Trading Crypto for the Long Term

As most of the regular blog readers will know, I mostly trade DAX and DOW on the M1 charts.  It’s a nice way to earn a good living and allows me plenty of time to do other things.  
With day trading, you obviously need a certain amount of funds to work with, so what do you do with the rest of your funds, if you should have any spare?  You could stick it in a bank and earn less than 1% interest per year; you could invest in managed funds where you might expect anything between 5% and 30+% in a year, if they’re any good (I have invested in such funds and they’re working nicely for me – perhaps a subject for another blog post one day). If you prefer to do things your own way, you can buy equities or trade the daily/weekly/monthly charts on pretty much any instrument that takes your fancy: equities, commodities, forex, indices, etc.

For much of this year, I’ve been building a portfolio of cryptocurrencies, as I suspect some of you already have. There is no way I would try to trade them on the lower timeframes – the spread / ADR is ridiculously poor, at least on most brokers that offer them for MT4/MT5; and what they do offer for trading is extremely limited, to a few instruments like BTC, ETH and XRP (all of which are still good for long term investments, in my very humble opinion).

I treat cryptocurrencies investments like I would if I were still investing in shares: buy and hold; and most importantly, without leverage. By not using leverage, you have almost no risk – unless the coin is binned of course. What you’ve bought will always be yours and there is no chance that the broker is going to do a margin call on your trades and force-close them.

The approach I’ve taken is to look for good value, using some of the basic ideas that I talk about in the trading course (I will add a module on crypto, if there is enough demand). Essentially, as I do for day-trading, I buy the dips – at price levels that I consider to be at, or near, the bottom of corrective waves. Unfortunately, I can’t use eWavesHarmonics on the platforms that I use for analysis, but I do use the same logic that is coded into it.

The percentage gains, and losses, that you see daily is often mind-boggling and certainly not for the fainthearted.  If you’re not prepared to ride the waves, then stay well away.  On one day, you can see a coin increase in value by more than 100%; on another day it can drop by more than 50%.  We’ve seen Bitcoin, and most of the altcoins, suffer a massive devaluation these past few weeks, on the back of some Elon Musk bla-bla: from $64k to $30K.  Bitcoin seems to be in the news more often that Harry and Megan, which is really saying something. Noob traders panic sell, feeding the bearish frenzy.  Us long-term traders just ignore the correction – there have been plenty of such corrections in the past, which have just formed a springboard for new highs.  Incidentally, it was so obvious that BTC would fall to $30k just from a basic approach to Elliott Wave analysis (as you might gather from the above chart pic).  I think 30K is a fine price to pay, if you’re in this for the long-term – and it’s still very good value, if you fancy it (that’s not investment advice, just my opinion). It could still go lower, we can never really know for sure - we're just looking for discounted prices.

You might be wondering what I use to make my trading decisions and investments, if you’ve never traded crypto before.  Here’s a very quick summary to get you started …

For trading I use Binance and Kraken. I find Binance to be more user friendly for everyday use. Kraken: I just have some very long-term holdings and seldom log into it but it’s still a reputable platform.
 
To find cryptos that I’d like to buy, and to keep track of my portfolio, I use CoinMarketCap.  It’s completely free, provides good information on the instruments and I can quickly see the gainers and losers in one place – it’s the losers that get my interest, as a buyer of dips.

For technical analysis, I use TradingView.  CoinMarketCap has links for viewing any instrument on TradingView, making it the obvious first place to go. I am working on a version of eWaves for TradingView, that (if all goes well) will become a version of eWavesHarmonics in due course.  For BTC, ETH and XRP, I just use MT4 and eWavesHarmonics, so that’s nice and easy.

There are plenty of good reasons to invest in cryptocurrencies, not least of all their ever-growing market cap and liquidity. I believe they are here for a very long time to come and provide terrific long-term growth potential, that you’re unlikely to see with many other instruments.  If you’re looking for some good long-term investments, now might be a good time to go crypto-shopping, given the recent dips in prices across the vast majority of them.  
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Start small, risking money you could burn and be prepared to ride the very big waves.