Active Trading Strategy

• Trading based on news and information

• Day/Swing Trading

• Momentum/Position Trading

• What is a Trading Journal and How Do I Use It？

It all boils down to risk management when it comes to cryptocurrency trading. The previous post, which looked at simple crypto trading techniques, emphasized the significance of matching your risk appetite, experience, free time, and dedication to the appropriate type of crypto trading strategy.

For most beginners, simple trading techniques based on Cost Averaging that are reasonably passive (i.e., you don't have to continually watch your transactions and respond to market movements) should be the first step.

There are, of course, more advanced trading tactics if you have the time, risk appetite, and commitment. The goal of this post is to describe the most common varieties, along with their benefits and drawbacks, before introducing some general best practices for someone wishing to get into active crypto trading, such as keeping a Trading Journal.

Crypto Trading based on News/Information

Despite the fact that the total market capitalization of cryptocurrencies is approaching $2 trillion, the industry is still in its infancy. Much of the $2 trillion is based on projected future value rather than projects or businesses that are already profitable. Because people's perceptions change in response to news, the crypto market is significantly influenced by information as it becomes available and is understood.

The most basic example is the rise in Bitcoin's price on February 20th, 2020, in response to news that Tesla had put $1.5 billion in BTC to its balance sheet.

BTC climbed $9k in 24 hours, according to our blog piece on the ten most dramatic events in crypto, with the majority of that increase occurring inside the first hour of news breaking.

There is no easy way to stay on the right side of such news. Those who know are telling, and those who tell don't know, as the phrase goes. Crypto is a speculative asset, which means there are a variety of competing beliefs and expectations about its future usage.

Speculation rises throughout a bull market, but with some believing Bitcoin is in an even greater state of price acceleration - dubbed a “super cycle” - the amount of noise and gossip is growing by the day. A reasonable trading approach in this case is to purchase the rumour and sell the news.

This essentially implies riding the early-stage speculation wave, which has the greatest impact on pricing. You'll be safe from the potential that it's simply a rumor, as well as the influence of profit taking, which occurs shortly after a rumour is proven in the news.

By building a dependable source of information and following people on social media who have a track record of breaking early news, you can put yourself in the greatest position to receive news as it breaks.

The 'Tesla Candle,' as it has come to be known, is a true anomaly. News has a much less influence, but it still presents a big potential. Traders using advanced algorithms will scrape and filter large volumes of data from Twitter or Reddit and use it to run trading algorithms.

The so-called 'Coinbase Effect' is another fantastic illustration of the importance of news that doesn't require you to be ahead of the curve.

According to Messari's analysis, cryptocurrencies launched on Coinbase showed a 91 percent gain in value in the first five days of their debut.

Because of Coinbase's massive reach and client base, their choice to launch a coin essentially ensures a massive rise in demand and liquidity. When coins are listed on other exchanges, the same is true, although to a smaller extent, therefore it is your responsibility to keep track of them.

You may put yourself in the greatest position to take advantage by collecting valuable news sources. This might just entail setting up Google Alerts, but for someone just starting started, the most effective strategy to news/information-based trading is to focus on a few specialized cryptocurrencies.

The value of cryptocurrencies listed on Coinbase increased by 91 percent on average in the first five days after they were listed.

Learn about the people behind the project by finding their social media accounts and paying attention to what they post. You might just pick up some nuggets of information with enough lead time to trade that news, but make sure you know how and where to trade the currency, as well as whether there is enough liquidity.

Pros

• Finding news does not necessitate technological expertise.

• There are no explicit entrance requirements.

• Isn't always time consuming.

• Allows for specialization

Cons

• It's difficult to tell the difference between true news and rumor.

• Because markets move so quickly, it's difficult to predict when they'll rise or fall.

• It still takes a technical evaluation to determine how much a piece of news will impact the market.

Position/Momentum Trading

Momentum Trading, also known as Position Trading, is another crypto trading method that is suited for someone who is just getting started and may lack technical understanding and time commitment.

Momentum Trading is essentially a more advanced type of speculating. The only thing a hodler will do is buy and hold. Momentum or position trading will look for entry points in the market based on important points of market momentum change. This could entail determining the beginning and finish of specific cycles.

The most obvious are bull/bear cycles or halving periods, but they can also include calendar-based cycles, such as the significance of March and the conclusion of the financial year translating into market decreases, as opposed to price advances in April. That narrative is told in this photograph from Coin Telegraph. or everything relating to political cycles (due to elections), weather, and hydro-electric mining.

Ark is a fantastic example of an investment firm that specializes in new technology investments.

Pros

• Possibility of a high rate of return on investment (ROI)

• Not time-sensitive/passive

• Fundamental analysis is more intuitive than tactics based on technical analysis.

Cons

• Requires monies to be held in escrow for long periods of time.

• There's a chance you'll lose a lot of money if you don't use a stop-loss strategy.

Trading on the day/swing

Day Trading is a term used in traditional stock markets to describe trading that takes place during defined hours when markets open and end. Of course, cryptocurrency markets are open 24 hours a day, 365 days a year, therefore the term “day trader” refers to someone who actively trades the markets on a daily basis, opening short-term positions based on technical analysis of price movement. The goal is to profit from minor price swings that don't indicate fundamental market shifts, but rather movement within trends.

Swing trading necessitates a thorough understanding of technical indicators, well-defined trading plans, and the patience to wait for the appropriate opportunities rather than trading what is immediately available.

Swing trading does not necessitate a confidence in crypto's underlying value, but rather in the accuracy of technical indicators.

Pros

• It is suitable for hobby traders because it does not necessitate a long-term commitment.

• Focuses on tiny gains/losses to reduce the likelihood of being rekt.

• Doesn't necessitate a thorough understanding of cryptography

Cons

• It is necessary to have a good understanding of technical indications and how to recognize them.

• It necessitates a great deal of self-control.

• Long-term hodling is unlikely to yield the same kind of rewards.

You don't need a spreadsheet if you have €1,000 in your Hard Wallet, but as your trading frequency grows and the time your transactions are open for reduces, you'll need to put a lot more effort into preparing and documenting what you do.

This may begin as a spreadsheet for Dollar Cost Averaging (as recommended in a separate article), but as your trading grows more advanced, it should evolve into a Trading Journal.

What is the purpose of a trading journal？

A Trading Journal is both an objective and subjective record of your trading decisions (numbers and dates), as well as why you made them and how they turned out.

If you're serious about bitcoin trading, you'll need to keep a completely honest Trading Journal. It's all too tempting to ignore the mistakes and focus on the wins, but that's a surefire way to get rekt.

Keeping a Trading Journal necessitates a methodical approach to each trade, divided into Objective and Subjective categories. The objective elements work well in a spreadsheet format, whereas the subjective elements are more akin to annotations.

A Trading Journal's Objective Elements

• Which currency pair do you trade？

• Your entry fee as well as the date and hour of your event

• Your exit price as well as the date and time of your departure

• The difference between your target exit price and the current market price Exit

• The longevity of the trade

• The type of trade: spot or limit; long or short Trade size and capitalization

• Profit or loss on a trade

• A well-thought-out strategy for making the trade

• A risk measure/index and a trade confidence level/index

A Trading Journal's Subjective Elements

Subjective analysis of your transactions can be done in the form of annotations, which can include things like how you're feeling and how much sleep you got the night before, as well as notes about things you think you got wrong and trading skills you should acquire or improve.

When you keep a trading notebook, you're demonstrating that you have the discipline to take cryptocurrency trading seriously and that you're willing to be honest with yourself. It's pointless to only keep track of your accomplishments. Active crypto trading isn't for you if you don't want to keep track of your losses.

Knowing the differences between active and passive trading is an important element of the crypto trading learning process, but thus far we've only looked at the actions of an individual manually trading in either a passive or active sense. Manual trading refers to physically entering trades into an exchange interface, although the majority of crypto trading that occurs on a daily basis does not come from individuals sitting at home in front of their computers.

The following essay examines how institutional investors, hedge funds, and skilled trading desks have been drawn to crypto trading because of its tremendous prospects.

This is a vital aspect of the evolution of crypto, and in many ways a prerequisite for price stability and greater adoption, but it's a far way from the cypherpunk mailing list where Bitcoin was born, and it's something that anyone serious about investing in or trading crypto should be aware of.