I have been developing trading strategies ever since I became a stock trader. However, since the crypto market is way way different than how stock markets are, I kind of developed this particular trading strategy that takes into account bad market days and given that the crypto market is 24/7, of course, I need to sleep, but a lot could happen in your sleep unless you have buddies with you and you have a shifting of some sort, then you don't need to be creative. This strategy kind of eliminates the fear of a bad market as well as your primary concern is to get more coins from the fluctuations of prices.
I call my strategy the Rubber Band Strategy. Like an ordinary rubber band, you can stretch and unstretch it, right? Applying this to crypto trading, I came up with a bit of a successful experiment and now I am writing about this.
To carry out the strategy, you need to choose two crypto coins that are more or less moves a lot, up or down. For me, I choose coins that are somewhat near in prices or trading ranges.
What I chose was atom and polkadot. It could be other pairs like ADA, FTM and Algo or XTZ and Theta.
Now why I call this rubber band strategy is because my goal is to end up with more units of the coin and doesn't mind the value. Oops, before you choose your pair, you have to qualify that both your chosen coins are kind of gonna go up in value in the future or maybe choose coins that have true projects/utility so even though you end up losing value (temporarily) you still know that eventually it's going to go up. Yes, I'm a fundamentalist and a fan of Peter Lynch.
Back to atom and polkadot, so I chose them because I think they are at least $100 in the future and move like squiggly worms. The more movement, the better.
I did say rubber band, right? A rubber band can be stretched and be unstretched. Imagine one end to be atom and the other end polkadot.
What I did was I started with 4 polkadot coins and 2 atom coins. For explanation purposes, let's just say the price of atom is $10 and polkadot is $9. Now when polkadot overtook atom, say atom remained at $10 and polkadot became $12, that means I can now transfer polkadots to atom. Let's say I transferred 1 polkadot, so that mean I sold polkadot at $12, and then I'm going to buy 1 atom at $10. But since I have $2 excess (which is 20% of $10), I can now buy 1.2 atoms instead from the proceeds of selling polkadot at $12. So in terms of number of units, I now have more atoms (1.2) as compared to 1 polkadot.
At this point, I now have 3.2 atoms and 3 polkadots. Add them together you'll get 6.2 units. I started at 6 (4 dots+2 atoms).
Then let's say polkadot further move up to $15 and atom got lower at $9, I will then decide to move more polkadot to atom because that means I will gain more than 1 atom for my 1 polkadot.
At $15 versus $9, that means I will have $6 excess (which is 66% of a full atom). So that means my 1 polkadot can get 1 more atom plus .66 atom.
So that means now I should have 4.86 atoms and 2 polkadots. At this point I now have 6.86.
Okay, so there could be many variations to the price movements, but I will just cut to the chase. The thing is with this strategy, you should get more coins when one coin moves farther. It could also work the other way around as the other coin might drop in price.
The thing to watch really is how far they are apart. Just transfer the higher-priced coin to the lower-priced coin. Then when the prices go near or over the other, that is the best time to transfer the previously lower-priced coin to the other coin.
But sometimes when the prices meet (meaning having the same price), I would normally just balance out the number of coins evenly as it's hard to predict which one will come ahead or drop in value.
In my dealings I have experienced atom and polkadot meeting at the same price three times (or could be just twice - memory gap) and have reversed positions a lot of times also, meaning sometimes atom is the high-priced coin or sometimes polkadot is the high-priced coin.
My little experiment resulted into 3 full coins either atom or polkadot. From 6 units ( 4 polkadots and 2 atoms), I ended up with 9 atoms from this strategy.
The only drawback to this strategy is if one of the coins you have less of is the higher priced one and it goes to the moon, so you have to have to assess if it the higher priced coin is about to take off, and you can only do that if you're paying close attention to both coins. Beyond looking at prices I also look at groups/forums of both coins and see the sentiments on those groups. Let's say one price got too far away, just look for another coin on the same price range of the lower priced coin.
Another downside, which I truly did observe is when both coins move so exactly alike like be it going higher or going down. The rubber band isn't really getting extended when this happens.
Imagine if you're moving 50 atoms/polkadots or more like 100 atoms/polkadots, imagine the number of coins you can gain from this strategy.
The last thing to remember in this strategy is use bitcoin pair if bitcoin is bullish. If bitcoin is going south, use usdt pair then revert back to bitcoin pair when bitcoin starts to move up again.
Oops, another last thing, promise this is the last, you have to be fast when you transfer because from experience sometimes when you sell the high-priced coin in order to buy the lower-priced coin, the other coin might move drastically higher and that could ruin your plan. Fast execution is also key. Binance is good for this trading strategy. I tried this with Poloniex, Polo is just so laggy. You have to know the speed of transactions in your chosen exchange too.
Hope you all make a lot of more coins from this strategy. Happy trading.