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 short and crisp way. Since I grew up with Bitcoin rather than stocks, here in particular a strong reference to digital currencies. However, the mechanisms or strategies are the same for these 5 investment types: cryptocurrency, currency trading, stocks, commodities or precious metals. I would exclude ETF 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 summarize 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. Trading has never been so easy!
No investment advice or purchase recommendation!
All information provided here does not constitute investment advice or a recommendation to buy. All statements are my general published opinion. I have obtained the information from my experience as a private investor. This experience report cannot and is not intended to replace personal investment advice from professionals.
Strategy 1: Well-known brands, hold for the long term
Strategy 1 is simple and the “safest” form of investment on 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 on different companies from Germany. This minimizes your risk.
But you could also buy shares yourself that have been successful in the long term. Classics from the DAX, for example Daimler, Adidas, Bayer or Deutsche Wohnen.
In the field of cryptocurrencies comparable – Important: Much 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, which 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. This means that only when sufficient demand is generated (range of 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 period?
Important for Beginners – It is not about whether a single stock makes $1.24 or $1.13 profit / loss. Ultimately, it is about relative changes (percent), just as with 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. You can easily compare the percentages of 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 on the market.
- B) What is the probability that a relatively new cryptocurrency such as XTZ (Tezos), TRX (TRON), EOS or XLM (Stellar) will increase its value tenfold, in the same time period?
Risk awareness: Price fluctuations
What you definitely have to be prepared for when investing in cryptocurrency is very high price fluctuations. While a stock might regularly lose 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, you are not 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 like you would with stocks in an ETF (spread a capital across multiple coins)
Briefly on diversifying 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 in down, so a few papers, not all. With cryptocurrencies, market movements are closely linked.
Diversify your portfolio!
Don’t just buy 1 coin, divide your equity among several. Crypto should only make up 5-10% of your portfolio. The rest is made up of investment alternatives like stocks, ETF, commodities, precious metals, possibly FIAT currencies, etc.
Strategy 3: Hochtief Trading
Wealth accumulation 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 can act even more “professionally.”
Traders who are aware of high risk use all their capital to make trades that are risky but have high profit. One possibility is cryptocurrencies, precisely because the price fluctuations are so high.
The higher the price fluctuation, the faster the deal
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 in advance
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 about 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 (price)
- 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.
When, which jump is how high, you can not predict, 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 for 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, have $147 value
- Price goes to $200 (some sell through TP automatically, you do too).
- Profit: 53$, assets increase to 200$
- Price drops to $180
- You buy for 200$, have 196$ value
- All others now have $180 value
This way you try to take only price increases. 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 by +$16 (despite re-investment), i.e. a whole +10.6%.
Profit + $16
Relative + 10.6 %
This profit is not taken by the majority of 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
Do you know the saying: In the purchase lies the profit?
You can buy financial products directly, i.e. execute a “Direct Order” or place an order.
- Direct order (immediate)
- Placed order (pre-planned)
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 the case occur, you will have made 0.77% extra 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 each individual 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! In 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 “quantum 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. In fact, however, 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 profit from small movements, is a good strategy to build your wealth further. Because that’s how you take:
- Gains from long-term increase in share prices and
- Gains from short-term price fluctuations
Time sale and schedule new purchases
I have built this table myself to calculate when I re-enter 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%
- Shares: 0.2 %
Download: Sell / Buy Table
In my table, the whole thing looks like this. In the line “Sell” you enter the rate at which you have set your TP. Of course, the table is also available for you and the community as a free download:
- Sell / Buy – Table, Download
The table contains:
- Calculation margin sale / purchase for cryptocurrency (% at eToro)
- Calculation margin sale / purchase for shares
- Calculation 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 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, stock, 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 mapped index funds automatically have leverage, such as the China 50.
Strategies for trade: risk assessment
You are 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, i.e. at least 6 months, maybe even 3 or 5 years. The risk is lower in relation to strategy 2 & 3.
Strategy 2 focuses on new values. No matter if cryptocurrency or stocks. For cryptocurrencies, this means that you buy Bitcoin (BTC), Ethereum, Litecoin (LTC), Dash, but also XTZ (Tezos), TRX (TRON), EOS or XLM (Stellar) in the portfolio. By diversifying across different assets, you try to minimize the risk for individual failures. The principle of an index fund. As an example and comparison to stock trading, here you would bet on new brands like Nio or Niu in addition to Tesla as an electric car manufacturer.
Strategy 3 requires your constant attention. You have to keep an eye on the prices, their origin, course and current values. Only then you can estimate how individual values will develop. The risk for mistakes is accordingly large if you want to trade “on the side”.
Now for the big question:
Can you make a lot of money with trading?
My trading strategies currently look like this, that I have 2 portfolios. My return in the investment account 1) is about 3.41% and in 2) currently 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
Thus, an investment of $10,000 grows in one 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
Thus, a $10,000 investment grows in one 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. Through the digitalization and decentralization of money, banks become superfluous. Only buyers and sellers are responsible for the control and security of their digital money. You want to invest in Bitcoin & Co. too? We have an overview of the most popular cryptocurrencies here.
Cryptocurrency future? History
The world is increasingly sent into lockdown by the new Covid-19 virus. March 2020 was the month in which stock market 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 stand out? Why im wanting to buy more cryptocurrency? Since March, BitCoin (BTC) has reached 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 development, 12 months after the start of the pandemic, in mid-February; with the consequences of the lock down in March.
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!