simply designating a percentage of crypto for investment into each coin solely on how well you think it will perform, allocating the highest percentages to the ones you think will perform the best.

If Litecoin has proven itself to you as the most profitable, then that’s the coin you invest the most into.

For Example:
Litecoin – 60%
Dash – 15%
Ethereum – 15%
Ripple – 10%

Predetermined percentages are what you would go off of, for each subsequent buy.

This is best suited for those that have done extensive research into each coin. Percentages for each coin can be changed, but make sure you have an educated reason before doing so.

Main downside for this strategy is predicting percentages incorrectly and missing out on the best gains.

Investing Your Profit into Other Coins

investing-in-other-cryptocurrency-coins-bitcoin-litecoin-ethereumSo you’ve made some steady profit on the strategies covered above and have had success in building your wallet full of those nice, shiny cryptocurrency nuggets. Now is the time to pick up other potential cryptocurrency nuggets that showcase huge potential.

You want to take half of the profit you have made on each coin, and start investing it into other coins with potentially high profit margins. This will help leverage your investment in order to produce more gains on your return and create a well-diversified portfolio. Look for times when your profits go parabolic (spike in price). This typically means the price is unsustainable and would be a good time to cash out and reinvest into another cryptocurrency before the price drops.

Remember, when you’re first starting out, it’s a good idea not to invest in too many coins at one time. You want to be able to keep a steady hand on the pulse of your coins for the very best growth potential.

So Which Strategy Will You Use?

With all the strategy’s I covered above, I hope this guide helps you to choose a strategy that fits you and your particular style and trading needs. That doesn’t mean your strategy can’t change or grow with time, just like your wallet.

If you have any cryptocurrency investing questions, leave them below…

Leave a Comment

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