Cryptocurrency Investment Strategy [Guide for Beginners]
Cryptocurrency investing can be a big and somewhat scary proposition, but one that can yield incredible return on investment in a short period of time given the correct strategies and experience in the field. If you are a potential or current investor looking for a guide of ways to improve your investment strategy from experts, then look no further!
This article will be more focused on the important tips that will be most effective for early beginners. Take a look at the bullet points below and find the level that best matches your current ability and experience in cryptocurrency trading. If you find that you don’t fall under the early beginner category, click on the appropriate link below the bullet points
- Buys and hopes for the best
- Doesn’t have a concrete strategy
- Doesn’t know how to properly use tools or trading signals
- Easily affected by social pressure and hype
- Doesn’t have full understanding of trading strategies
- Good skills related to back-testing trading strategies
- Basic, but not profound understanding of trading strategies
- Difficulty adjusting to changing markets
- Less easily affected by social pressure, but still puts too much stock in hype
- Does not have considerably above-market returns
- Manages investor funds
- Very comfortable with trading fundamentals
- Can adhere to clear investment strategies and execute a plan
- Uses analytics, metrics, and external tools
- Experience managing >$1B portfolio
- Above-market returns for every market state
- Can agilely adjust strategies and employ new tactics
- Uses analytics, metrics, and external tools extensively
If you believe you are a Beginner, click here.
If you believe you are Intermediate, click here.
If you believe you are Advanced, click here.
If you are an Early Beginner based on the above chart, you likely don’t partake in any concrete trading strategies, but rather are on the lookout for tips and speculation from experts. While this is certainly better than aimless trading, it isn’t maximizing your time or your profits. In this article, we’ll discuss how you can improve and get a leg up over other traders and increase your profits.
Table of Contents
The Mistakes You’re Making
Early beginner-level cryptocurrency traders tend to make a few mistakes that if avoided can yield significantly better returns from your trading endeavors. Here are some of the most common cryptocurrency trading mistakes that our experts see in beginners:
Putting Too Much Stock in Hype
Fear of missing out (FOMO) is seen more in crypto trading than perhaps any other trading endeavor. While on the surface it doesn’t sound like a bad idea to go with the crowd (after all, the crowd has been right before), blindly following hype leaves a lot of potential value on the table. Part of being an experienced and successful cryptocurrency investor is accepting that sometimes you will miss out on a coin that spikes.
But the key to this type of investing is taking a long-term view and looking to get the best guaranteed results over time given the information you have access to. Yes, you might have that one that got away in the back of your mind forever, but you will be much happier with your returns with disciplined investment that listens to where the hype is pointing, but doesn’t put too much stock in it.
HODL (which is an intentional misspelling of the world “hold”) is a frequent cry from investors that are trying to encourage others to hold the crypto they have and not give in to the pressure to cash out. Plain and simple, HODL-ing is not a good crypto trading strategy. HODL-ing is great in upward-trending markets, but when the market takes a dive, the losses are significantly worse than a more advanced and nuanced trading strategy. Remember: everyone saying “HODL” is monetarily incentivized to have you not sell your crypto. Good strategies will recognize that there is an optimal entry and exit point for each crypto, and that recognizing when those might be is what separates an unsuccessful investor from a successful one.
How You Can Improve
Improving at cryptocurrency trading is a long process, but these two crucial points will help you change the way you trade for the better and put you on the right track towards becoming an expert investor.
Understanding Trading Strategies
The first big step you can take to become a better cryptocurrency trader is learning how to analyze trading strategies, and is something you can get to work on right now. Even when looking at the simplest of strategies, we can extrapolate information that will help us understand if it is a good fit for the current market.
The HODL strategy, for example, is the simple invest-and-hope move we see many beginner investors make. When the markets are going up, HODL-ing guarantees that you will make money, although it certainly doesn’t guarantee that you will make as much money as you can, since the strategy misses out on the more nuanced ups and downs of the market. In down markets, HODL is a disaster, as you are guaranteed to swallow all of the losses as the market swings downward.
The critical information to derive from this is that when the markets are up, HODL is an acceptable, if not blunt and suboptimal, trading strategy.
“Not everyone would associate Ethereum with investing in gold, but that is exactly one of its uses.”
– Ikuya Takashima, Cryptocurrency Author
On the flip side, if you examine advanced trading strategies, such as those that use Ai machine learning or are deployed by experienced traders with over $1B USD in their portfolio, you can similarly extrapolate information about both where those traders believe the market is heading and where the strategy’s strengths and weaknesses lie. As an example, if one of these strategies is to invest all available funds into Ethereum, that strategy indicates that the investor has faith that Ethereum will go up, but the strategy is weak if Ethereum drops. Similarly, if the investor is spreading their investing across a dozen or so cryptocurrencies, the strategy is less vulnerable to sudden drops of any one cryptocurrency, but is also an indicator that the trader doesn’t believe that any one cryptocurrency is going to spike.
Master Short-Term Strategies
Examining long-term strategies is certainly a challenge if you are a beginner, but examining short-term ones that are lower overall risk is the perfect way to improve your trading skills. We recommend gathering about 5 or so basic trading strategies that each take around a week. Then, at the beginning of each week, analyze where the markets have been trending and employ the strategy in your arsenal that you feel is best suited to the market.
Doing this for several weeks will drastically improve your ability to recognize market trends (rather than buying and hoping), understand trading strategy strengths and weaknesses (rather than HODL-ing), and matching strategy to market situation (rather than employing one singular strategy).
Once you have mastered this, the crypto world is your oyster! With your increased understanding of trading strategies and your success in short-term trading, you can venture into longer term trading, and the Beginner level.
If you have already mastered the point in this article and are looking for more ways to improve, you may be a Beginner. We’ve written an investment strategy guide for you here.
If you don’t have the time, energy, or effort to make strides towards becoming an expert investor but want to have returns like one, RoninAi allows you to do just that with its advanced Ai that analyzes minute market trends to achieve oversized returns. CCN, a giant of the crypto news space, firmly believes that a dynamic approach to analyzing the market is critical, and that RoninAi is the best option available:
“Right now the only trading tool that seems to analyze and interpret both technical, crypto specific, and social data is RoninAi whose saas platform is launching this summer.”
Related article: Should I Buy Ethereum? 4 Reasons Why It’s a Smart Investment