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Blockchain technology – particularly its cryptocurrency wing – is spreading worldwide like wildfire during a windy day in a dry summer season. One minute you hear it is on the horizon. The next minute, it’s in your neighborhood; one minute after, you are engulfed in its choking, roasting red flames.
However, unlike wildfires that cause damage to properties and loss of lives, cryptocurrencies could lead to a rise in property ownership and enrich our lives. A case in point is the rise of Bitcoin to cryptocurrency stardom. Those who invested early are now multi-billionaires, and those who can still catch the bitcoin wave at the right time are still smiling to the banks.
How to Get In on the Crypto Trading game
Like the Gold Rush period in America, the tech world is similarly experiencing a crypto rush. Earlier news of windfall gains by early investors in bitcoin has seen many speculating investors also coming into the bitcoin platform to try their luck.
“Luck favors the Prepared.” – Alden Mills.
Yes, there are windfall gains to be made within the crypto world. However, it won’t be a walk in the park. If anything, it requires a lot of due diligence. Failure to which you will burn your fingers and ruin your future.
The crypto market is quite volatile and unpredictable. You must employ due diligence at all times while venturing into this market. This article points out some conventional wisdom learned by successful investors over the years. They are as follows:
Event-driven Trading
To put it plainly, you buy into a cryptocurrency when it is trending with positive news. Then sell out quickly just when negative news is about to start trending. In this current age of the internet and social media, a strong media focus on a given cryptocurrency or an exchange platform can quickly change the market.
A wise trader should have various coins in their portfolio and focus sharply on coins with a strong positive media focus. While shedding off those with negative coverage. Typically one would wait for the crypto market to show a strong consolidation pattern just a few moments before an expected media coverage. Then invest just when the market breakout happens.
Relative Strength Index (RSI)
Expert market analysts have coined the term, Relative Strength Index (RSI) to identify momentum, oversold, and overbought market conditions. RSI can also be used to detect hidden financial market divergence in what is commonly called trend trading.
RSI computes profitable price closes with respect to unprofitable price closes, presented as a percentage.
RSI = 100 – (100 / [1 + RS])
The lower the percentage, the oversold the coin. The higher the percentage, the overbought coin. Then what would be the best RSI? The answer to that question will depend on just how risk averse or risk tolerant you are.
Dollar Cost Averaging (DCA)
DCA is a market trading strategy that does not require you to keep tabs on the market indicators. It is quite ideal for both newbies and veteran crypto speculators. As it works out, DCA involves dividing your investment into smaller bits, then spreading the investment over a chosen period. During which, you regularly invest those bits of money into a given coin.
For instance, let’s say you have $25,000 that you want to invest in bitcoin over a one-year period. You take that $25,000 and divide it by 48 weeks (number of weeks in a year), and you get roughly $520 each week for investing in bitcoin.
You then pick a specific day and time during the week to invest. Say, every Wednesday at 10 AM. You will be investing $520 into bitcoin over the next one-year period. This strategy helps you minimize the impact of market volatility. Also, the chances of this strategy yielding a higher return compared to investing all your money at once are much higher.
Scalping
Scalping is a very short-term strategy where the investor enters and exits the market several times within a short period as the market trend develops. In scalping, a single trade is held within seconds – or a few minutes at most – before being sold off.
As it works out, a trader keeps a keen eye on the minute-by-minute price changes. As soon as it becomes profitable, they exit the trade. This strategy works best for active day traders but requires you to be hawked eyes while on the clock. If that seems like a daunting task for you, then you might want to automate the process by checking out Bitcode Method Registration is free, and the website promises low maintenance, speed, and consistent profitability. It doesn’t even require you to have previous trading experience. In a nutshell, it is a bot that will automate scalping trading and the rest of the tips mentioned in this article around the clock.
Moving Average Crossovers
A Moving Average (MA) is a technical analytics term referring to an indicator that combines the price points of a financial instrument over a given period divided by the number of data points to give a single trend line. This trend line can thus be used to examine the trajectory of the financial instrument without being impacted by random spikes in prices.
MA can also give you insightful knowledge on the level of support or resistance a certain financial instrument has through analysis of the previous price movements. MA can be used in the crypto trading market through what experts call ‘crossovers.’
A price crossover is when a coin’s price rises above or below the MA trend line. Traders will have to wait until there is a price crossover to go long or short on their trade. Alternatively, MA can be used to keep tabs on the short-term and long-term performance of a given coin. When the short-term MA crosses above the long-term MA, it’s likely a good time to buy. This point is often referred to as the golden cross.
Conclusion
The good news is, cryptocurrencies are traded on decentralized markets. The bad news is, that they are traded on decentralized markets.
That means they have no centralized authority regulating the market. They are also quite volatile. A huge part of following due diligence, as mentioned above, entails investing only money you are willing to lose. That is to say, don’t put all your life savings there no matter how well your recent tradings have been.
