Crypto Wealth Nation
BASIC TRADING STRATEGIES
Learning how to trade the Crypto Market
The representative icon for a growing/increasing market is the bull; strong and audacious, head held high. So when experts mention a “BULL” market, they are referring to a market that is going up, or an uptrend.
The representative icon for a lowering/decreasing market is the bear, head down, conserving energy and hibernating. So, when experts mention a “BEAR” market, they are referring to a market that is heading downward, or in a downtrend.
2 MAIN BASIC TRADING STRATEGIES
There are 2 main, basic strategies, amongst infinite variations, which can be applied:
1. LONG TERM INVESMENT:
Buy and forget, then revisit in a few years; don’t stress about market fluctuations and the 4-year cycles. A Bitcoin should be worth US$1 million in 4 to 10 years’ time. This is the least stressful trading strategy, but you may feel cheated if you follow the 4-year cycle, as during bear market (downtrend), Bitcoin can drop 80% or more of its value. For example, during the last 4-year cycle, Bitcoin went from US$180 (mid-2015) to US$19,897 (Dec 2017), then even lower to $3,187.
This last low of US$3,187 (15 December 2018) was over 83% lower than the previous high of US$19,897.
So, if we use the same numerical parameters (110.538, which was calculated by dividing $19,897 cycle HIGH with the start of the 4-year cycle LOW of $180), in this cycle we should reach US$352,284. (This cycle LOW $3,187 x 110.538). I believe US$240,000 to $300,000 to be more realistic. Only time will tell.
The next cycle would bring Bitcoin’s value from the next low of US$70,456 (20% of $352,284) to US$1 million to 7.75 million based on previous years’ percentage gain ($70,456 x 110). So, if you bought one Bitcoin now for around US$60,000 and waited until the end of 2025, you should have between US$1,000,000 – US$7.75 million.
STRESS LEVEL: NONE to VERY LOW
2. LONG TERM INVESTMENT, BUT FOLLOWING THE 4 YEAR CYCLE:
Buy and forget until the next bear cycle starts (worry only about the crypto’s 4-year cycle) – we still have around 5 to 7 months until the next bear cycle, based on past history. This means that you could maximize the cycle and get 3 to 12 times the number of BTC in your portfolio, if your timing is good, that is.
EXAMPLE: If you bought one Bitcoin today at US$52,445 (AU$66,234) and got out at the end of the year, and the price at that time was US$352,284, that would mean that you would have made 6.717 times your money. You now have US$352,284 in your account. You know that there was at least an 80% retracement in previous 4-year cycles, so you put a limit order, activated only when Bitcoin reaches a certain price. In this case, an 80% drop from US$352,284 would equal $70,456. So, you put a LIMIT ORDER to buy 5 Bitcoin when the price reaches US$70,456 ($352,284/$70,456 = 5). Then, you would monitor the Bitcoin chart twice a month just to check if your order has been fulfilled.
If you sold at the peak or close to it, and got US$352,284 per Bitcoin, and bought when it went down by 80%, then you would have increased your holding from 1 Bitcoin to 5.
In the next cycle, you could do the same and your 5 Bitcoin could potentially become 25.
STRESS LEVEL: NONE to VERY LOW
4 MAIN ADVANCED TRADING STRATEGIES
(Available in the Intermediate and Advanced Course)
There are 4 more advanced trading strategies which I use. These are taught to more experience traders and for those that can deal with market fluctuations.
1. BUY THE CORRECTION/DIP:
Buy when a correction (aka ‘dip’) occurs and sell when a peak occurs, before re-entering after corrections. Please note that this can be a double-edged sword. It can make you lots of money and also lose you lots too, if you enter or exit at the wrong time. When I was inexperienced, I lost over AU$100,000 trying to time the market right. If you use this strategy, you could have sold BTC on the 14th of April 2021 for US$64,600 and rebought when BTC reached a 25% correction: US$48,450. This would have made quite a bit of profit. The only issue here is that most traders get their timing wrong!
You could have sold when the market reached $62K and then as the market increased, bought back in. This would have cost you around 2% of your portfolio. This is not for everyone, as watching the charts, deciding when to sell or when to buy all the time can be highly stressful.
So, you decide what works best for you and ignore all the rest of the noise.
STRESS LEVEL: MEDIUM to HIGH
2. MARGIN TRADING ON CORRECTIONS & MAJOUR DIPS:
This is similar to Basic Strategy #3, but with the use of margin lending or buying using leverage and using your coins/portfolio as security. If done correctly, the risk is minimal, and the rewards can be quite high. In a correction, this strategy could double your portfolio balance. If it is done incorrectly or at the wrong time, the result could be catastrophic!
STRESS LEVEL: MEDIUM to HIGH
3. EDGING YOUR PORTFOLIO AGAINST MARKET SWINGS:
This is what most expert funds and traders do, once the market has reached an oversold or overbought territory. Different people do it differently. Each one has their own systems. When I see that the market is on oversold territory (RSI) and other indicators show that a reversal could be imminent, I change my portfolio to capital preservation. I keep 1/4 of my Portfolio as a hold or staked. I keep 1/4 as strong big cap coins. Some of the more dispensable coins are turned into stable coins or USDT (I do this with 1/4 of my portfolio) and 1/4 I use to short sell BTC. Which pretty much puts parts of my portfolio on neutral. 2/4 are still working and making profits on they way up. 1/4 is neutral (stable coins like USDT) and 1/4 is hedge against a falling market.
If the market goes up or down, the funds in my account remain the same. What this allows me to do is: if there is a correction, I can make money on the downtrend (buying the dip) and then sell the position once a 25% retracement has occurred, buy back at leverage with both the funds from the position that has been closed and the USDT available.
This strategy when applied correctly can increase your account balance dramatically, the only downside is if you have timed the market incorrectly and it keeps going up, while your account is still in neutral.
STRESS LEVEL: LOW to MEDIUM
4. DAY TRADING – RIDING THE WAVE:
This is for the advance trader. In this game, it’s all about consistency. I follow specific rules and make the process as emotionless as possible. Trading is all about mastering oneself. Emotions, especially greed and fear, have the power to take you out of the game.
This can be highly lucrative, but only a few traders make money consistently. When I started trading in 2007, I lost a lot of money because I allowed my emotions to dictate my decisions. Today I have a system that allows me to make consistent gains.
STRESS LEVEL: MEDIUM to VERY HIGH4