When it comes to the world of trading, one of the most important decisions you have to make is which trading strategy works best for you. Are you interested in day trading, swing trading, or simply holding your currencies? Are you looking for long-term investment opportunities? This decision will shape your trading journey. It will have an impact on your potential results.
No matter where you are on your crypto journey, you want to have a plan. In fact, you need a plan.
A brief introduction in case you are just starting out in cryptocurrency
HODL – This phrase stands for “hold on for dear life” and is typically the ideology of a crypto fanatic who believes in their coin to death and you can’t pry their tokens from their cold corpse even if you try. While HODL is a deliberate investment strategy, it also lacks some key features that are important to a strategy. For example, at some point, there needs to be an actual plan to secure the profit, pass the HODL on to future generations, or attach a way to use the increasing value of the coin instead of fiat currency. These are big challenges for a HODLer. In addition to the true blue HODL, there is the force HODL, where someone is “stuck” with their HODL bags, or the coins are falling so fast and furiously that Vin Diesel comes along ready to run over the market price with a modified car. The unwitting HODLer often finds a sense of community among others who are going through the same thing, because crypto markets come and go in cycles, so if someone is obsessed with AltCoin, there's a good chance that at some point in the near future, they'll join thousands of others who are frustrated when asked if their wallets will ever come back to life.
Investing – Although similar to HODL, it is long-term with a goal. Investments are designed to have a long-term view of the incremental value of the asset, but there is a strategy behind the investments. One may buy or sell an investment based on their research, but typically you can stack investments like HODL, but the end game is really about taking profits, either in one big batch after a targeted sale, or choosing milestones to take some profits while allowing some of the assets to mature. Investments in traditional finance often include incentives such as dividends that help one feel good about holding them for the long term, and even consider converting those profits into new stocks or coins.
Swing Trading – This is the longest period of time that anyone can trade, and it’s too fast for most people in the crypto space. Swing trading is basically studying the market with a plan to set up a trade that one believes is a good buy low on the first day, in order to sell at the high of the second day. A swing trade is supposed to last 2 days, 3 days max.
Day Trading - This is the fastest-paced category of trading, where a person intends to make a profit during the day... on the same day.
I could go so far as to describe the fastest form of day trading as scalping, where one literally watches the market momentum for an opportunity to quickly pounce, take a small profit and move on.
Each of these trading plans includes a myriad of interesting options. I will detail them in future posts because I love doing that. For now, think of this as an overview of all the categories.
Both the currency holder and the investor can do something that benefits them, which is DCA, or dollar cost averaging.
This is basically a strategy of buying a set amount of their assets at regular intervals, regardless of the current price. You can imagine that in cryptocurrencies there are pros and cons to the true set-and-forget DCA model. In cryptocurrencies, we like to call it “staking sats.” One does not sell, but rather adds to one’s assets regularly over time.
Statistics are a wonderful thing, and theoretical mathematics has some mysteries that I will never tire of. In this case, the fact that the average simply works is amazing to me. Like the wisdom of the crowd and other seemingly impossible statistical facts, dollar-cost averaging proves to be a way to gain value while investing without the pressure of regularly monitoring the market. This usually means that one sometimes deliberately buys at the dip, sometimes at the peak, and sometimes anywhere in between. Over the years, everything adds up to a decent average market value.
A slightly more sophisticated model of averaging, which I personally believe in compared to the above, is to plan to add more to your HODL over time, choosing a set amount, or even a fixed percentage of profits if you think that might mean contributing more money on occasion, but when the time comes that you have to make a purchase, actually watch the market and target the daily or weekly low. There is usually enough data and volatility in cryptocurrencies to warrant outperforming the average once you pay a little attention to the market. You don’t have to target the low for this to be effective, but you do need to be consistent.
For the investor, although it is very similar to holding assets, there is room for averaging the interest rate, but also selling the profits when the market reaches extreme levels, and waiting for a correction to buy the dip. In this case, you are not selling the asset because you have given up holding the asset and not because you “believe” in the paper currency you are selling it for. You are doing this in order to get more of the asset you believe in. For example, if an asset is regularly fluctuating up and down by 10-15%, there is plenty of long-term data to tell you when an asset is approaching a peak or a dip. You might sell some of the asset at the peak, hold it until it is below the average at that time, and then use that profit to buy the same asset back. You have just gained momentum in your long-term investment and this does not sacrifice your long-term ideals.#BinanceTurns7 #MarketDownturn #TopCoinsJune2024 $BTC $NEIRO $NOT