Cryptocurrency Strategies (Buying & Selling) – Whether it’s cryptocurrency, currency trading, stocks, commodities or precious metals, these 3 strategies will help you understand the basic stock market game. I developed these 3 strategies to help beginners and novices understand the mechanics in a nutshell. Since I grew up with bitcoin rather than stocks, here in particular a strong reference to digital currencies. But the mechanisms or strategies are the same for these 5 investment types: cryptocurrency, currency trading, stocks, commodities or precious metals. I would exclude ETFs and index funds here, as the risks and price fluctuations are significantly lower here.
How can you invest in cryptocurrency? Investment Strategies
For beginners and novices, I would sum up the stock market in general and digital currency in particular, like this:
- Defensive – buy and hold portfolio of “well-known” brands
- Defensive – buy and hold portfolio of “new” brands
- Active trading with TP, SL and order placement
Reading tip: Which app do I use to buy and sell shares, cryptocurrency & Co. Here is the answer! My recommendation: Trading App.
Strategy 1: Well-known brands, hold for the long term
Strategy 1 is simple and the “safest” form of investment in the stock market. Bet on known values. The easiest way to do this is through ETFs (index funds). These bundle several values from one area. For example the DAX, it contains the largest, German, listed companies. If you invest your money here, you spread your capital over various companies from Germany. This minimizes your risk.
But you could also buy stocks yourself that have been successful in the long term. Classics from the DAX, to stay with the example, such as Daimler, Adidas, Bayer or Deutsche Wohnen.
In the field of cryptocurrencies comparable – important: significantly higher risk – with Bitcoin or Ethereum. You then hold these purchases in your portfolio for 1 year, 3 years or 5 years.
Strategy 1 summarized:
- Buy known, solid (< 5 years) values
- Hold your portfolio for a long time (> 1 year)
Strategy 2: New coins and broad investment portfolio
Why do I find coins under $5 so interesting?
My second strategy that I want to present to you deals with coin alternatives. By this I mean coins that have only appeared in the last 1-3 years. Another factor, they must be listed with large, reputable brokers. Because, the price of cryptocurrency is created by supply and demand. That is, only when sufficient demand is generated (the reach of the brokers), the investment is profitable. The third central aspect is of course the price development itself, in the long term and in the short term.
- Listing with major brokers
- Relatively new (< 3 years)
- Share price development
Bitcoin or alternatives? Here is a brief explanation of what makes the alternatives so attractive to me personally as an investment opportunity. As I said, economics is psychology. Coins are based purely on supply and demand.
Question 1: Short-term development +/- 6 months
- A) What is the probability that bitcoin will double in the next few months? So from currently ~ $45,000 to $90,000
- B) What is the probability that new coins, for under $5 will double in the same time period?
Important for Beginners – It’s not about whether a single stock makes $1.24 or $1.13 profit / loss. Ultimately, it’s about relative changes (percentages), just like stocks. Which paper / currency / coin / etc. goes up 5%, 6%, 7%, etc. in 30 days. Ultimately, wealth building and profit maximization is not about specific values. Percentages you can clearly easily compare with each other, with different investments.
Question 2: Long-term development +/- 12 months
- A) What is the probability that bitcoin will reach ten times its value? After 10 years in the market.
- B) What is the probability that a relatively new cryptocurrency like XTZ (Tezos), TRX (TRON), EOS or XLM (Stellar) will increase its value tenfold in the same period of time?
Risk awareness: price fluctuations
What you definitely have to be prepared for when investing in cryptocurrency is very high price fluctuations. While a stock regularly loses maybe 5 or 10%, cryptocurrency can go down up to 30, 40 or 50%.
If you have invested 10,000 euros and in the morning – 5,000 is in your account, stay calm!
Tip – Stock market always means strategy. Strategy means, a “precise plan for a behavior”. That means for you simply said:
You sell at a profit. As a rule, do not be impressed by short-term price fluctuations.
Cryptocurrency Trading Tips: My Top 3
For the reasons stated above (risk), it is so important (for individuals):
- View cryptocurrency as a long-term investment strategy (3 months to 3 years).
- Cryptocurrency is part of the investment portfolio (5 to 10%)
- Diversify your crypto portfolio, just as you would with stocks in an ETF (spread a capital over several coins).
Briefly to diversify your investment portfolio:
Cryptocurrencies are still very close to each other. With bitcoin as the perceived reserve currency, prices go up and down. If you spread a stock portfolio across several public companies, usually only a fraction of your stocks go down, so a few papers, not all. With cryptocurrencies, market movements are closely linked.
Diversify your portfolio!
Don’t just buy 1 coin, split your equity across several. Crypto should only make up 5-10% of your portfolio. The rest is made up of investment alternatives such as stocks, ETFs, commodities, precious metals, possibly FIAT currencies, etc.
Strategy 3: Hochtief Trading
Wealth building with less risk, prefer long-term investment strategies. If you want to maximize your profit, you have to trade daily and stick with it.
Here’s some insight on how you act even more “professionally.”
Traders who are aware of high risk use all their capital to make trades that are risky but high profit. One possibility is cryptocurrencies, precisely because the price fluctuations are so high.
The higher the price fluctuation, the faster the trade
So it’s about daily, hourly, buy and sell. Unlike stock trading, this requires full attention as the price is subject to constant fluctuations. Your goal:
Taking targeted profits from differences in highs and lows
Trading explained: Profit taking, loss stop and margin
These 4 aspects are particularly important here:
- Margin (profit margin of the broker)
- Take profit (TP)
- Stop Loss (SL)
- Buy planned ahead
Simply explained, it works like this.
Margin: Broker fees on purchase
First of all, let’s talk about “margin”. As you have already learned, the margin is the profit margin of your broker (provider of the platform, website or app). Some brokers take an additional order fee of 5 to 10 €. With most “modern” apps, you no longer have to pay this, only the margin.
Tip! Trade without order fee and without Marin? If you have your residence outside of Germany, then you can trade with Robin Hood (no advertising link)! The highlight: Robinhood is free of margin trading. I would also like to, unfortunately I have my residence in Germany. Unfortunately we can’t do that in Germany. Not yet. I myself trade, after I really tested all apps, everything from stocks to ETF and Crypto with Etoro.
This fee for the purchase, is usually around 2% of the price. The selling price is the actual value. The purchase price is the actual value plus the broker’s margin.
- Sell: $100 (rate)
- Buy: $102 (including margin of $2)
Take Profit: Take profits
As soon as you buy, you usually set 2 values as a trade. Your TP, i.e. “Take Profit” indicates when your order should be sold again.
A simple example is psychological values, like $10,000 price value, $10,200 price value, $11,000 price value, etc., when we talk about bitcoin. For a stock like Tesla, this would be just $880, $890, then $900 again.
You can’t predict when, which jump is how high, but you can guess. The biggest jumps are usually on
- X.5 – something like $9.50 or $15
- X,0 – even values like 10$ or 200$
The fluctuations are smaller with X,1 steps.
Once a stock or other tradable asset reaches these levels, many traders take the profit, why? Because many do. As a result, the price goes down. Reminder: supply and demand.
If this downward price jump is greater than the broker’s margin, the automatic sale through the take profit (TP) is worthwhile.
This way you can buy the coin again at a lower price directly after the price collapse. With this purchase, you then directly set a new TP and can use even small price fluctuations to maximize your assets.
Calculation example: Profit taking
This is how the game of “take profit” and “margin” works.
- You buy for $150, you got $147 worth…
- Price goes to $200 (some sell through TP automatically, you do too).
- Profit: 53$, assets increase to 200$
- Price falls to $180
- You buy for $200, you got $196 worth…
- All others now worth $180
This way you only try to take advantage of price rises. In this way, your capital increases step by step without being reduced by falling prices.
Because of your increased capital, you now hold a higher value.
Portfolio increase: + $ 16
You repeat this step over and over again.
This way you protect your capital from falling prices (if your price targets, within the investment strategy, are reached).
Your assets have increased (despite re-investment) by + $16, a full + 10.6%.
Profit + $16
Relative + 10.6 %
This profit is not taken by a large part of the investors. This is where you get the extra profits.
Stop Loss (SL): Stop losses
The principle is quickly explained. Stop Loss(SL) protects you from too high losses.
Stop Loss is the counterpart. If the cryptocurrency falls below a certain value, the position is automatically sold. In regular stock trading, you might set your stop loss at 60%, 80%. That is, if the paper is at 60 or 80% of the purchase value, it is sold.
You can define the values at any time. Either as a concrete contribution, or as a percentage value.
Plan ahead for purchases: Buy cheap at lows
Have you ever heard the saying, “There’s profit in buying”?
You can buy financial products directly, i.e. execute a “direct order” or place an order.
- Direct order (immediately)
- Placed order (planned in advance)
You can buy cryptocurrency directly or plan your purchase in advance. So, if you expect the cryptocurrency to fall below a certain price, you can schedule the purchase in advance to drive your profit further up.
Let’s say bitcoin is currently at $45,300 and stagnating. You have time to trade but you think that the price will go below 45,000 today, maybe even 44,800, because there is hardly any momentum in the market. Instead of buying directly at the price of $45,300, you place an order at the price of $44,950. Should this happen, you will have made an extra 0.77% profit.
With the high-low strategy, you can generate even more profit in combination. If this pre-order works 5x, your fortune increases additionally by itself by the fortune increase in every single trade. So to speak, compound interest, only as profit.
- Trade – 0.77
- Trade – 1,55 %
- Trade – 2.33 %
- Trade – 3.12 %
- Trade – 3.91 % (+0.06%)
Sell + Buy: Trading Tip
With my articles and guides, I want to help you save money! On my first trade, I made -5,500 euros in 1 hour. Why? I wanted to practice quickly. Because besides my companies, I only have the morning and the night for trading.
What is the Quint essence?
“Quantum interest” explained: take short-term profits
I came up with the term “quant interest” to clarify the concept. We do not wait for the big end, we also use small jumps (price movements) to take interest (profits).
A quantum leap is often perceived as something big. But in fact, a quantum leap is the smallest possible unit in physics, simply put. Smaller than any virus, smaller than any atom, smaller than a proton, even smaller than an electron.
As you have already learned in the article on trading strategies, taking profits from small movements is a good strategy to build your wealth further. Because that’s how you take:
- Profits from long-term increase in share prices and
- Gains from short-term price fluctuations
Schedule time of sale and new purchases
This table I have built myself to calculate when I get back in after a TP (take profit; selling the stock / currency / etc.). For this I subtract the margin x2 (i.e. the trading fee of the trader). At eToro, for example, you pay round about the following fees (margin) per trade:
- Cryptocurrency: 3%
- Equities: 0.2 %
Download: Sell / Buy table
In my table, the whole thing then looks like this. In the line “Sell” you enter the rate at which you have set your TP. Of course, there is the table for you and the community also free as a download:
- Sell / Buy – Table, Download
The table contains:
- Calculation margin sale / purchase for cryptocurrency (% at eToro)
- Calculation margin sale / purchase for shares
- Calculation of leverage (spreadsheet 2)
Price Alert for Realtime Trading
In addition, I set up a price alert. This is then always slightly below the price, usually by 0.5 – 1% before my TP. So I can reorder directly after the sale.
Tip. You can also “buy” automatically! To do this, you do not place your order directly, but buy at a certain price value. You can do this easily when buying the Cryptos, share, etc..
Leverage effect explained (Leverage)
What does leverage mean for financial products?
Leverage means increased capital / risk.
For pretty much all products, you can use leverage in trading apps and with brokers. Simply put, a short-term loan from the broker. This increases the profits and (!) the risk. You give $1,000, take a leverage of 10, and you have $10,000 of capital tied up.
X10 = from 1.000 you make 10.000
Examples of levers:
|5.000 $||1:1 / X1||5.000 $|
|5.000 $||1:2 / X2||10.000 $|
|5.000 $||1:5 / X5||25.000 $|
|5.000 $||1:10 / X10||50.000 $|
|5.000 $||1:20 / X20||100.000 $|
|5.000 $||1:30 / X30||150.000 $|
Also, some index funds that are tracked automatically have leverage, such as the China 50.
Strategies for trade: risk assessment
You’re probably already aware of the risk of the 3 forms of trading.
- Defensive – buy and hold portfolio of “well-known” brands
- Defensive – buy and hold portfolio of “new” brands
- Active trading with TP, SL and order placement
Strategy 1 is defensive, you bet on “known brands” and hold the individual stocks for a long time, so at least 6 months, maybe even 3 or 5 years. The risk is lower in relation to strategies 2 & 3.
Strategy 2 focuses on new values. No matter if cryptocurrency or stocks. For cryptocurrencies, this means that you buy Bitcoin (BTC), Ethereum,
Strategy 3 requires your constant attention. You have to keep an eye on the prices, their origin, course and current values. Only then can you estimate how individual values will develop. The risk for mistakes is accordingly high if you want to trade “on the side”.
Now for the big question:
Can you make a lot of money trading?
My trading strategies currently look like this: I have 2 portfolios. My return is in the investment account 1) at about 3.41% and in 2) currently at round about 8.56% per month.
- Investment Account (Strategy 1)
- Trading Training Account (Strategy 2/3)
My current trading strategy: 50 / 50
50 / 50 means – One “serious” with stocks and ETFs and a second with stocks, ETFs, cryptocurrency and sometimes commodities / precious metals. So to say: 1) my investment account and 2) my trading training account. In both are about 50% of my capital.
As described, my return in the investment account 1) is about 3.41% and in 2) currently round about 8.56% per month. Your first important learning of the trading strategies above is also back: %-values are more important than Euro or US Dollar.
Accordingly, you can express the question, can you make a lot of money with trading? but also in numbers.
Development: Long-term trading
So a $10,000 investment grows in a year, with a monthly return of 3.41%.
- Investment: $10,000
- Capital after 1 year: $13,983.81
- Increase: + $3,983.81
- Yield / month: 3.41
- Yield / year: 39.84
Development: Daily Trading
So a $10,000 investment grows in a year, with a monthly return of 8.56%.
- Investment: $10,000
- Capital after 1 year: $22,735.18
- Increase: + $12,735.18
- Yield / month: 8.56
- Yield / year: 127.35
Warning: You can only achieve such returns with 1) practice 2) significantly higher risk and 3) constant “readiness” in trading.
Cryptocurrency: Reading Tips
- Trading App: Recommendation
- Cryptocurrencies: List
- Cryptocurrency future? History
Trading App: Recommendation
eToro App – Trade stocks, ETF, cryptocurrency, in my blog you have already learned a lot about trading. Lots of questions of course: which app do you trade with, what do I recommend? So today I want to share with you my favorite trading app, eToro. 29.88% asset growth in 12 months, with low risk through “Copy People” and “Copy Portfolios” or up to 127.35% through active trading and trading strategies. Learn about the app, fees and more here step by step.
BitCoin, BitCoin Cash, Ethereum, Litecoin, Dash, Ripple, Zcash or Binarcy Coin: they are considered the answer to traditional means of payment. The digitization and decentralization of money makes banks superfluous. Only buyers and sellers are responsible for the control and security of their digital money. You too want to invest in Bitcoin & Co? We have an overview of the most popular cryptocurrencies here.
Cryptocurrency future? History
The world is increasingly being sent into lockdown by the new Covid-19 virus. March 2020 was the month when stock prices also plummeted. Papers like those of Lufthansa fell to ~ 1/5 of their pre-value. Minus 80% losses in a few weeks. This happened to almost all sectors except e-commerce and online trading. In contrast, the price of Bitcoin and other cryptocurrencies is holding up. What makes cryptocurrency tick? Why im wanting to buy more cryptocurrency? Since March, bitcoin (BTC) has hit 453.9%. Ethereum (ETH) 376.2% and Binary Coin (BNB) at 428.5%. Currency trading is attracting more and more investors, including individuals. The phenomenon is strong in forex, but more investors are also getting involved in the stock market, as seen recently at GameStop. A look at the trend, 12 months after the start of the pandemic, in mid-February; with the consequences of the lock down in March.
Stock, ETF, Crypto: My Experience / Mistakes
Stocks, ETF, Forex, Cryptocurrency, Social Trading – Here’s a little list of a few learnings that cost me money but are so simple you should know them! You want to buy stocks, index funds, cryptocurrency like Bitcoin or Ethereum, foreign exchange (currencies)? You’re thinking whether house bank, direct bank, online broker or app? Trading all on your own at risk or new options like social trading via app? My experiences and mistakes!