Crypto Trading Strategies

Table of Contents

Disclaimer: Crypto is a fast-paced economy and things change quickly. Information on this post might be outdated even if written today. Do your own due diligence and stay safe. I might get affiliate commissions for purchases made through links in this post. Read the disclosure.

Alpha Gained:

Getting Started With Trading Platforms

While decentralized exchanges (DEX’s) are already an integral part of crypto, the most fluent trading experience can still be had in centralized exchanges. Centralized exchanges like Coinbase, KuCoin, Binance, and Gate.io are some of those exchanges where you spot trade crypto assets fluidly from and to USDT, for example.

USDT is the most used trading pair in crypto and is considered a stablecoin where you can park your money into. Stablecoins let you take a breather from the market and also enable you to trade different tokens in exchange for USDT. However, be wary that USDT might not be so stablecoin as you might have thought of.

To get into USDT and to start trading, you need to select a platform for yourself. One of the best ways to get into crypto is to use Coinbase as it’s heavily regulated (thus providing more security to your assets). Coinbase lets you deposit USD, EUR, and other fiat currency to the exchange, from which you can further trade it to crypto assets.

However, when it comes to spot trading and wanting to nail those profit targets and limit orders, you need to use other exchanges like KuCoin (currently using) or Binance. These mentioned exchanges let you strategize your trading vastly more than what DEX’s currently offer.

Legacy World Vs. The New World Order

Instead of focusing on USD, EUR, DKK, or some other fiat currency and calculating entries and profit targets via fiat metrics, you might want to train your mind to trade in BTC pairs.

It’s a new way of thinking when switching from fiat-based thinking to digital currency and to the future financial world. Instead of comparing profits to USD(T), you might want to compare profits against Bitcoin. Did you make more or less Bitcoin with your trade?

Bitcoin is still and more than likely will always be the king of crypto, that one digital currency that all other tokens and coins will be compared against. Bitcoin is seen as the store of value and is often referred to as digital gold.

When you start trading crypto tokens, you are entering the digital currency world, and it does not obey the laws of physical fiat money, and thus a new mindset is needed.

Logarithmic Price Scale

Many YouTubers use linear price scale when doing chart analysis, and while that is not by any means a wrong way to do chart analysis, using log could be a better fit in crypto trading. The logarithmic price scale works very differently than the linear price scale. In log scale, price fluctuation is shown in percentages, whereas in linear, it’s shown in absolute price values.

The reason why the logarithmic price scale is more preferable to use when trading crypto is because of the somewhat insane price fluctuations the crypto market presents. In the log scale, two equivalent price changes are represented by the same vertical changes on the scale. For example, if a price moves from $10 to $20, that is represented in the scale the same way as $20 to $40 as the price increase is 100% in both cases.

This way the chart is smoothing out the price fluctuations as the fluctuations in price are shown in percentages, not as the actual price.

The beauty of log scale in crypto trading is that the log scale gives you a very nice indication of how the percentual gains are growing or shrinking and when combined with BTC trading pairs, you will rather instantly see which coins you should actually buy or own for a long time.

BTC Trading, Not USDT Trading

More than always, people tend to trade tokens from and to USDT because it’s easy and convenient. Thus this also tends to take your focus to the USD value of the token. However, when you switch your thinking from USD(T) to BTC, you will quickly see if you are making any gains or are you actually losing money in the long-term.

Many coins are underperforming when using the log scale and comparing the token against BTC. The reason why it’s beneficial to compare against BTC is that BTC grows in value and IS a valuable asset in the crypto space. If the chosen altcoin is not performing better than Bitcoin, then why not just own Bitcoin. 

If the altcoin is making gains against Bitcoin, then it means that it’s better off owning that specific altcoin rather than Bitcoin, and when the market turns to the downside, you might want to sell your altcoin back to Bitcoin or exit the market altogether and trade your hard-earned Bitcoins to USD or other fiat currency.

Short-Term Crypto Trading Is The New Long-Term Trading

When thinking about trading stocks long-term, you might think 10 to 15 years of investment time. In crypto trading, the time span might be 4 years at max. If you are ever hodler, then surely you can just buy Bitcoin and hold it for 10 years. However, crypto is famous for huge dumps in the market, where 50-80% of your invested capital is down the drain in a matter of few days. 

So instead of just buying and holding, you might want to be in the market a bit and see how the value and price is growing and then exit the market when things get too hot. One important thing to notice too is that majority of the coins and tokens out in the market today won’t be there after 3-4 years. Only the strongest ones and the ones that have gained some sort of adoption will stay but others will fade into history.

For that very reason, it’s best not to get attached to any specific coin, as after a huge correction in the market, that coin might never see the daylight again. So do jump ships as often as you need to.

Bitcoin (BTC) chart from 6/2016 – 10/2021, Bitcoin grew roughly 10,000% in 5 years.

Getting Good Entry In Crypto, Buying The Dip And Why

The toughest part of being in the market is to buy the red. Red means the situation where everything is going down, and everything feels like “this was it, it’s never going to return from here”. When the market dumps and you feel the fear kick inside you, that’s probably the very best time to buy the coin and token that you have been looking for.

The most beautiful thing about an entry is that when you get a good entry and you actually buy the dip (the bottom after a market crash or small dump), the entry that you then hold is more precious than anything.

The entry will give you security and confidence in the market because the entry that you have is so low and so good that the market has to dump hard to get close to your entry. Let’s say you bought your coin when it was at $50 and it was almost the lowest point went on that specific dump, then naturally the coin surges up and up and settles to $80 in a few weeks.

Then a correction comes, and it will take your coin to $60 when you bought your coin at $50 you are still in profit, and you do not feel the urge to dump your coin and take a loss because your entry is still at $50. Thus you are in profit, and you can just breathe without the worry of losing money.

That is the very reason why an entry is almost the single biggest factor of successful trading and investing (taken that you buy emotionless and don’t expect anything from the market). The hardest part is to buy the fear because the fear has taught you not to go forward. Not to do something that is harmful to you. Your amygdala is protecting you by sending you a feeling of fear and thus keeps you from buying the dip.

When the market is red and “blood” is in the streets, that is the perfect place to buy, timing however isn’t ever easy.

Day Trading Vs. Short-Term Investing

Mindset And Skill

It’s somewhat known that day trading is a skill mastered by only a few. Day trading requires a mindset of not expecting anything from the market, keeping emotions away from the trades, and accepting that the trade can take any form or direction at any given moment. If you are one of those who can manage all that and not a flinch when your trade goes bad, and your portfolio takes a hit time after time, then maybe day trading could be an option for you.

Knowledge Is Profit

Short-term investing especially using a log scale, is for those who want a bit smoother sail, but this approach requires not mindset but knowledge; knowledge of market trends (topics that are trending, remember narratives), sentiment reading on markets, research on projects, and firm-believe on protocols.

There’s no limit or rule that you couldn’t do both, but to keep things simple and easy for the mind, usually, one route is taken. Investing is easier when making trades but harder on research. Trading is easier on knowledge but harder on mindset.

Simple And Effective Charting

Trendline

What I look for in a trendline is when a trendline is broken and when it is created. The more points the trendline touches the better. When the trendline is broken from the upside, it could indicate a bear market for the coin or a small dump. Fakeouts can also happen, meaning that a trendline is broken but the continuation doesn’t happen. Trendlines give you a nice view of where the coin is heading and if you are entering the trade at a good time.

Support And Resistance Levels In Crypto Trading

Support lines are created by past valleys and dumps. Support line means that the price was seen as the minimum for the coin in that specific time frame, creating a support level for the coin. Resistance lines are created when a coin is going up and is approaching ATH level, experiencing resistance to go past the previous high or ATH.

Social_Media_AVATAR_2022_v2
Written By Juha Ekman

Table Of Contents

Services Used

More Alpha...