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.
But 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.
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.
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.
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.
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
❗ DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com 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.