A profitable Cryptocurrency picking is a very challenging exercise and investors follow diverse tactics. Nevertheless, it is clever to keep an eye on common steps to minimize the risk of the investments.
Here in the following paragraphs, the basic steps are being outlined. These steps will help you to pick a high-performance cryptocurrencies.
As a first step, you have to decide on the time frame and the wide-ranging Strategy of the investment. This particular step is vital for the reason that it will dictate the category of coins you buy.
Assume you choose to be a long-term investor; you would want to find cryptocurrencies that have justifiable competitive advantages along with stable progress.
The key for finding these cryptocurrencies is by observing at the historical performance of each coin over the past few years and prepare a SWOT (Strength, Weakness, Opportunities, and Threats) analysis on the business or firm.
If you decide to be a short-term investor, you would like to stick to one of the following approaches:
- Momentum Trading: You can apply this strategy to have a look at the coins that increase in both price and volume over the recent past. Most of the technical analysts suggest this particular trading strategy.
You make sure that you carefully look for coins that have proved stable and smooth rises in their prices.
The notion is that when the coins are not volatile, you can simply ride the up-trend until the trend breaks.
- Contrarian Strategy: This specific strategy is to look for over-reactions in the crypto market. Market analysts illustrate that crypto market is not at all times efficient, which means prices do not always accurately signify the values of the coins.
When a business publicizes a negative news, people panic and price often falls below the coin’s fair value.
To decide whether a currency or coin over-reacted to news, you should look at the probability of recovery from the impact of the negative news.
For instance, if the coin drops 25% after the company loses a contract with an exchange or a firm that has no eternal damage to the business’s future, you can be confident that the market over-reacted.
The key advice on this strategy is to find a list of coins that have recent drops in prices, analyse the potential for a reversal (i.e. candlestick analysis).
If the coins demonstrate candlestick reversal patterns, you can go through the latest news to analyse the reasons of the recent price drops to determine the existence of over-sold prospects.
As a second step, you have to conduct several researches that help you in choosing a range of coins that are steady to your investment time-frame and strategy.
There are several coin Resources on the web that can help you find coins according to your requirements.
Once you have a list of coins to buy, you would need to diversify them in a way that delivers the maximum reward/risk ratio.
You can conduct a Markowitz analysis for your portfolio. This particular analysis will give you the proportions of money you should allocate to each coin.
These three fundamental approaches should get you started in your quest to steadily pick a profitable cryptocurrency and make profits in the crypto market.
They will develop your understanding about the crypto or financial market, and would offer a sense of confidence that helps you to make improved trading judgements.
This information is for Learning purposes only. We are indeed not financial mentors. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be the finest for your individual needs and risk tolerance.
Please do your own research.