Trading altcoins is so simple that it is actually easier to win than it is to lose… If you know what you are doing.
As an altcoin trader, you must be aware of the factors that dictate price movement. You have to understand that sell resistance is the gate-keeper to profit. When this gate keeper is absent profits flow freely and abundantly, when it is present – you have no chance of striking a profit.
When trading altcoins you have to understand that sell resistance is such an important factor that it exposes which phase of the price cycle a coin is in. Buying during the wrong phase is the quickest route to the poorhouse.
People often ask me which is the best strategy between long and short-term trading, and my response is always the same.
First, I define a “good strategy” as a method of trading altcoins that produces above average gains whilst the initial risk is minute. For example, hitting a 200% gain on 2 BTC would produce an overall return of 6 BTC.
In this scenario the risk is small, yet the gain is high.
The smartest trader would then seek to gain a similar return on this 6 BTC.
6 BTC + 200% is 18 BTC
Again, the risk is small – yet the gain is high.
Trades like these are only possible when you adopt a longer term strategy in this market, and although the waiting time between getting into a trade like this and cashing out may be lengthy – you are actually making money up to 10 times faster than you would be if you were only executing short term plays, and not only are you making money faster – you are making less trades than the average short term trader. Thus, you are being more efficient.
The typical approach of an inexperienced trader is to not only take short-term trades, but to “diversify”.
This means, whilst their trading fund may be sized at 2 BTC – 5 BTC, they will only ever take small positions in multiple coins. They do this to “limit their risk” when actually, this diminishes their earning potential.
For example, many people in this market are currently holding up to 15 coins simultaneously.
In each coin, they have only invested small and insignificant portions of money: 0.003 BTC , 0.013 BTC, 0.1 BTC etc..
Their belief is that, by splitting up their funds in this manner, they are reducing their ability to lose money, but what they are actually doing is reducing their ability to make money.
Nothing risked, is nothing gained.
You see, a 200% gain is not rare. In fact, it happens multiple times every single week.
It happens again, and again.
In this market, 200% gains are average.
However, a 200% gain on 0.1 BTC is only 0.3 BTC… a 200% gain on 0.013 BTC is a piss-poor 0.04 BTC… a 200% gain on 0.003 is a useless 0.01 BTC profit.
Yes, the risk is low, but in these examples the risk is so low that the reward is also low.
So traders who adopt this short-term + diversification strategy are actually self-imposing a low:low risk/reward ratio on each and every trade that they make.
This is why they struggle to gain money.
So I would have to state that, long term trading strategies are far superior to short-term strategies.
When you are buying, there has to be a period of accumulation where weak hands are being shaken out of their positions, because this will enable you to build a suitable position (0.5 BTC and higher) in a single coin.
A 200% gain on a small amount such as 0.5 BTC leaves you with 1.5 BTC.
Your risk reward ratio is now low:high instead of low:low
Going on to get another 200% gain on 1.5 BTC leaves you with 4.5 BTC… again low:high risk/reward ratio.
This is how you build your bitcoin holdings, via long-term trades with meaningful position sizes.
In order to win big, you must ditch the short-term mind set. You must realise that altcoins generally spend more time in the accumulation cycle than they do in the distribution cycle. So, interestingly, trading becomes much more simple and stress-free once you begin to adopt a longer term strategy.
Buying can be carried out in a more thoughtful and controlled manner, and therefore selling can be carried out in a calm and controlled manner.
In addition to this, taking a longer term stance on price movement allows you the opportunity to build larger positions in a coin which puts you at an advantage over 95% of the market – because once that coin moves out of accumulation and into distribution the profits you will reap will dwarf the profits achieved by short term traders, simply because their method of buying disallows them the possibility of buying a meaningful amount of a coin at below value prices.