There are many interesting and intriguing ways to make gains off the market. I don’t believe in the Holy Grail Theory, whereby one particular strategy is the end-all-be-all. Instead of one ideal strategy, a healthy mix of strategies that can be executed across several different markets works best.
The most intriguing way to actually make money entails connecting the various dots across multiple data points. Unfortunately, the existing platforms or tools, which serve the crypto industry, make it hard for you to actually connect these dots, despite the fact that most of the data on Planet Earth is available for analysis.
So, if you look at how much of the world has been digitized, and how much actual data we have about what’s going on, you should have enough indicators to see a little bit about what’s going on in the markets. But, the reality is we are much simpler beings than we like to believe. This is even truer in trading.
But, the market balances that out. It regulates human behavior. When you are greedy, the markets will surely punish you. When you’re not greedy, the markets give back. The same goes even for an algorithm or a bot. A greedy algorithm likely fails. If it’s not greedy, it will do well. The most intriguing aspect of trading is analyzing each situation individually, discovering the gaps in the market, and exploiting them.
And the beautiful part of the story is, we every day see new possibilities in crypto, because this industry seemingly constantly grows and evolves, particularly as it pertains to the tools now available. Just look at the past six months with the proliferation of DeFi.
Taking advantage of the myriad opportunities presented by crypto, while harnessing existing infrastructures, is certainly exciting. For instance, when you analyze actual social sentiments in a multitude of ways, the data flows on social networks, and you combine this with a couple of varying factors. The future can be made to be predictable.
One thing that is predictable is how, in rising markets, the greedy people come late. At the beginning, they don’t believe in the investment thesis. Then they watch others make gains. Their greed hits them hard, and they enter when it is too late. The rational traders are leaving the trade by that time. The greedy ones are overtaken by emotion and begin gambling. That is not healthy. Becoming a part of greed, it becomes unpredictable.
Most signaling services would fail to produce profits were it not for their reach. They can wisely choose pairs and situations in the market where their reach in combination with the greed of their users generates enough mania for a price to go up. If you do a bit of arithmetic, you can skim profits every time you jump into a price early.
Personally, I am not interested in large percentage gains on one trade or event. That’s not wise. I’d rather be a part of all of the events with very small gains each time. I find that a more secure approach.
Indicators
There is no sole social media indicator for predicting markets. Given the number of indicators, one could certainly misuse them. It is in fact the combination of indicators in every situation, and how you use them, which enables the best results. One example can be seen on Lunar Crush, where we have a mix of mentions, positivity sentiments, and blockchain information that creates a validation index, which changes fast. When you combine these indicators, it can be surprising what happens when you trade into the top three mentions each hour with the intention of earning a couple percent.
If you are going to start trading cryptocurrency, it helps to know about the technology. Experts in the field of crypto can at least understand what makes a good project. Be sure to watch some YouTubers. Ignore the ones talking about getting rich quick, and hone in on those teaching you about tools and techniques.
If you’re a cryptocurrency expert, you probably hold a certain portfolio. You might consider diversification. Don’t hold everything in a single basket. Beyond that, be sure to dollar cost average into your long-term positions. Conduct a backtest, and examine what you would have made on Bitcoin if you, instead of merely holding it, had dollar cost averaged into it.
Then you must consider something rather important. Since crypto heretofore has gone up anyway, you might consider sitting tight and being right; that is, holding onto Bitcoin and letting time do the trick.
Then, you must distinguish between strategies relevant to different market conditions. For instance, a bull market strategy will not work in a sideways market and vice versa. Even then, one needs to understand the basics of trading and what it means to do so.
Very simple strategies can go a long way. The crypto traders who win have patience. They devise a plan, and they execute their plan. While certain tools can help you, even the best algorithm platform in the world will burn your money if you don’t know the basics.
You could use a robo-advisory app, but you don’t learn this way. This is not trading. It is rather automated investing. There are algorithmic trading platforms, but even then you need to understand what you are doing to make sense.
As far as tools, you’ll want those offering technical standardization and transparency. Crypto bots often lack transparency, so you might want to avoid those.
Learning to trade is a step-by-step process. You will at first need to fail to learn, of course. The market will trick you, as markets do, and you will fall for it. That’s how you learn from your mistakes.
Social media offers a certain level of magic for traders. Look at eToro, which has combined social media with trading. The nice thing about eToro is you can see what others are doing. Perhaps one day, one could almagate enough data from traders to know what they are doing, and trade based off of that.
Start off slow. Test your hypotheses.
Tools for traders continue to evolve because the infrastructure has been built out. However, the user experience is still being developed, and soon you will see simple platforms, which would allow traders such transparency as to efficiently connect all the dots needed to trade effectively with reliable information. When that day arrives, and everyone is profitable because the tools are hyper-accurate and user-friendly, what does it then mean to profit? That is a philosophical question I often wonder about.
But, let’s say one day in the future these tools become hyper-accurate and user-friendly. What happens when everyone trades profitably? That is a philosophical question, but interesting.
We are in my estimation a far way off from enjoying very simple and user-friendly platforms, where you can promptly understand what has happened in the past across many different indicators.
There is no one right way to trade, but knowing how society works, how the economy works, helps to identify potential profits. I believe then technical analysis can help you draw your final conclusions and estimate risks. For instance, TA can help you find the exact moments to enter or exit. But, if you are doing something stupid, all of the TA in the world won’t help.
What approach you take to trading depends on your own personal values. Some people go with strictly mathematical formulas, not looking at economics nor society, and do very well. Others simply have patience, and then use very simple strategies like dollar cost averaging.
Or, if you don’t know the exchange you’re using is a scam, your funds will one day disappear no matter how solid your trading strategy is.
Don’t fall for FOMO
Over time you will develop your own trading style. But it won’t be the only way to trade. Everyone thinks their style of trading is the best. People have such different perspectives on the right way to trade. There is no one way to trade. But, having a basic understanding of TA, economics, and socio-economic issues is pertinent to being a long term successful trader.
In markets, there are certain players, who have an outsized impact. These players might be the owners of a media house or bank, and have the data available to them to take advantage of information for timely trades. They might be a search engine. For instance, Google can not only predict what people are doing but can also influence it. Those with such influence represent a tiny minority of people. In the crypto markets, it is easy for whales to influence prices and for people to be influenced on the internet, and this creates opportunities for those with enough data to predict the future.
Guest post by Thierry Gilgen from MachinaTrader
A seasoned trader and CEO of automated trading platform MachinaTrader, Thierry Gilgen has highly infectious motivational energy in the trading industry. With years of experience in forming startups and understanding the hurt points of enterprises, he provides insights based on his experience. From starting from garage path lifestyle and selling websites from at home during his teenage years, his goal is to provide valuable insight to the finance industry and share his thoughts on how to build successful businesses.
