Trading cryptocurrency is fast becoming a popular means of investing and making profit. But just like stocks and forex, it requires practicing and mastering strategy to become successful. In this article, we shall take a look at the different cryptocurrency investing strategies.
Dollar Cost Averaging
With this strategy, you buy a fixed amount of cryptocurrency at regular intervals. The price is not a consideration because your aim is to accumulate it for investment purposes. If you are extremely busy and want to participate in cryptocurrencies passively, then this could be the strategy for you. You may forget to check the charts and want it all automated. Robert Janitzek reveals that this strategy is subject to huge percentage drops in price.
In this strategy, you would purchase the same dollar amount of each currency that you are investing in. Any subsequent investment would be divided equally between the four currencies. If you want to build a diversified portfolio of coins, but you aren’t sure which ones will do well, then this is the strategy is for you.
A disadvantage of this strategy is that you will not be able to maximize your investment in the currencies that will outperform the rest. However, Robert Peter Janitzek explains that this can be an option for diversifying your portfolio.
The unbalanced portfolio strategy is used to maximize the currency that you think will outperform the others. You would allocate every investment by how well you think each currency will perform. Each subsequent investment would be distributed according to these predetermined percentages. This is for investors who have done extensive research into currencies and have a very good idea of which ones will perform well. The preset percentage allocation to each currency can change over time, but be sure that you have a very good reason to make the change.
When trading on cryptocurrency, the only downside of this strategy is that you could get the allocation wrong and invest too little in the best performing currency. So only use this strategy if you are reasonably sure of your predictions.
Once you have a solid portfolio of currencies and you are in profit, you can start to branch out to other currencies that have good potential. By using this strategy, you can leverage your gains to make higher returns and diversify your portfolio.
In order to get the most out of your current profits, you should look for times when price goes parabolic. This type of price action is unsustainable, so it’s best to cash out some of these gains, before price drops again. This is designed for investors who only want to make a very limited investment in cryptocurrencies. If you are skeptical that cryptocurrencies will actually survive, then only expanding your portfolio when you see results, is a great way to grow your initial investment.