Introduction

If you want to learn how to trade cryptos, this post is for you.  While the initial bubble has most likely subsided, it is still not too late to get in on some great opportunities.  The purpose of this post is to take you through the process that enabled me to turn $5,000 into $100,000 in less than a year.

The process has three phases: discovery, execution, and management.

Discovery

During the discovery phase, we are seeking data that could support a particular decision to enter a position.  This process is an amalgamation of laboriously scouring trusted internet sources for news events combined with detailed technical analysis.

News Events

The first phase of the discovery process focuses on finding new and interesting news.  The cryptocurrency landscape is a new and burgeoning industry.  As such, there is a dearth of dedicated, trusted news wires from which we can draw content.  However, there are some sources I've come to trust.

Relevant news events could consist of upcoming ICO’s, crypto and blockchain events like conferences, statements by major players in the blockchain industry, funds being transferred from market moving wallets, and more.

Strategize Entry

Upon recognition of a potentially lucrative position, the next phase of the discovery process is to strategize an entry.  This process leverages my own personal experience as a technical trader, and my own custom indicators, which are particularly useful in crypto trading.  Also, I find cryptos to be particularly mindful of Fibonacci levels, and the dragon head pattern, which will be the focus of a future post.

Analyze Risk

The final phase or the discovery period consists of risk analysis.  Arguably, this is the most important phase of an investment decision.  It is a combination of technical and fundamental analysis.

Risk analysis really should be the focus of a series of blog posts, if not an entire book.  It consists of not only asking oneself “How much do I have to risk in order to make the returns I want?”.  Assets never move monotonically, they ebb and flow capriciously at times, and you may find yourself underwater in a position at times.  But proper risk management helps you plan for that.

Another important concept of risk management is entry price.  If you get FOMO (Fear Of Missing Out), get greedy, and enter a position right away, you are likely to hold it offside for a while.  However, if you wait for a good entry price, you’re much likely to be in the money, and if the trade doesn’t go your way, you’ll lose less.

Execution

The next phase of the process is execution of a trade.  Trade entry consists of determining the entry price and how to distribute the size of the order.  When you’re trading large size, you should never plunk down your entire position at once. 

Finally, it may be a good idea to distribute orders across platforms.  This helps us minimize exchange risk from the various problems endemic to cryptocurrency exchanges.

Monitoring

The final step is monitoring the position.  Many platforms allow you to apply your stop losses and profit targets when you enter the position.  This is definitely advisable since crypto exchanges are 24-7, and with as little sleep as crypto enthusiasts get, we can’t watch our positions all day every day.

But we shouldn’t just leave our position to its profit target and stop loss.  Often, there are gigantic selloffs in the crypto space for no apparent reason.  In such cases, when momentum has turned against us, it is a very good idea to exit the position.  Finally, in the presence of no momentum, we may want to consider exiting a position, at least partly.  After all, if the market does not want to go with us, it’s probably going to go against us.

Conclusion

This post summarized my crypto trading strategy from a very high level.  Essentially, there are three phases, discovery, execution, and monitoring.  Each stage is relevant for its own reasons.  Hopefully, you can integrate some of this into your own trading strategy.  Good luck and good trading!