I HAVE UPDATED THIS GUIDE:
See the updated version here.
Why Crypto?
I recommend newer traders, or traders with a smaller account balance to strongly consider trading Cryptocurrencies. The volatility is off the charts. Volatility equals potential. If you can be a winning trader here, you can do much better here than in equities. You can much more quickly grow your account in Crypto.
These markets have a lot of amateurs and not a lot of professionals. This equals opportunity if you are serious.
There are risks. High volatility does equal high risk. The exchanges have had many issues in the past with hacking, downtime, etc. I find these markets to be somewhat like a high tech version of Jesse Livermore’s bucket shops, if you have ever read Reminiscences of a Stock Operator.
Please do your research before jumping into this.
Prerequisites
I recommend going through my stock trading method series before reading this post. There are many parallels between my equities method and my crypto method. I have added in elements of the Brian Beamish “Little Old Lady” Method and Lucky36Luc’s method.
Tools
For charting and alerts I recently made the switch to Coinigy. I used to use TradingView for charts(I still use them for stocks, occasionally for crypto), and the android app Bitcoin Checker for alerts. The problem with Bitcoin checker is the client side nature of the alerts. Crypto moves fast and on occasion you will not get an alert as the app only updates on a set interval. Even with mine set at 5 minutes I would miss alerts from time to time.
Coinigy has server side alerts. This feature by itself makes it worth the cost. I never miss an alert this way. I can set up SMS and/or email alerts. It is powerful and useful. Coinigy is currently working on scanning features which would be a huge deal for me and me crypto traders.
Exchanges I Use
I use GDAX to buy Bitcoin and Ethereum. I view these as the top two cryptocurrencies. Once in Bitcoin I leave half in GDAX/Coinbase. I place a sell order at a 50% gain. The rest of the bitcoin I move over to Poloniex and Bittrex. I have also been using Binance more and more recently.
For Ethereum I sell half at a 100% gain. I will also take small profits below key resistance areas. Free USD is used to place tiered orders near key support levels for both BTC and ETH. I do utilize stops on ETH, but I do not on BTC as it is needed to trade alts. I am a trader and investor of BTC. I will keep a small amount of ETH at the completion of every trade. I am an investor of ETH as well.
Top Alt Coins
If you look at my Weekly Setup Google Sheet, you will see the alts that I am currently trading. I have a tab for “Top Alts” that I trade with larger position sizes. I will utilize up to 50% of my alt coin BTC balance(25% of total balance) for a trade. It depends on the quality of the setup.
Check my Google Sheet and you can see where I am placing my alerts/bids at. It is similar to my stock trading strategy in that I look for fairly deep pullbacks to strong support levels. Horizontal support meeting trend line support is ideal for me.
I do keep my technical analysis fairly simple. I don’t get into crazy 30 minute technical analysis of one chart. It works for me, maybe others need to go more in depth. I do look for deeper pullbacks in these coins than I would in BTC, ETH, or a stock. I will keep a small amount of these coins from winning trades in case of a blow off top rally. Crypto has some insane pumps. Stops are used on these trades.
Trade Only Alt Coins
The next tab is coins that I will only trade. I do not keep any of these after the trade. I will utilize up to 20% of my alt coin balance(10% total) to trade this, depending on the quality of the setup. I look for even deeper pullbacks on these.
How did I decide on which tab to put each coin? Mostly looking at monthly volume and market capitalization of the coins on CoinMarketCap. I also checked the story of these to see if they are bringing anything new to the table, etc.
The Next Tier of Alts
Some of these are undoubtedly good coins with good stories, but until the trading volume and/or market cap is high enough I will not add them to my tabs. Many of these are scam coins. However, I will trade them, but obviously with very small position sizes and I do not keep any after the trade. I did go through the arduous process of placing an alert with Coinigy on every single coin that trades on either Poloniex or Bittrex. I do this because I do not have a real good way to scan for setups like I do in stocks. I typically place these alerts on these coins at or near all time lows.
The End
I think I have covered everything for my crypto strategy. Any questions please ask.
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