I have been a buy and hold investor in the crypto-market for 3 – 4 years with more preference for the top 4 cryptocurrencies with the highest market capitalization. With this revelation, you’d surely not be surprised that I hold Bitcoin, Etherum, Ripple and the likes.
Recently, I had a chat with a friend (not the first time) who advised that I try the active trading of cryptocurrencies since I could interpret price actions on the chart and analyze short-term trend for trade opportunities. And I decided to give it a try as long as it doesn’t tie me down or make me stay glued to my system like a forex trader.
My first move was to re-activate my dormant account on one of the top cryptocurrencies exchanges in Nigeria and fund with $1000 (that’s quite huge and risky) but not after trading some of my potential picks on paper.
How do you pick these cryptocurrencies? My straight and bankable strategy is not different from what I already know and adopt in the stock market. I used the lesson I learnt from my successful trades (that had pulled over 15%, 20% or even 50% return) to power my crypto picks.
So far, the result after a 4 days of real trade has been amazing!
I have earned an unrealized gain of $97.52 on my $1000 initial with $13.18 profit generated today – this is still an ongoing trade as I intend to ride the crypto to a pre-defined resistance.
Take a look at the chart below, each bar represent the profit or loss position on a daily basis – the green bar means your account closed higher as at the end of the day while the red bar is for a down day.
Like I pointed out earlier, this is an ongoing trade that started on the 26th of November, 2020.
I am sure you are already wondering, how can stock trading help me master the crypto-currency market, wait! I will definitely share the strategy with you.
While stock trading requires fundamental and technical analysis of a company’s stock so that you can time your entry properly, crypto-currency trading requires technical analysis of chart to gauge overbought and oversold region.
I just refreshed my trading platform to see the profit or loss position of my crypto-portfolio, Wawooo! my daily profit has moved from $13.87 to $27.14 with cumulative profit surpassing $100 in 4 days, that’s like 10-12% return on my $1000 initial deposit.
The simple truth is that I didn’t do anything different from what I already know as a momentum stock trader.
Momentum trading in the stock market is a trading strategy in which you buy a stocks that are rising fast and sell them when they look to have peaked. The goal is to work and leverage volatility by finding buying opportunities on pull backs in a short-term uptrends and then sell when the securities start to lose momentum.
If you look at all the stocks I recommend on this blog, they follow the same pattern – exhibited initial momentum before I jump in to ride the bigger move.
This is what I adopted while scanning for the first set of crypto-currencies to trade; I looked for the top performing crypto-currencies in 3 and 6 months, a strategy that helps me find currencies investors love and are buying aggressively, then waited for their price to pull back significantly to the oversold region that doubles as support levels (either on a 50/200 moving averages – but I pay more attention to crypto-currencies that are grossly sold off to the 200-day moving average.
After I deployed this model, my scanner pulled only 4 cryptos, out of 6,000 potential picks which are XRP/USDT, LTC/USDT, BTCUP/USDT and REN/USDT.
If you ask me what each of these crypto-currencies is, seriously, I don’t know but from my little knowledge, USDT is a stable coin that is pegged to a fiat currency, United Stated Dollars. It’s intended to be on a 1:1 ratio with USD. This means that USDT’s value is directly hitched to the value of the US Dollar.For someone that’s looking for a way to buy the US dollar, this is another good opportunity to diversify your portfolio.
The interesting discovery about this strategy is that you don’t have to stay glued to your system, you buy, set your profit target and let your trade run. And also, trade opportunities don’t come in every day, like 2-3 times a month.
The chart below is a clear demonstration of how I bought one of the momentum crypto-currencies after significant pull back to its 200-day moving average.
I keyed into BTCUP/USDT at 21.869 (at exactly the 200-day average), the pair has since appreciated significantly to 26.475, that’s like 21% growth.
The same pattern also played out on LTC/USDT:
I bought the LTC/USDT at 67.81 after it bounced off the 200-day average, the crypto-pair has moved up to 80.02, representing a 18% return on the invested fund.
You’d notice that both cryptos have had a very strong bull run in the past before they pulled back on profit-taking, this is just the same buying a stock that is correcting from its week, month or year high.
Wait! Let’s refresh the platform for update:
Trading Risk and Tactics
Yes, there is no market without its related risk and this isn’t different. Some of these cryptocurrencies may go down and remain at their low level for a long time -this also happens in the stock market.
The same tricks I used to scan for stocks that are outperforming the NSE index, that’s what I copied in the virtual asset market to weed out the dormant currencies by screening for the top-performing crypto-assets in the last 3 and 6 months, then wait for a correction to the almighty 50/200-day average which should have acted as very strong support in the same 3 and 6 months.
While this isn’t 100% fool-proof, I’d advise you do your due diligence.
If you’d like to see how I trade crypto-currencies, click here to join OgaCrypto.com – a new forum for you and active traders of stocks and crypto coins.
- Here is the crypto exchange broker I use – See Here
- Here is the chart I use – TradingView