Are you struggling to make gains in crypto? Are you tired of blindly following signals that end up making you lose money? Are you frustrated that despite many crypto’s being bullish, you still end up losing money?
If that’s the case, this article is just for you. You’ll learn here a simple strategy that’s bound to get you profits as long as the crypto market is bullish (as in time of writing, we are in a very bullish market), so don’t miss out on this potential money making opportunity.
Disclaimer: I created this strategy by trial and error trying to find the optimal balance between time spent and money profit. A lot of research has gone into this strategy, and I’m currently using it for this bull market. I’m not responsible for your actions. I’m not a financial advisor or anything of this sort, just hoping you find something useful :)
Okay now, let’s get started!
First Step: Know Yourself
Don’t skip this as this may be the most important step in this strategy. You must first understand that you’re a human and thus are subject to biases, mistakes, and misinterpretation.
Biases: These are the irrational thinking patterns that tempt us to go against our principles in trading. They make us look into short term FOMO (EG: I must act now and quickly or I’ll miss this, I can’t miss this!) rather than the bigger picture (EG: I have seen the news and events, I’ve done my own research and have determined that unless something big happens, the price should increase. Thus I must hold my long position!)
As humans we hate losing much more than we enjoy winning.
This is why many of us end up panicking and immediately close a profitable position when our profit decreases in value even if deep down we know it will increase in the long run.
This is also why many of us end up staying in a losing position even if our losing position gets worse as we keep hoping it will turn positive and eliminate the losses. Deep down we know it’ll keep getting worse in the long run yet we can’t bring ourselves to do anything.
Another bias would be WYSIATI (What You See Is All There Is). This bias is mostly shown when doing due diligence and studying what we’re investing in. We see a guy on YouTube saying the current market is bearish, and then we see another guy on Social Media saying the same thing. Given the current information we immediately assume the market is bearish. This is a huge bias as we only took into consideration what we saw first and we didn’t take into consideration the other things that show whether the market is bullish or bearish. Always plan your research beforehand.
Tip #1: Write the biases on a piece of paper and make sure never to enter a position without understanding what you’re working with and doing your due diligence (more on due diligence later). After writing this paper, stick it onto your wall or mirror where you’ll be reminded of the biases every time you look at it.
Mistakes: Most of us make mistakes, that’s what makes us human. It’s very normal to make mistakes especially in the crypto market, what’s not normal is beating yourself up for it every time you make one. Just take the loss and move on. If possible try to revisit what you know, what you expected to happen, and what actually happened after your head clears from that mistake. More often than not you’ll find it to be something out of your control in which cases that’s fine. However, many times you’ll notice it’s you who’s at fault (whether due to a bias or due diligence related). In this case you must learn from this mistake and you must realize that the cost was worth it, be grateful for that.
Tip #2: Keep a Journal next to you when you trade, write down all expected outcomes for a trade, it’s results and how you can learn from it. Even better if you made a mistake, as you just learned something valuable. Here’s a big mistake that I made (I’ll give the strategy behind it soon):
This was a week before writing this article. Can you catch the mistake? Many of you would say it’s because I didn’t close a losing trade. That’s not the case as I had already done my due diligence and was willing to bet on both of their price increasing in the near long term. The mistake was I didn’t take into consideration the volatility of ADA at the time. I believed it was going to increase as it’s one of the coins greatly affected by bitcoin’s prince change. I believed bitcoin was going to increase due to the ETF to be announced soon. I was willing to take the risk and I did. Here’s the outcome as of today (time of writing the article)
As you can see my BTC trade is profitable while my ADA is no where to be seen (you might notice a margin increase in the BTC contract, that’s because I added more investment into it). The ADA trade automatically closed due to it hitting the stop loss. This caused me to lose money even though ADA $ADA rebounded and went up as I expected. My mistake was not correctly taking into consideration the potential losses of the trade. This mistake could’ve been prevented by going with lower leverage (and consequently a more lenient stop loss) for an exceptionally highly volatile asset like ADA. As you can see, I opened a new trade after studying XRP and took into consideration my previous mistake (now lower margin and leverage in a lower volatility coin).
Some Common Mistakes:
Not setting a Stop Loss (this might get your entire account liquidated in a cross position if not set up correctly, plus it gives a peace of mind as you know the maximum loss possible)
FOMO (Fear Of Missing Out)
Not doing your Due Diligence and Research
Having no idea when to cut losses and take profit (this is a part of doing your due diligence)
Second Step: Enter Strategy
This step includes how to know whether to enter a long position and when to do so.
Finding a suitable investment:
First of all, we need to find an investment suitable for our risk tolerance. BTC $BTC and ETH $ETH are considered safer options, better start from there if we’re new and aren’t sure where to proceed (they’re both great options regardless of our experience, you shouldn’t go wrong investing in them).
We need to study such investments. The first things to study are the news and events scheduled to occur in the near future. Place such events on a calendar and go on berserk mode trying to analyze what the outcome should be if they occur the way you thought they’ll occur. For example, there’s the bitcoin halving and the ETF going on soon, we can take an educated guess that the probability of an ETF is very high and the probability of a halving is imminent. Based on news and events we can have a better vision into the future of our investments. In this case it’s showing that as we go closer to the dates of the previous events, BTC should increase in price.
We need to study the graphs and charts. Is our investment prone to extreme market manipulation? If yes, is it worth it? If yes, how can we set a good stop-loss and take-profit to stay safe and balance our risks? Then we need to determine the current situation of our potential investment. Our goal is to buy low and hold till a significant event deadline is reached, and then we take profit based on the result or sell before such result if we believe it might not harm the price of our investment. We hold because by now we know how much it will go, even if our investment goes down -100%, -200%..
Only buy the dips, or stable lower positions. If the coin has already skyrocketed, you probably missed it and it’s probably too late to re-enter. Better invest early if you believe in great potential. If the investment is doing good and suddenly it dipped, and you know it’s going to go up, don’t be afraid to increase your margin and go more in this case. (We’re buying these lows and stable lower position when it’s safe within our risk tolerance (don’t get the contract liquidated, careful with this) and as long as we believe the investment will be worth more in the longer term)
Due to the frequent whale actions and volatility, it is recommended (based on my trial and error) to go cross futures having an initial margin of less than 10% of the money you’re willing to lose 100% of (we’ll gradually add more margin when we become in safer positions with lower chance of liquidation later on). And to set a stop loss so that your cross loss won’t exceed that of which you’re willing to lose (the 100% of what you’re willing to lose). Careful with leverage (too much in highly volatile coins might trigger your stop loss quickly even if the stop loss was lenient, use leverage accordingly to the coin and to your risk tolerance). This cross is to ensure that extreme buys and sells from whales don’t end up triggering your stop loss even if it brings you down -400% temporarily on the contract.
Note: Our investments might go down and sideways a lot of time, happens to bitcoin all the time for example. It is important to not close the position out of fear. In a previous picture I showed 2 negative trades. Did you know that at one point the BTC was at -300%? I didn’t close because I chose to stick with my strategy and in fact decided to buy the dip (risky when in a negative trade, but was within my risk tolerance). And when it went all up then slightly down (my trade here is positive) I bought even more because I believed BTC was underpriced for a crypto getting an ETF soon. If you truly believe it’s going to go up and you truly have done enough research and are willing to take the risk then why not stick with your plan? Self control must exist to control the biases within. Seeking short term quick gains will drain you out if you don’t know what you’re doing.
Note 2: I go leveraged but under a risk tolerance and adequate stop loss since I’m starting on low margin for now. Leverage is optional as long as it’s within a large stop loss and as long you’re willing to lose all your money you allocate to the trade. Stop loss must not be tight for this strategy (but the margin should be minimal).
Third Step: Exit Strategy
How to take profits?
Well everyone takes them in their own way, I suggest you create a take profit level whenever your investment reaches a certain milestone. But you must know all bull markets end and most of them go back to where they began. You must be willing to forfeit potential profits for the current ones when they’re your target goal. Yes, set a target goal that you believe is feasible and create a take profit level over there. No need to empty the bag all together, maybe profit at 25% of your margin every time. It’s different for everyone, but one thing’s for sure: You don’t want to keep holding coins forever, you’re a trader and you’re here to profit over them.
You’ll do much better knowing what you’re doing and sticking with one tested strategy throughout your trades.
I know this because I kept doing the same mistakes of trading just because it feels right rather than doing what’s actually right.
I hope you benefited from this article. I wrote it mainly to set my principles straight after a series of bad trades where the only good trade was due to the strategy. I’m still new to trading (hence the name naive_trader), and still have a lot more to do.
