Countless times people ask me this question; between day trading and holding, which approach is the best for cryptocurrency investment?
Each of the investment styles serves a purpose, perhaps no approach is better than the other.
Even conventional investment, like stock trading, there’s a place for day trading and long-term holding.
Nevertheless, I am amongst the school of thought that believes that the rules and strategies employed in a conventional investment like stock have a place within cryptocurrency investment.
We might differ with opinions, but I beg you to at least see through my line of thought.
The focus should be on; how to become consistently profitable and how to handle the growing apprehensions of taxations on capital gains of cryptocurrency investments.
Cryptocurrencies can serve as a means of monthly income, as well it can be a tool for building personal wealth long term.
So, there’s a need to adopt both investment styles.
Whether you are a novice or a sophisticated investor, you can make reasonable profits.
However, the reality varies when you desire dependable profits.
Here is where it gets a little sloppy.
I can recall when I traded off all my Ethereum holding around 20 units after a year, Ethereum rose to 500 dollars before getting to its current price.
I traded it all because I was more concerned about taking the immediate profits without considering the long-term potentials of my portfolio.
Each moment I remember this, I feel terrible.
Then, I was a naïve and inexperienced investor: now I know better.
In this article, we will discuss some ideas and strategies I learned and implemented that worked for me conceivably you may pick up one or two ideas from it.
The journey of growing into a consistently profitable trader and successful crypto investor is a task that demands dedication, foresight, continuous learning and excellent execution — it doesn’t happen by an act of luck.
If you want to join the crypto millionaire club — you have to work for it.
There’s no shortcut to this.
Follow these steps to become consistently profitable.
1. First, understand the dynamics of making and capturing capital gains in cryptocurrency.
Fortunately, there are several ways in which a trader or investor can improve his profit-earning capacity.
First, the trader or investor needs to know how to do the math.
In any business endeavour, the most critical function is the ability of the business owner to do elementary accounting; adding and subtraction.
Without this, the business owner won’t know how to improve his odds to become profitable.
The same concept applies to cryptocurrency.
If a trader knows how to do the math, he can easily design a strategy to capture the capital gains without being trapped in a trade if the trend reverse.
Likewise, long-term investors, like the experience I had with Ethereum.
If I knew what I know now, I wouldn’t have sold my 20 units of Ethereum, yet I will capture the gains from the price increase and still keep the units.
Not just that, I will recoup my initial invested capital and become risk-free while holding the coins for a long-term of at least ten years.
What is Profitability? The simple answer–Profitability — is the ability of an investor or trader to earn profits.
Here, the emphasis is on how the trader can effectively design a system that optimizes core variables in cryptocurrency that influence profitability.
In trading, there’s a concept called; Trilogy of trading success.
The trilogy of trading success is; System, Strategy and Psychology.
Alongside these variables in cryptocurrency, there are other factors a trader needs to pay attention to, which are:
- Units filled
- The price level you bought the coin
- The percentage price increase or decreases.
- Amount invested.
- Winning Rate
- Reverse rebalancing
You need to know how to piece together the variables and use them to your advantage.
Now let’s take an example of how we can consider the earning on the investments?
Using Shiba Inu, let me explain how this plays out.
I bought Shiba Inu at a price level of 0.00001816 immediately after its listing on Binance.
My initial invested capital was 200 USDT.
With it, I got 11 013 215.9 units filled.
So, I hold 11,013,215.9 units of Shiba Inu as of that time.
200 USDT divide by the price level: 0.00001816
=Units Filled: 11,013,215.9
When the price surged to 0.0008429, I sold 50% of my holding, which is 5,506,607.95 Units, to reverse-rebalance.
And, I made 464.15 USDT in Revenue.
How to calculate your potential revenue:
(Revenue = Target profit Price level x the units you want to sell)
With Just 50% sold, I made over 100% Return on Investment.
Using the Fibonacci retracement tool, I map out the level I will buy back the coins when the market corrects.
So, I set a buy limit order of 264 USDT to buy back the coin at 50% Fibonacci, which is at 0.00004656 price level.
This time I got 5,670,103.09 units filled.
Totalling my holding, I have 11,176,711 units.
Primarily, I am risk-free in my Shiba Inu holding.
Not just that, as the price increases, I will reverse rebalance while holding it.
My target is to hold it for five years within this period to accumulate over 20,000,000 units or more.
And I will increase the units without investing additional funds.
The point is, as an investor, you need to actively manage your portfolio to de-risk your exposure using reverse rebalancing.
Reverse rebalancing is a cryptocurrency portfolio management strategy that involves selling 50% of your holding when the asset record a new All-Time High, then buying back the asset at 50% or 30% market correction.
After every bullish surge, there will be a market correction or retracement.
On a day timeframe, the market will retrace to 50% Fibonacci.
Premise on this thesis, an investor can reverse rebalance his asset holdings.
With reverse rebalancing, investors can de-risk their holding to reduce their risk exposure.
Apart from this, here are other benefits of reverse rebalancing:
- Recoup initial invested capital
- Capture the profits
- Grow the asset units without investing more funds
Reverse rebalancing requires dedication and the ability to spot trend reversal or trend exhaustion during a bullish trend.
So, a crypto investor needs to learn Trade analysis (Technical analysis, fundamental analysis, and Market sentiments analysis).
If an investor does not know how to conduct trade analysis, he will find it challenging to act rationally with managing his investments.
The knowledge will help the investor to reverse rebalance his portfolio effectively.
Alongside this, the investor needs tools such as Fibonacci Retracement, Volume Profile and CryptoCurrency Investment Tracker Spreadsheet.
The tools will increase the investors’ level of accuracy.
For a day trader, the profit dynamics may differ slightly, but the variables remain the same.
For a day trader, factors such as:
- Trader’s psychology
- the strategy of choice
- and winning rate
Play, important roles for a trader to become consistently profitable.
As humans, we have our psychology to contend with — Until you grasp this as a trader, you will struggle to make consistent profits and fight to pull through from losing streaks.
To deal with this, work on your psychology as marines do.
Because you need a level of mental grit and control to be on top of your game, I recommend you pick up this book, “Mastering Trading Psychology” by Andrew Aziz and Mike Baehr.
The book will give you a push towards improving your Trading Psychology.
Now, let’s talk about the role of strategy. There are a plethora of trading strategies.
But before you adopt any trading strategy, backtest it. To know the winning rate of the strategy.
Preferable, 55% winning rate and above. If the strategy has a 55% winning rate, then adopt it and master it. You need to be skilled enough to be profitable.
Practice the strategy more to perfect your skills before using it in your live account.
In Mrchino Club Trading Academy, we first expose the students to various trading strategies.
Because it is needful, to know various trading strategies’ their pros and cons before settling with one or two.
In our academy, we encourage students to select one or two strategies.
After rigorously back-testing: to assess different thesis to find out the strategy winning rate, risks, and profitability ratio.
Other elements that determine your profitability as a trader are the Risk-Reward Ratio and profit-taking level.
If you have a habit of setting unrealistic Take profit, it will always trap you in a trade.
Unrealistic Profit-taking level is a challenge many crypto day traders face.
I once faced this challenge to deal with it; I adopted the 20% Rule and compound gains concept.
The idea of compound gains is to aim for an average profit using a 20% increase in price.
That’s for a trade you will aim to capture only a 20% increase in price.
This thesis might not sit well with many.
Well, if you can’t keep your greed in check, hardly will you be consistently profitable.
For a trader that opens a position with $1000 and makes $200, the profit might be small.
But, when you factor compounding gains, the payout will be reasonable in the long haul.
Here is how this plays out.
Assuming a Trader has 1000 dollars as his trading capital.
According to his trading plan, he planned to have ten trade entries’ per week using a trading strategy with a 65% winning rate at a 1:10 Risk-Reward Ratio.
In a week, the trader stands the chance of 7 wins and three losses.
Here is how this plays out.
100 USDT divide by 100 percent x 20
= 20 USDT profit.
20 x 7 = 140 USDT Profits weekly.
100 USDT divide by 100 percent x 2
= 2 USDT loss
2 x 3 = 6 USDT loses weekly.
In a month, the trader stands the chance of making consistently 560 dollars as profits.
Okay, let use BTC/USDT pair to buttress the point.
Assuming the trader bought BTC at $59,850 with 100 USDT on the spot market.
The units filled will be:
100 USDT divide by $59,850
= 0.000167084378 BTC
If the trader uses the 20% Rule, the Target Profit level will be:
$59850 ÷ 100 x 20
Take Profit level = $71,820
When the target hit, the profit will be:
Take Profit level x Units filled ($71,820 x 0.000167084378 BTC)
= 120 USDT (Revenue)
From this piece as a trader, I believe you have seen the key factors that you need to work on to become consistently profitable.
The next thing to do after this;
2. Figure out where crypto fits into your financial plan
Beyond making monthly profits, the best part of cryptocurrency is investing for the long term.
Cryptocurrency can be an instrument for growing wealth to achieve financial freedom within a brief span.
You can sort out your financial concerns, such as emergency fund, retirement, consumption smoothing, or paying your college loans from the return on investment from cryptocurrency.
So take time to figure out where crypto fits into your financial plan; role cryptocurrency will play as a financial instrument to achieve your goals.
You may ask, “If this is necessary?”
From my interactions with students at Mrchino Club Academy, I discover that students with a financial plan make better investment decisions than those without a financial plan.
And, they are unlikely to invest in shitcoins that will rekt them, than those without financial plans.
When you have a college loan to pay off, you will be more conscientious about your investment.
Conscientious investing is another angle to the dynamics of making profits in cryptocurrency.
Being conscientious about your investment eradicates the get rich quick mentality.
Many people attach to cryptocurrency investments that make them vulnerable to scams.
“it’s not about I am going to make ten times my money; I am going to be rich”; — instead, investing in cryptocurrency should be viewed as another path towards financial independence that can help people beat inflation.
If you can manage your risks, you can be profitable.
It is what it is.
3. Design Alpha Crypto investment and trading system
The focus of this article is to guide you through designing a trading and investment system, which is the bedrock of profitability in cryptocurrency.
A System brings together various variables and rules in a way that defines how the variables will interact to deliver consistent results.
An Investment system is a strictly rules-based approach to trading and investment.
To create this bottom-up approach is required to consider all related variables.
You need to identify the components of the problem (area of deficiencies that make you have losing streaks) and find the best strategy available for each of them.
Then create procedures, rules, strategy and risk management guidelines — this is what an investment system is.
Besides this, you need to have tools for the effective management of the system.
The tools you need are:
- Trading Journal
- Back-testing spreadsheet
- Crypto screener and scanner
- Charting Platform
- Cryptocurrency investment portfolio tracker
- Trade execution checklist
- Trading Plan
- Trading Robots like Royal Q and 3commas might be handy in some situations.
- Trading community
At this point, you should feel very confident with your trading and system and feel comfortable taking trades with no hesitation.
Meanwhile, if you would like to learn more about cryptocurrency and investment, at Mrchino Club Academy, we offer Advance Masterclass on crypto investment and trading.
The masterclass is a comprehensive online-based course that teaches you everything you need to know about cryptocurrency from Basic to Advance if you would like to enroll click here:
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