Crypto Investing Strategies for Beginners

What is Cryptocurrency Investing Strategy

A crypto investing strategy is a step-by-step guide you use while buying and selling cryptocurrency. Most importantly, you should develop a crypto investment system that suits your knowledge levels.

A crypto investing system only becomes effective if you stick to it. And to make your system binding, write down the rules. Always revisit these rules before you trade.

Again, always test the system before investing. You can use crypto investing platforms to see how your system behaves under different changes. Besides, you can record the performance of a change system.

You can invest your design on a live account if you find impressive results. But, trade only in adherence to the crypto investing strategies below;

The Timeframe

Choose a timeframe that resonates with you. If you don’t have enough time to watch the market throughout the day, be a long-term investor/trader. You’re also a long-term trader if you take a lot of time to analyze every trade.

And you can organize the timeframe of your chart weekly or daily. This time frame helps you make fewer transactions and hence spread your loss. Yet, such a system will only give you a few signals.

So as a long-term investor, you must be patient. And you must make more giant steps; otherwise, you need a big crypto account to avoid receiving margin calls.

Again if you’re impatient, you’ll spend a lot of your time observing the markets. And you’ll be tempted to trade, making you an intra-day trader constantly. An intra-day trader uses 15-minute to 1-minute charts.

Although, as an intra-day trader, you’ll have more trading opportunities daily, helping you avoid overnight risks. But you’ll pay the spread more oftenly. Hence you must become resilient to focus and constantly change your biases.

Or you can be a swing trader who uses hourly charts to implement short-term trades. These short-term trades last a couple of days or hours.

Yet you must identify the trend and wave of your preferred investing timeframe. And always trade in the trend’s direction.

Find Your Ideal Market Position

The trend should help you choose an appropriate market position. You can trade when there’s an uptrend implying a series of consecutive highs and lows. And often, an Uptrend has five waves, as illustrated below:

According to this illustration, Wave 1 moves from A to B. Wave 2 moves from B to C. And wave three moves from C to D. Finally, wave four moves from D to E while wave five moves from E to F.

Waves 5,3 and 1 move in the uptrend’s direction. And wave 4 and 2 move in the opposite direction of your upward trend. So, use trends to identify your market position.

Besides, the market trends influence the crypto price patterns. There’s a range, an upward and downtrend. An upward trend tells you it’s time to buy cryptocurrency.

And the downward trend tells you it’s time to sell your cryptocurrency. So ask yourself whether you’re safer entering your trades near the resistance or the support levels. The decision can help you control your risks better.

Identify Your Support and Resistance

You can use different strategies to identify your resistance and support levels. These strategies include:

After opening the chart in your preferred timeframe, identify the highest peak. Mark it as an All-Time High peak. Likewise, check the lowest bottom peak and mark it as an All-Time Low peak.

And in a downtrend, every lower low is a support level. Yet every lower high is a resistance level, as shown in the diagram below.

Downtrend

In an upward trend, the opposite happens. Every consecutive higher peak is a resistance level. And every higher trough is a support level, as seen in the illustration below.

Uptrend

Counterchecking your previous support and resistance levels can help you identify your perfect resistance and support levels. For example, if you previously had a 15-minute time frame, check the 1-hour time frame.

And integrate the resistance and support levels to the 15-minute time frame. Again check your 4-hour time frame, take the resistance and support levels, and put them in your current 15-minute time frame.

The resistance and support levels to the 15-minute time frame

Your resistance and support levels from the higher time frames can match the low edge from the above illustration. This signifies that their price level is similar. Yet, such resistance and support levels would be your most important and robust.

The Fibonacci retracement levels can help you identify your resistance and support levels. And for forex trading, the most common Fibonacci levels you should use are 23.6 %, 38.2%, and 61.8%.

So, prices retrace a substantial part of the original direction after any significant price moves downwards or upwards. And as the prices retrace, your resistance and support levels occur near or at the Fibonacci retracement levels.

Moving averages too can help you identify your resistance and support levels. In a downward trend, your moving average line acts as the resistance. And, prices bounce off the line and fall back.

But in an upward trend, your moving average is your support level. And when the prices bounce off your moving average, you have dynamic support. So you can use different moving averages(exponential or straightforward).

Trend lines

In the chart above, the uptrend line is your support level. And the price action holds above the bar. Yet, the prices are below the downtrend line in the downward trend, acting as your resistance level.

So always have at least two points-two bottoms, or two peaks to draw your tentative trend line. Although if you have three or more points, you’ll have a good trend line.

Hence the more points in a trend line, the more significant the trend line. So, when the prices trade sideways within a range, they build strong resistance and support levels.

Market Entry

The trading bounce determines your market entry or exit. In an uptrend strategy, the trading bounce involves buying on the dips. And in a downward trend, a trading bounce involves selling on rallies.

So in the uptrend, you allow the prices to dip to the most substantial support level. Afterward, wait for a trade bounce from the support until prices rise again.

The trend must be Up and the wave down in a trade bounce. So wait for the trade bounce to buy to ensure your support holds.

Buying the dip

And you can use stop loss below your support level to minimize losses in the trade bounce. Also, buy a dip using a white candlestick. And while selling a rally, ensure the trend is down, and the wave is up.

The prices should bounce off from the most substantial resistance levels. Sell on a black candle and set stop loss above the resistance levels.

Selling the Rally

Trading the Breakout also influences your market exit or entry. In an uptrend, trading the breakout involves buying crypto when the prices break the resistance levels.

Buying

In a downtrend, trading the breakout signals a sale. You can sell your crypto after the prices cross below your support level. Observe your chart pattern for a flag, triangle, or consolidation.

Selling

Trading the Trend Reversal also determines your market entry or exit. When you have a failure swing, enter the market.

Buying

Selling

Market Exit

The stop loss and take profit signals tell you it’s time to exit the market.

The Multiple Time Frame Analysis

This strategy can help you manage your risks. Avoid looking at a single time frame to trade. Check the following time frame higher to understand the general trend.

Then make your lower time frame to make a market entry. Besides, the trend’s direction can vary in every time frame. So using a multiple time frame analysis can help you minimize your losing trades.

Multiple time frame analysis

From the above illustration, it helps to use at least two or more time frames. Consider pairs with a 1:4 ratio for more precision.

Crypto Investing Strategies Comparison

How to Choose a Crypto Investing Strategy: Tips for Novice Traders

Active trading - involves trading frequently to beat average index returns. It’s time-consuming and needs expert market analysis. It’s also rewarding but risky. So, choose this strategy when you have a lot of time to dedicate to learning.

Passive investment - involves buying and holding crypto for long. Choose passive investments when looking for future income sources like retiring benefits. They have lower costs, low risks, and high returns.