My Transition To Enlightenment: How To Trade?
In my previous post (here) I wrote about my first ever steps in crypto currencies trading. With a bit of luck, I came out with some interesting profit 1.5 day later. Saturday evening I sold BURST and took position in DASH and kept also some Bitcoin. On Monday morning I saw around 2% gain on DASH and some minor loss on Bitcoin, but all in all some profit.
Although I was happy, I started noticing cryptos are very very volatile, going up and down quite a bit. Also I noticed very little daily news on cryptos. These two facts makes trading with cryptos quite risky IMHO. Ok, I can bank on the fact that some of the cryptos will stay in the market for a long time, and expect their values going up in the long run, but I wanted to see if short term trading would make me some profits whilst the risks are lower.
The Start
A friend once told me about his efforts in short term trading on stock exchange indexes with options. The reason he was working with options is the relative high gains you can make since options of 'normal' stocks cost much less then the stock itself and changes in value more or less with the same value change of the stock. He focusses on super short term trades, meaning stepping and out in matter of hours and sometimes even minutes. These trades are based on riding the short waves that seems to be there always.
With that knowledge I started looking in more details to various cryptos, specifically looking at their short term volatility and the number of trades. Although I hardly know anything about any type of trading, I think for this super short term trades, it is best to look for short term high volatility, relative high number of large orders (buy and sell) during the day, relative high number of trades (ie many orders executed per minute).
Ethereum, Dash, Namecoin
So yesterday I decided to concentrate on Ethereum and Dash, the top 2 cryptos in trade volume. I also decided to include Namecoin in my list of cryptos to test; This crypto has a much lower number of trades, sometimes only a couple of orders per minute, but the volatility was tremendous, sometimes jumping 100% up and down in less than a hour; I thought: "with a bit of luck I can make interesting profits".
BTW, I don't know anything about what the realities are behind each crypto currency, but I suppose when going for the short term trading method, it doesn't matter much what the realities of the currencies are, what the companies behind it want to achieve with it, where they are in the process, and what the chances are if they succeed and so on. The whole idea of short term trading is to make profits within minutes/hours and have no position when the trading day ends.
Results
I executed 6 times a buy/sell trade, using my Bitcoin as my home base.
With those 6 trades (in/out) I ended up with a profit of 3,25%.
Note: the profit percentage is against my entire available funds in Bitcoins and other currencies at the exchange I'm using for my trades. At times I was in my trades with all my Bitcoins, at other times I was only partially in.
Profit Good Enough?
I'm not sure of this is a good profit, and what risks I actually took, but I would think such profit is very interesting knowing that most of the currencies I was trading went down in value to the Bitcoin during the entire day I was executing this short term trades. At times, I made wrong decision, stepping in when the currency went further down in value. For those trades I used the method to buy more to lower the absolute value of the currency to get to breakeven point.
But, if working with lets say 20.000 US$ and being able to get a 3% profit on a daily bases, I suppose one can really live well on the profits.
Trades
In table below I present some stats around my trades. I gave each trade a number, chronological in time based on initial buy.
Some interesting facts from my first 6 short term trades:
- 3 times (trade #2, 3 and 6) I bought a currency expecting it would go up, but actually it went down quite a bit; In these trades I decided to purchase more to make sure I don't have to stay too long in position and banking on the fact it would go up again. Result: I was successful in all three times.
- 1 trade I lost some money (trade #4), but I decided to free up Bitcoins to support another trade I was in (trade #5) that went the wrong direction. In the end trade #5 turned around again, and I didn't need the additional funds anymore.
- One of the shortest trades I was in, made me the most profit, by far (trade #6)
- Namecoin brought me the most overall profit, with trade #3 and 6. Namecoin is also the most risky coin for short term trading, since the number of contracts/orders executed per minute is very limited, the volatility was more than 100% in a period of hours and the overall trend of the currency was downwards big time.
- The shorter trades made me more profit than the longer trades (not counting trade #4 since I took a loss deliberately to free up money that I expected to need for trade #5); I suppose the reason for this is that I stepped in at the right trend and got out at the right time; The longer trades such as #2 I bought another 2 times since the currency went down and down in value and was not expecting it could go up to the value I made my initial purchase with in a matter of hours.
- Even with the risky currency Namecoin, I was able to get more than 13% profit in just 21 minutes wherein I even bought at the wrong time, hence my second purchase to make sure I could step out relative quickly without taking a loss.
Final Words
I think short term trading can be quite profitable.
It is a real job though! It takes a lot of time looking at the screen to the different currencies and waiting for the moment some larger orders are executed after which I usually saw some more volatility, a good time to find a wave to ride.
Based on my experiences yesterday, I think it works best for me to concentrate on 1 trade at the time. For the initial buy I think it works best for me to step in with 25% to maximum 33% of available funds. This leaves 75% to 66% for additional purchases to lower the risks, decrease the time, and increase the changes of a positive outcome when the currency value is going the wrong direction.
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I'm ( and I hope also some other Steemians) are very much interested in your successes, your opinions, your methods.
So, let us know what you think of my approach; Let us know what your approach is; Let us know what your favoriet trading method is.
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"My Transition To Enlightenment" series: Previous articles
My Transition To Enlightenment: First Hours Of Crypto Trading
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Thank You!
Great insight and since I am learning it helps if you continue to teach
Will post from time to time my progress, bad or good :)
I think you and I started trading at the same time. I'm excited to see the methods you choose to use and the progress that you make!
Thank you for your message.
I'll plan to post from time to time.
What are you trading, and with what method?
Currently I'm in Bitcoin and Dash, I sold my ethereum after some growth. I'm lending the dash I've accumulated out on poloniex and holding bitcoin. I've also tried crypto casinos and lost money so I dont recommend doing that. I explain things more in detail in the last vlog that I've posted if you're interested.
Watched your vlog. I also noticed you just here at Steemit and got into crypto trading with the payout of your first post here; NICE! You done well!
For the moment I'm continuing the method of trading I was doing yesterday. Lets see what that will bring me. I also plan to start mining. But I think I get a mining contract with FIAT currency; Although it would be nice to buy the contracts with the funds created by Steemit and Trading :) But I actually like to keep as much funds as possible available for trading and SP.
What currency are you planning to mine? I was thinking of Dash and/or Bitcoin. Both different methods, different contracts and both allow mining of some other currencies as well. I may mine other currencies later on, but don't know a lot about all of them to know what is the right way to go.
I'm planning to mine dash, but that could change. I'm in the same boat though, I don't know a lot about all the different coins and mining contracts so I'm going to continue learning.
I am interested because I am in the middle of learning
I will have a look at your vlog. Thanks.
Hey, great post!
I wanted to ask if you think it's safe to invest in these coins for a long-term? I'm interested in investing in the coins you mentioned and sit on them essentially. Keep up the good work!
That is a very good question!
I actually think that virtual currencies are here to stay. However, I have no idea whatsoever, which of the virtual currencies will stay and which one will bleed to death. I'm sure that some (or more) of the available currencies will not make it over time Other will survive. Some of the ones that will survive will become very very big, others will play more in a niche.
Investing in crypto currencies is therefore not without risks. General investment rules shall be applied when investing in cryptos. One general rule is; invest with money you can loose 100%, money you do not require at all for the short but also long term. The money I invested into cryptos since last Saturday, is money I generated through Steemit, so more or less 'free' money (ok, I spend a lot of time on Steemit and the rewards I got through Steemit may compensate me a little bit for that time, but that is a different topic). Since I (so far) use only Steemit generated money, I can loose this without having to cut down on my living costs, now and in the future; Therefore low to no financial risks involved.
Investing means spending time; Understanding what you invest in; Understanding the risks; Being OK when it does not work out. I for sure will spend more time on following the crypto currency news, trying to understand what the chances and risks are. Better understanding means better equiped to make decisions. For now, I hardly have an understanding of this market to make even an educated guess what will happen, and therefore I cannot really answer your question in more specifics.
I plan to write from time to time on my effort in crypto land; If you like, you can follow me and keep reading those posts. Maybe it'll give you direction and helps you to get deeper into crypto currency land.