Anyone can be right and profitable in an upward trending market. Even a poorly timed buy order at a local top is likely to yield a profit. That is assuming the trader is willing to sit on their trade for a little bit of time. But is trading your way through a bull market really worth it? Well, it depends.
Before you start trading, it’s good practice to ask yourself if you believe in crypto overall. Then ask if you believe in the asset you are looking to trade. If you answer “no,” to both and are looking to capture quick profits without the systemic risk that investors face, then trading could make sense for you. If you believe in crypto overall, but not in the coin long-term then trading can also be suitable for you as long as you consider the following points. These trading strategies will apply to people that answered “no” to either or both of the above questions.
The Three Most Common Trading Strategies
Ask yourself, are you looking to…
- Stack more of that coin?
- Strictly accumulate USD from the coin?
- Stack BTC from the profits of that coin?
Stacking Crypto
Neither 1, 2 or 3 are better than each other, rather each has implications worth considering. If you are looking to accomplish Option 1, you need to consider not only your skill as a trader but also the momentum of the current coin.
Take Ethereum, for example. It has been moving quickly to the upside, so buying any dip and selling any top could allow you to stack more coin. As easy as it seems to stack more ETH, it is more likely, however, that you will be left on the sidelines or stuck buying back in at a higher price, leaving you with a smaller stack.
If at any moment you sell and it rises, you are now missing on gains you would have otherwise realized had you just been more patient and not made any trades. Generally, Option 1 carries major risk and is a frustrating exercise in futility.
Accumulating USD and Stacking BTC
Options 2 and 3 are better suited if you don’t see long-term potential in the coin you are trading. If you believe the digital asset you are looking to trade has no underlying value, Option 2 is best suited for your set of beliefs. This may mean the market beats you overall. But you can sleep comfortably at night taking specific trades with guaranteed exit plans. Option 3 is the most complicated strategy, but arguably the most common among crypto traders.
This strategy is complicated because the trader has to watch the movement of both the asset AND Bitcoin. The money you invest in the altcoin plus the net return needs to outpace the result of an equal trade in Bitcoin. In a market full of momentum, this can become especially challenging as the threshold to overcome is raised by the upward trajectory of Bitcoin. Strategy 3 can be great when Bitcoin is moving sideways and alts begin to perform well. But this is far easier said than done. There are very few moments where altcoins consistently beat Bitcoin.
Hopefully, the above exercise reveals to you how you should be trading in a bull market and what is an appropriate goal if you are doing so. Repeated small gains across rising assets are likely to give the false impression to new traders that they are consecutively profitable and skilled at trading. More than likely they are in the right place at the right time and are actually underperforming the market. For this reason, holding through a bull run is more profitable for a strong majority of people.
If you’re looking to trade, then stop guessing and start protecting your assets.