Crypto Currency Trading Strategy

Crypto Currency Trading Strategy

So what are crypto trading strategies – have you got a good one? What is a Trading Strategy? A trading strategy is a method of buying and selling in markets that are based on predefined rules used to make trading decisions.

Why do I need a strategy? – You must have a strategy if you want to make consistent predictable profits in the markets. Your strategy is your edge in the markets if you don’t have an edge you are just gambling.

The Game of Probabilities

What has a roulette table got to do with trading? Roulette has a house edge of around 5% – Roulette remains one of the most popular casino games, but it carries a high edge for the house. The casino WILL profit long term out of the roulette wheel because it has the edge.

So what is an edge in the market? An edge is your advantage you need an edge if want to play this game of probabilities and come out in front. An edge doesn’t mean that your strategy has to win more than you lose though, you can have a strategy with say a 40% win rate and still make profits, let me show you how.

Let’s look at a coin toss first what are the chances of tossing heads 50/50 right. When you toss a coin each toss has an equal chance of being heads or tails it doesn’t matter what the last toss was right. If you toss a coin 100 times you get heads approximately 50 and tails approximately 50 times. Don’t believe me click the link for the coin toss and check Interactive: Coin Toss anyway if you got a dollar every time you won the coin toss what would you bet on, with those odds it doesn’t really matter does it.

The Edge

Free Crypto CourseBut what if I said every time it landed heads you win $2 and every time it landed tails you only get $1. You would bet on heads right. So with that in mind if we flipped a coin 100 times and you bet on heads it should land on heads around 50 times right, which means you would pocket $100 (50 x $2) and if you bet on tails you would have won $50 (50 x $1)But what if you tossed the coin 100 times and it only landed heads 40 times, well with the same rules if you got $2 every time it landed heads you would have won $80 (40 x $2) right and if you bet tails you would have won $60 (60 x $1)

In that example, we only had a win rate of 40% it only landed heads 40 times out of 100 tosses but we still come out in front. Why because we had an edge we had the advantage you can do the same thing in trading, I just wanted to make the point here that your win/loss ratio does not have to be better than 50% to have a good winning strategy.

If you reward to risk ratio is 1:1 well then you do need to win more than 50% to make a profit. You need to have more winning trades than losing trades but in the example above that has a 2:1 reward to risk you only need to win 34% of the throws to be in front.

What strategy for Me?

So you need a strategy with an edge, there are thousands of strategies out there that have an edge but which strategy is right for you?

First, you need to work out a few things about the way you want to trade, are you going to trade short term or long term? Are you going to trade a trending market or are you going to swing trade or day trade? You might want to trade the Breakouts. Ultimately the strategy you choose will need to give you the edge in the market the way you want to trade. Example – A strategy that a day trader might use would not work for a long term trend trader. Likewise, the long term trend traders strategy would be no good in a sideways market because his strategy relies on a trend to be in place.

If you haven’t worked it out yet you need to work out what sort of trader you will be, then you need to do a bit of research and find what strategy is going to work for you.

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How do you find an Edge?

So once you have determined what sort of trader you will be you need to pick a strategy or develop one yourself. Developing one for yourself is for a more advanced trader but certainly not impossible. So how does a beginner find one that works? Research that’s how, the internet just do a search for best crypto trading strategy, yes you will come up with a lot of crap and everyone will tell you they have the best strategy but you know what you don’t need the best one, you just need one that suits you and has an edge.

So how do you know it will work – backtesting that is how. Once you think you have found one that suits you go and test it in the market. You don’t need to use real money you can use a paper account of just backtest on charts like TradingView. Now I won’t go into backtesting here now that is another topic for another post but you do need to do this to ensure you have an edge.

Backtesting will give you confidence in your strategy which you must have. Once you have confidence in your strategy you will step up to the plate and place your trade every time the right market conditions are met without hesitation. You need to take the emotion out of trading, it is a lot easier to do this when you have confidence in your strategy.Success

Your Strategy is Only a Small Part of Success.

What! – I hear you say, the strategy is everything. Yes having a good sound strategy is important but it really only plays a small part in your success as a trader. Your strategy is your edge but you must learn how to use that edge consistently to be successful.

So many people will have what they think is the best strategy because someone told them it is, they jump in the market with their new winning best ever strategy but then have a losing streak, they might have 5 or 6 losses in a row. They haven’t backtested the strategy and don’t realize that a particular strategy might have up to 7 losses in a row.

Now they blame the strategy (instead of themselves for not backtesting) give up and move onto the next winning strategy only to do the same thing again, if only they stuck to the original strategy they would have realized it does work over the long term. This is why it is so important to backtest and have confidence in your strategy.

Your strategy really is only a small part to achieving success, you need a good Trading Plan (no a strategy is not a trading plan) you need to have the right mindset as well, have a read of my post The Trading Psychology Edge you need to put all this stuff together.


My Final Thoughts

I hope this has helped you realize that a strategy is just a small part of the big picture. You need to work out what sort of trader you will be, you need to have the right trading psychology, you need a good solid trading plan and you need the edge.

If you want to learn all this stuff yourself it will take quite a long time and I very much doubt you will get it right the first time, you will most likely blow up more than one trading account, that is why I highly recommend you follow someone who is already successful. Find a good mentor, this will speed up your journey to Wealth with Crypto. A good mentor will already have mastered all the aspects of being a successful trader and can show you what NOT to do so you don’t have to learn the hard way for yourself.

A Good Mentor

Even though I knew quite a bit about trading, when I first started trading crypto I sought out a good mentor. The mentor I choose was TraderCobb. If you want to know why check out my review on TraderCobb. If you want to be successful and fast track your crypto trading journey you need someone like TraderCobb in your corner.

So I hope you got something out of this article and if you have a good strategy or have any questions let me know, drop a message in the box below and remember……

Be the Best you can Be

Crypto Dave

❗ DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.

14 thoughts on “Crypto Currency Trading Strategy”

  1. Yes if you start any trading you need some form of strategy. Sit down first before you engage and define the rules. When do you get in and where you get out. Its even better to write down your strategy. I agree with you its also good to find a mentor. Someone who is already successful in the business and you learn from him. Thanks

    1. Yes it is important to write down your strategy, it you can’t write it down you haven’t got one!

      A good mentor just speeds up your progress so you can enjoy Wealth with Crypto sooner. Have you got a good strategy?

  2. Hi Dave 

    This is a brilliant article that explains the concept of achieving the edge with a trading strategy really well. I thought that a trading strategy is the same as a trading plan. This was one of my misconceptions. I hope that I now understand it correctly that a trading strategy is part of your overall trading plan? 


    1. Spot on Louis, your strategy forms a part of your plan. I guess I should do an article on Trading Plans next. Your “strategy” should be written into your plan, it forms just a small part of your overall Trading Plan.  Excellent question, if you have any more just ask. Do you trade Louis?

  3. This is an amazing site! I don’t know much of anything about crypto currency or bitcoin, but this is a well designed, well written article and website. Very informative! I like how you offer to write a new post based on a topic your viewers request. It seems as though you really know what your talking about.

  4. Excellent and detailed explanation of Probability and how it works. Gives the typical example of “Coin Toss”. Meets the structure suggested, with introduction and conclusion. The author gives good comments about what is “Strategy” from his/her point of view, explaining that Strategy is not 100 percent of succes “Two THUMBS Up”.

    1. Glad you enjoyed my post, yes the coin toss is a simple way to explain probabilities, and yes strategy forms only a small part of your success.

      Good to see you enjoyed it, thanks for reading and remember…

      Be the Best you can Be.

      Crypto Dave

  5. This is a very helpful post on trading strategies and the importance of having a strategy. I do have a shares portfolio that I manage myself, but I have regarded is as a long term investment, rather than daily or weekly trading, so I do not really have a strategy. I did not know about backtesting, so will certainly look into doing backtesting in the future. 

    1. Backtesting is a must for any strategy. You said you don’t use one for your stock but you must have some criteria like when to buy. I know a really good basic share strategy if you are interested just let me know.

      Crypto Dave

  6. Yes I completely agree that if you are looking to be a successful trader finding a strategy that works for your personality as well as your trading style is vitally important. From personal experience there are some other factors that I feel are also important such as good risk management, never revenge trade, plan a trade and then trade the plan, being extremely disciplined, never try to second guess or think you know more than the market, always use a stop-loss and lots and lots of practice. For now though I personally like to DCA rather than trade, especially in crypto which looks like it will be a lot of fun in 2021! 

    1. Hey Paul, yes the way BTC is going off we will be in for a fun year. You have pointed out many good factors there, and yes, I would agree they are critical to your success. I would put them in my trading plan as they are more general and not so much strategy related.

      They are excellent points that you have raised and definitely should be included. I always use a Stop Loss and only ever risk 1% on any one trade. Trading psychology definitely plays a big part in your success.

      You should have a look at the free course , Paul. I think you would get a lot out of it; it covers all the things you have mentioned and some more.

      Crypto Dave

  7. Hi Dave, 

    I appreciate this article on Crypto Currency Trading Strategy.

    I think it is yesterday or the other day that I have read about CAKE DEFI.

    Even asked you to let me peek in your website from time to time.

    What I like in this article is that you explained it in layman’s term. Something that a beginner on Crypto Currency would get some good points.

    I love the way you explained Crypto Currency Trading Strategy using a roulette with an edge. I have understand the probability of winning using a strategy and getting the right mentor to be guided with that chance of winning.

    From my comments above, do you assess that I have understood this post already?

    I still want to read more. I find you discussing things in the way I can get points. At least some, if not all.Thanks.

    1. Hi Rose it sounds to me like you have understood my message loud and clear. Thanks for letting me know.

      If you ever want any clarification on anything just ask, it can be quite a learning curve when starting out in crypto but you look like you are doing fine.

      Be the Best you can Be

      DeFi Dave

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