Posts

Risk Management for Traders and Investors

Risk management is an important part of any trading or investment strategy, and this is especially true in the world of cryptocurrency. The high volatility and lack of regulation in the crypto market can lead to significant losses if proper risk management techniques are not employed. 

Risk management refers to the processes traders and investors put in place to help keep losses under control and achieve a good risk/reward ratio while trading or investing. It involves developing strategies to reduce losses and maximize gains. 

In this blog post, we will discuss key risk management strategies that crypto traders and investors can use to protect their portfolios and maximize their chances of success. We will be looking at what risk management is, why risk management is important, how to manage risk while trading and investing, and risk management strategies, tools, and resources. 

What is Risk Management?

The process of identifying, assessing, and managing the risks associated with any investment or trading activity is called Risk Management. It involves understanding the likelihood of an investment or trade losing money as well as the potential for it to generate profits. It also includes strategies to manage the risk and prevent losses, as well as techniques to maximize potential gains.

Risk management’s goal is to ensure that the risks associated with any trading or investment activity are minimized, while at the same time maximizing the potential for profits. Risk management is an essential component of any trading or investment strategy and should be taken into consideration when making trading or investment decisions.

Why is Risk Management Important?

Crypto markets are highly volatile, with prices fluctuating significantly in short periods of time. This volatility presents significant risks to traders and investors, including the potential for significant losses. To minimize the impact of these risks, it is important to implement a risk management strategy.

Effective risk management can help to preserve capital and ensure that traders and investors are able to make informed decisions about their investments. It can also help to reduce the overall level of stress and anxiety associated with trading and investing in crypto markets.

Automated & effortless crypto investing
Protect your portfolio during bear markets with Vestinda

Sign up for FREE

How to Manage Risk in Trading and Investing

There are several steps that traders and investors can take to manage risk in crypto markets:

  1. Diversify your portfolio: One of the most effective risk management strategies is to diversify your portfolio. This means spreading your investments across a range of different cryptocurrencies, rather than putting all your eggs in one basket. By diversifying, you can reduce the impact of any one particular coin on your overall portfolio. For example, if you have a portfolio that is heavily weighted towards Bitcoin and it suffers a major price drop, your entire portfolio will be affected. However, if you have a diverse portfolio with a range of coins, the impact of any one coin’s price drop will be less significant.
  2. Use stop-loss orders: Stop-loss orders are a useful tool for limiting potential losses on a trade. They allow you to set a certain price at which your trade will automatically close, thereby limiting your potential losses. For example, if you buy a coin at $100 and set a stop-loss order at $90, your trade will automatically close if the price of the coin drops to $90. This can help you minimize potential losses if the market moves against you.
  3. Use limit orders: Limit orders allow you to set a specific price at which you would like to buy or sell a coin. This can be useful for maximizing your profits on a trade. For example, if you buy a coin at $100 and set a limit order to sell at $120, your trade will automatically close once the price of the coin reaches $120. This can help you lock in your profits and avoid the temptation to hold onto a coin in the hope that it will go even higher.
  4. Use risk-reward ratios: Risk-reward ratios are a way of measuring the potential risk and reward of a trade. The basic idea is to compare the amount of money you are risking on a trade to the potential reward if the trade is successful. For example, if you are risking $100 on a trade with a potential reward of $200, your risk-reward ratio is 1:2. In general, it is advisable to aim for trades with a risk-reward ratio of at least 1:2, which means that the potential reward is at least twice the amount of money you are risking.
  5. Regularly review your portfolio: It is important to regularly review your portfolio to ensure that it is still in line with your risk tolerance and investment objectives. This can help to ensure that you are not taking on more risk than you are comfortable with.

Risk Management Techniques for Different Types of Trading and Investing

Traders and investors can use a variety of risk management techniques to manage their risk. Different types of trading and investing may require different risk management techniques. Here are a few examples:

  • Long-term investing: If you are a long-term investor, you may be more concerned with minimizing the overall risk of your portfolio. In this case, diversification and regular portfolio review may be particularly important.
  • Day trading: If you are a day trader, you may be more concerned with minimizing the risk of individual trades. In this case, setting limits on your trades and using stop-loss orders may be particularly important.
  • Margin trading: If you are using margin to trade, you may be taking on significantly more risk than you would with regular trading. In this case, it is especially important to carefully manage your risk, including setting limits on your trades and using stop-loss orders.

Conclusion

Risk management is a critical part of success in the world of cryptocurrency trading and investing. By implementing strategies such as diversification, stop-loss orders, limit orders, and risk-reward ratios, you can help protect your portfolio and increase your chances of success in the highly volatile crypto market.

Regardless of your trading or investing style, it is important to implement a risk management strategy to protect yourself from significant losses. By identifying and managing risk, you can help to ensure the long-term success of your crypto portfolio.

 

/by

What Is Copy Trading And Is It Worth It?

The dream of every trader is to get good returns for their investments. But of course, this is not as easy as it sounds. The path to successful trading is even harder as a beginner. What if there was a way to trade just like the experts with little knowledge of trading? This is where copy trading comes in! In this guide, we will be diving into the wonders of copy trading, how it works and if it’s worth it.  

What is copy trading?

As the name implies, copy trading is an approach that enables individuals to copy the trades of expert traders, algorithms, and strategies. Copy trading has been helpful, especially to entry-level traders. For beginners, technical analysis, price movements, and price predictions can seem quite puzzling. It’s alright if you don’t grasp the whole concept all at once. This is why you can employ copy trading as you figure it out. 

Copy trading is also great for traders with little to no time to focus on the market. An individual may choose to automatically copy positions made by another trader so that they don’t have to monitor trades so often. 

For the most part, your trades reflect the positions of your chosen strategy. That is not to say that you lose total control of trading decisions. You may still have power over risks, entry, and exit points. 

Since you have some power in copy trading, you might as well use it to its maximum potential. You can best utilize copy trading by having some knowledge of the market, using indicators, among other means. This could help you determine entry and exit signals.

Copy trading types

Copy trading does not only refer to trading strategies, but also algorithms, a basket, and all trades of your chosen trader. This form of trading can be executed in two ways:

Manual

This method requires an individual to monitor and copy positions all by themselves.  Unlike automated trading, programs are not used for trade executions. Hence, this method can be rather tedious. 

We can see that automation and technology are considered the end-all and be-all in the contemporary world. That does not stop the fact that the human mind thrives in areas that even automated machines do not. In cases like this, manual trading has its advantages. For example, humans can perceive the news and how it might affect the market. 

Automated

This method uses programs and algorithms to track, copy, and automatically execute trades. It is usually a feature in trading platforms. Automated copy trading involves running programs that will perform copy trading operations. 

It is no doubt that this method sounds too good to be true. This hassle-free method of trading is easily admirable. But of course, there is usually a catch to most good things. Expert traders that get their positions copied often charge fees to enable people to use them. Some traders may also require you to share a part of your profit after successfully using their copied positions. 

While the fees might cause you to rethink this method, it could all be worth it. A small token for your potential profits does not sound so bad. After all, the return of investments may be incredible compared to the initial deposit. Automated copy trading also enables a less tiring and stress-free means of making returns from trading. 

Copy crypto strategies with Vestinda
Diversify and grow you portfolio with ready-made, validated investment strategies

Sign up for FREE

Copy trading vs mirror trading

A common misconception is that copy and mirror trading are the same things. Although they share some similarities, that is far from the truth. We can see that copy trading involves copying entire strategies, trades, or algorithms. In mirror trading, there is more choice on strategies that should be copied. Mirror trading may also involve copying more than one trader. 

In essence, mirror trading is a method of trading that allows individuals to copy selected strategies from different trading experts.

There is no doubt that the concept of mirror trading may sound a bit complex. This begs the question: How does mirror trading work? The platform used for mirror trading will require you to choose from different options like goals of investment, risk tolerance, and so on. Your choice of those options will determine the outcome at which your trades will go. 

A major advantage mirror trading has over copy trading is its diversification of traders. Instead of copying just a specific trade, you have a plethora of expert traders, algorithms, and strategies to copy from. Although one should be careful because researching lots of expert traders may pose more difficulty than researching just one. 

Copy trading vs social trading

Social trading is a form of trading operated by a group of traders that share information and resources to make trading decisions. Social trading goes beyond copying trading strategies and implementing them in yours. It is a more interactive and “social” method of trading. 

Social trading was popularized with the emergence of social media. It created an avenue for different traders to share ideas, strategies, and insights. Since two heads are better than one, social trading has done an amazing job in educating traders and leading them to a good turn. Some platforms that hold a strong community of traders include Twitter, Twitch, and Discord among others. 

A big plus goes to social trading for allowing traders to have more control in investment decisions. It also gives traders access to information. This is important as the market is controlled by the news. But be careful with this form of trading especially if you are driven by emotions. It could lead you to make impulsive decisions that you may regret later on. In addition, it requires a lot of time as it uses manual means of trading and a ton of research. 

How to copy trade?

Now that you know the fundamentals, you can go ahead with the operations. Here are the steps on how to copy trade: 

  1. Pick your preferred trader/algorithm: Successful outcomes do not just lie in picking the best strategy. Instead, it lies in picking the best one that aligns with your goals. Hence, it is important to conduct proper research on chosen traders, strategies, or algorithms based on your investment goals. 
  2. Select investment amount: You will be required to invest a particular amount for copying portfolios, traders, or algorithms. Most platforms do not allow individuals to invest more than 20% of their portfolio. This helps to promote portfolio diversification and reduce risks.  
  3. Payment of fees: Subscription-based plans are sometimes offered. This is when users pay a fee periodically for copying positions. Alternatively, you might pay by getting a cut taken out of your profit. 

Why copy trading is becoming so popular?

In 2005, some traders came together to develop an automated replication system for their audience. From this system, copy trading was born. Little did they know that this creation would revolutionize trading for beginners and experts alike. 

Copy trading stemmed from algorithmic trading. This is an automated trading system where a program uses a set of criteria to determine trades, entry, and exit points.  For this reason, we can see that copy trading does not only copy traders but is also widely used in copying algorithms. The advancement of copying successful algorithms has also made it ever-growing.

Copy trading has been speedily popularized in the Forex and crypto space. Its growth can also be attributed to available data, the openness of APIs, and transparency. 

Every day, there is a consistent rise in its use due to profitable results. This has only increased its relevance as it continues to serve people with improved algorithms and successful trades. 

Can you make money in copy trading?

The trading scene has its fair share of risks and failures. This factor has questioned if you can make a good amount of money from it. Successful copy trading depends on various factors, especially the trades being copied as well as your personal plans and strategies. 

While the vices you use for copy trading are important, you also need to put in the work to reap a positive outcome.  Hence, you should treat copy trading like any other investment by mapping out a plan, and conducting your research. So, the answer is yes. You can make money with the right strategy. 

Copy trading platforms

Using a good and trusted crypto trading platform is important for positive outcomes in your copy trading journey. You also need to ensure that your chosen platform offers copy trading. Here are some of the best trading platforms you can use: 

  • eToro: They are widely known for their CopyTrader system. The platform offers a unique form of trading that caters to millions of people. 
  • Mudrex: They present a fast and easy way of copying trades through their automated platform. 
  • Iconomi: A trading platform equipped with hundreds of strategies for traders.
  • Vestinda: A library with ready-made crypto investment strategies, curated and validated by experts and constantly updated according to market conditions.

Copy trading offers a great means to make passive income, in the long term. But keep in mind that it is not all roses. You will have to put in work when it comes to picking the right strategies and algorithms. Thankfully, you can always use this article as a guide. On your quest to copy trading, ensure to follow the steps in this article to grant you a seamless journey. 

/by

How To Build a Diversified Portfolio

What is a diversified portfolio? How to build a diversified portfolio? And how can a diversified portfolio improve your chances of reaching your financial goals? Creating and maintaining a diverse portfolio may seem like an overwhelming task. After all, the market has had some big ups and downs over the years. But knowing how to properly allocate assets can make your investment experience much more rewarding. The information in this article will help you understand what kinds of assets are needed in order to compose a well-balanced and effective portfolio.

What is a diversified portfolio?

Spreading your investments so that you are not exposed to one type of asset for an extended period of time is known as diversification, and it is aimed at reducing the volatility of your portfolio over time.

One part of a portfolio that’s declining in value can hopefully be offset by another part that’s increasing in value. Though diversification does not ensure positive investment performance, it is widely used in investing to construct portfolios that can withstand changing economic conditions.

Advantages of building a diversified portfolio

  • Impacts of market volatility are reduced
  • Ensures the security of the capital
  • Contributes to long-term investment plans
  • Monitoring the portfolio requires less time
  • Gives you peace of mind

Asset classes to use when building a diversified portfolio

The most important element of diversification is to find the right combination of asset classes that have the lowest possible correlation. For example, real estate will be hardly connected with crypto.

Here’s a non-exhaustive list of all potential asset classes you might want to consider:

Crypto

Think of using Vestinda as it enables you to automate your portfolio, greatly removing the human element that causes problems.

Equity

  • in general markets. You can buy index funds like the Vanguard total market index fund which gives you a safe exposure to the full US stock market. Or you can bet on the entire world and buy an ETF like the one from iShares that tracks the investment results of an index composed of developed market equities. Or just hand pick your own basket of preferred stocks and ride the ones you believe in.
  • in your own business. Being an entrepreneur and starting your own business is the best form of investment. That is because you own equity and, assuming your business succeeds, you could automate parts of it, allowing you to have forms of passive income.

Debt

  • Bonds are used in most of the portfolios as the risk is low. It doesn’t come with a high return but can be vouched by governments or good companies that will most probably not default.
  • Another way of investing in debt is  P2P lending. You can consider platforms like Mintos in the traditional space or Nexo and Blockfi in the Crypto space. Our advice is to use regulated companies that have strict collateral rules in place and insurances.

Commodities

In this category, the most known investments are precious metals like gold, and silver. But there are a bunch of other subcategories to think of like energy or agriculture. It may come with more risk due to seasonality, or the storage of the commodities.

Real Estate

One of the most used category assets is also one that works best most of the time. It works during high inflation and can be used as a hedge to the more risky options. The drawdowns are low liquidity and a cost of maintenance (both in time and money).

Alternative assets like art and collectibles

This is one of the categories that gets more and more exposure in overall portfolios for the more sophisticated investors. The returns can be quite appealing; as more rich people want to own luxury or unique pieces. Similar to real estate, luxury pieces have lower liquidity so you need to account for that when giving this category a slice in your portfolio.

 

One can also diversify within the same asset class.

  1. You can do it on a national level. The mortgage market in the US is safer but less lucrative than the one in Venezuela.
  2. In Forex, you can buy major pairs like the EUR or GBP, but at the same time, get exposure to exotic, more volatile pairs like the Turkish lira or Russian Rouble.

 

If you don’t want to make them, you can instead look for other ways to make money work for you for you:

  •  You can angel invest in a business. That way, you let someone else take the risk of executing the idea and do the hard work.
  •  You can try to copy and automate investment strategies on platforms like Vestinda, that can help you find a profitable and consistent trader.

Vestinda Strategy Library
Jump-start wealth building with ready-made investment strategies.

Get FREE access

How to diversify your portfolio?

Once you have identified the assets you can, and want to have as part of your portfolio, you need to ask a very important question: “what is my risk profile?”

  • Are you someone who likes taking high risks, and expecting high rewards? Do you like the idea of buying SHIB and seeing it rise 1,000%, at the risk of buying another coin that will drop 90%?
  • Or, are you someone who’s more risk averse and is okay with a return that beats inflation and the indexes by a few basis points?
  • Or, are you a conservative person who prefers to invest in tangible assets that you can see such as physical gold, or real estate?

Your profile can of course be a mix of all of these profiles, and there is no one set rule here. You need to identify what kind of investor you are, in order to allocate your capital. At the end of the day, no matter how many dollars you have, you still have to divide a pie worth 100%.

A risky investor might want to decide to put up to 80% of his capital in crypto, while a conservative might choose to be 50% in real estate, with 20% in bonds and interest rates, with the last 30% left for stock speculation and crypto investments.

To sum it up, there are 2 very important requirements to diversify your portfolio:

  • Determine your risk profile
  • Create an investment strategy that serves your profile best… and STICK to it. Don’t cheat and look around for new strategies when the price doesn’t go your way!

How to diversify a crypto portfolio?

In crypto, you can think of the coins as being divided into 6 categories:

  1. The most popular large caps that everyone knows like Bitcoin or Ethereum.
  2. Other famous layer 1 tokens that have existed for a while like Litecoin, Ripple or Monero. These are usually pre-ICO era.
  3. Newcomers largely propelled forward by the rise of DeFi such as AAVE, COMP, or LINK.
  4. The newer coins that flourished during the ICO (2017) and DEFI (2021) eras, but never materialized in real-world projects. These are usually highly volatile.
  5. You can also expose yourself to the highly volatile meme coins such as Doge or Shib.
  6. And last, but not least, the metaverse tokens that are gaining in popularity such as AXS or MANA.

In order to build your diversified portfolio, follow these steps:

  • Decide how many buckets you will divide your cryptos in. You can use the 4 categories above for example. Note that it is also possible to divide them instead by sector or user case. Payments, Security, Governance, etc…
  • Based on your risk profile, determine how much you will allocate to each of these buckets. A safer investment would focus on the big guys and old guard, while a riskier one would include more of the shit coins with massive upside potential.
  • Decide on how often you will add to the portfolio. Will you add every other week, or once a month?
  • Decide where you’ll store the coins, and how or when, if ever, will you take your profits.

When to consider portfolio rebalancing?

At the end of the day, the key to success in any investment strategy you employ is that you come up with your own investment strategy. Do the research yourself and study the options well so that you can come up with your own investment thesis and the best moment for rebalancing. A bespoke solution might be the wiser since it can be adapted to your own needs and risks profiles.

In order to maximize the profit and safety of your portfolio, it might be wise to look at other topics, for example:

  • Global macro trends and macroeconomics can have a significant impact on your assets. COVID is such an important event that affected all asset classes at once creating chaos in some areas, but if you were smart enough, you could have turned this into a fantastic opportunity.
  • Technological trends also play a massive role in the rise or fall of a portfolio’s assets. Crypto tokens are a prime example of an entire asset class capable of disrupting or bringing massive innovations to many areas of life. When smart contracts, for example, will reach mainstream usage, we will see a trove of new opportunities. NFT’s are such an example, but all other sorts of tokenized assets will change in life day to day, and thus, impact the price of assets that are directly correlated with the asset in question.

Keep these aspects in mind, and try to look for major news headlines, or hidden nuggets, that can point at a change in the wind for the progress of a certain industry or technology.

  • For example, what are the potential repercussions of remote work on some tech stocks, or traditional retail stores, and thus of their price?
  • What can be the future of semiconductors once the TSM bottleneck is resolved? And which stocks are capitalizing on it?
  • How can you be part of the new cannabis boom?
  • What new technologies that are now on the early adopters’ curve will change the world 15 years from now?

And on a final note, no matter what you decide when you ask yourself how to build a diversified portfolio, always remember the importance of having a strategy, and sticking to it.

/by

Best Indicators for Crypto Trading to try out

Trading indicators are essential trading tools used to gauge past and present financial trends. It is no news that predicting the outcome of future trends in the market can be very challenging. But with the right indicators, this task can be made easier. This piece will be exploring the best crypto trading indicators you can use to improve trading. 

What are trading indicators?

Indicators are used by traders to provide more clarity on market trends. The use of indicators has served as a profitable trading strategy. It takes data from the previous state of the market and uses them to predict the future market state. 

A trading indicator can either be: leading or lagging. Leading indicators predict the price action of a trade while lagging indicators show previous reports of a trade. Both indicators can be merged and employed to make trading decisions. 

What are technical indicators?

Technical indicators are patterns that traders use to predict price movements. As a trader, you may use technical indicators to understand the way price movements work in the market. 

The accuracy of technical indicators is questionable without a doubt. This has struck a question to technical analysts: Do technical indicators really work? When it comes to crypto technical analysis indicators, accuracy is not 100% guaranteed. But the goal is to have more accurate predictions than inaccurate ones, obviously. Once that is accomplished, technical indicators can create winning strategies. 

What are the best crypto indicators for technical analysis?

Regardless of the numerous trading indicators, people still look out for the one that is just right. Choosing the best technical indicators for bitcoin, ethereum and other crypto assets can greatly improve the accuracy of price predictions and overall trading performance. 

Here are the best indicators for crypto trading you can use:

Moving Average Convergence Divergence (MACD)

What is MACD?

MACD is an acronym and stands for Moving Average Convergence Divergence. MACD represents the average price of an asset over a particular period. 

The two types of MACD are simple moving average (SMA) and exponential moving average (EMA). Calculating a simple moving average requires you to find the average of prices of securities through a particular time frame. The EMA, on the other hand, is calculated in a similar way. The difference between these two is that EMA places more emphasis on recent prices. 

How to read a MACD chart?

Here are a few things to note when learning how to read a MACD chart:

  • MACD comprises three major lines: MACD line, signal line, and zero line. 
  • There is an uptrend when the MACD line rises over the zero line.
  • There is a downtrend when the MACD line falls below the zero line.
  • A bearish movement occurs when a MACD line dips below a signal line. A trade is said to be bearish when there is a continuous decline in price action. This is an indication that a trader should sell to avoid further losses.
  • Conversely, a bullish movement occurs when a MACD line rises above a signal. A trade is said to be bullish when there is a continuous rise in price action. This is an indication that a trader should sell to make returns.

Relative Strength Index (RSI)

What is RSI?

RSI is an acronym that stands for relative price index. It is an indicator that evaluates past and current price movements to determine securities that are overbought or oversold. 

An asset is said to be overbought when it has experienced a rapid uptrend within a short period. This occurs when the demand for an asset increases. The rise in demand thereby causes a relative increase in price that rises above the upper band.

An asset is said to be oversold when it has experienced a rapid downtrend within a short period. The price of an oversold asset is usually below its true value which leads to an increase in supply. 

How to read RSI indicator?

Now that you know how it works, you can now learn how to read RSI. RSI uses an oscillator that has an upper boundary of 100 and a lower boundary of 0. The RSI is overbought when its level is above 70. Conversely, it is oversold when its level is below 30. To determine the RSI of an asset, you need to understand the calculations behind it. 

Here is a step-by-step guide on how to calculate RSI:

  • Determine the upward change (U) and downward change (D).
  • Find the average of the Upward change (AVgU) and the average of the downward change (AVgD).
  • Calculate the Relative Strength (RS). 
  • Find the RSI using this formula:
    RSI= 100–100/(1+RS).

On-Balance Volume

What is OBV?

OBV is one of the best indicators for crypto trading that stands for On-Balance Volume. OBV shows the relationship between trading volume and price, and how one affects the other. Joseph Granville brought this indicator into the limelight and used a spring analogy to describe it. He explained that when there is a sudden increase in trading volume without a price change, the price would eventually rise or fall. 

When choosing this indicator, you need to have a proper understanding of how to use and read OBV. Here are the main instances to look out for when reading OBV charts:

  • An uptrend can occur when there is a decrease in price and an increase in OBV. This is known as a bullish divergence.
  • A downtrend can occur when there is an increase in price and a decrease in OBV. This is known as a bearish divergence.

How to calculate OBV?

The calculation for OBV depends on the situation of the trade. Here are the three possible scenarios and their respective calculations. 

  • When the present closing price of an asset is greater than that of the previous day:

             OBV= Previous day OBV+ Present volume

  • When the present closing price of an asset is the same as that of the previous day (no change):

            OBV= Previous day OBV

  • When the present closing price of an asset is less than that of the previous day:

            OBV= Previous day OBV- Present volume

Bollinger Bands

What are Bollinger Bands?

Bollinger bands is a type of crypto chart indicator that assists traders in navigating trading entry and exit points. A major element employed in the use of Bollinger bands is the standard deviation. Standard deviation is simply how far apart the current price of an asset is from its usual price. In trading, prices tend to deviate as a result of volatility. But there is usually an average point at which the price falls. Standard deviation is measured by how much the price moves closer or further from the average price point. Bollinger bands are good examples of a buy-sell indicator.

How to read Bollinger Bands?

When learning how to read Bollinger bands, you need to consider the things that make up the chart. Here are the major things you would find in a Bollinger band:

  • The lower band
  • The upper band 
  • The middle band

The middle band represents the average price of an asset. The lower band represents the lowest point in which the price is expected to move while the upper band represents the highest point in which the price is expected to move. The upper and lower bands of the indicator contract with decrease in price and expands when there is an increase in price. 

Bollinger band is also a means to determine if an asset is overbought or oversold. The price of an asset is overbought when it moves towards the upper band. Meanwhile, the price of an asset is oversold when it moves towards the lower band. 

Although this indicator is widely used, people often wonder how accurate are Bollinger bands? Just like many other indicators, Bollinger bands are not 100% accurate. Not all data produced by Bollinger bands are correct but the indicator has proven true many times. A trader should also use their knowledge and precision when using this indicator. 

Automate crypto trading
Join Vestinda Private Beta

Get FREE access

Ichimoku Cloud

What is an Ichimoku Cloud? 

An Ichimoku Cloud is an indicator used to measure support and resistance levels and other relevant data, including trading momentum. The Ichimoku cloud chart contains so much information that with just a glance, you can decipher a lot. But attaining this level of understanding is not easy as the charts may seem complicated. This is why you need to learn how to use and read the Ichimoku cloud. 

How to use Ichimoku Cloud?

Here are some things to note when you want to use Ichimoku Cloud:

  • The Ichimoku cloud has two major lines. The leading span A line, as well as the leading span B, work hand in hand.
  • There is an uptrend when the leading span A rises above the leading span B. This is known to be a bullish indicator. 
  • There is a downtrend when the leading span A dips below the leading span B. This is known to be a bearish indicator.
  • An uptrend is about to occur when the cloud turns green. Conversely, a downtrend is about to occur when the cloud falls downward and turns red.
  • Together with the Leading Spans, Ichimoku Cloud indicator also plots a Conversion Line, a Base Line and a Lagging Span. 

Having seen the features of the Ichimoku cloud, one might ask: does the Ichimoku cloud work? The answer lies in the numerous testimonies of traders that have used this indicator. It has been known to be very effective and reliable. Even greater results are reaped when paired with other indicators like RSI. 

Moving Average 

What is the Moving Average? 

A moving average is an indicator that uses the average price of future trends to determine present ones. It is calculated by adding all the prices of a security over a period, y and dividing it by the number of periods, y. A moving average indicator is continuous because it is frequently calculated.  

The two main types of moving average traders use are Simple Moving Average (SMA) and Exponential Moving Average (EMA). The SMA calculates the average price of a security over a particular time frame.  The EMA performs the same operation but lays more emphasis on recent prices during calculation. 

How to use Moving Average?

A moving average can determine when an asset is experiencing an uptrend, downtrend or when it is ranging. When the price rises above the moving average line, it is a signal to buy. But if it falls below the line, it is a signal to sell. 

Divergences

What are divergence indicators?

A divergence occurs when the price of a security moves in an opposite direction with the indicator. Just from the look of it, divergence sounds like a strange concept. But the truth is, it can either be positive or negative! A divergence is positive when the price of an asset hits a low but the indicator hits a rise in price. This signifies that there is a possible uptrend coming soon. Likewise, a divergence is negative when the price of an asset is high and the indicator signifies a low. 

How to use a divergence indicator?

  • A good indication to take action is when you spot a divergence (either bearish divergence or bullish divergence). If you have the patience and nerves to wait for a triple divergence, or even a quadruple one, then the market will reward you.
  • A stop-loss order can be placed when the price reaches a certain level against you to avoid further losses.
  • Timely price confirmation is important in determining the right entry point. 

Now that you have learned about the best indicators for crypto trading, you can now put them to use. Note that you can use more than one indicator simultaneously. But to do so, a proper understanding of indicators is needed. This article is your ultimate guide in tackling decisions relating to the best indicators for crypto trading, what they are and how to use them. 

 

/by

Top 5 Trading Strategies, Most Popular in 2022

In the world of trading, many factors come to play in driving a trader’s decision in the market. But to become a successful trader, you have to follow some strategies to guide your choices. Trading strategies keep traders firm in their principles and prevent careless decisions driven by emotions. This article will be digging deep into the top 5 trading strategies you can follow. 

What is a trading strategy?

Trading strategies are a set of techniques followed by traders to make profitable returns on their investments. Simply put, trading strategies are rules to follow when making trading decisions. 

It is no news that many traders in the stock market tend to make decisions out of panic especially when they sense a change in price levels. This is often associated with the disposition effect. The disposition effect occurs when investors sell assets of a higher value and keep assets with depreciating value. Trading strategies exist to eliminate such problems giving rise to following a set of rules in the market regardless of news or personal emotions. 

The provision of different strategies ensures that each type of investor can have a particular technique that suits them. Trading strategies are dependent on various factors like portfolio diversification, tax, leverage, and market capitalization, among others.  

Top 5 trading strategies

Here are the top 5 most popular trading strategies you can employ:

1. Day trading strategy

What is a day trading strategy? A day trading strategy involves the buying and selling of securities within 24 hours. This type of trading strategy is short-term as profit is made due to small movements in price in under 24 hours. A simple day trading strategy you can use is buying the dip. This entails buying an asset at a low price and selling when there is an increase in value.

Note that day trading strategies are not only used in stocks trading but also crypto trading. Similarly, crypto day trading entails that crypto assets are traded in under 24 hours. Since crypto is very volatile, this method could yield profitable returns or set you up for a great risk. Hence, you have to carefully weigh the options before employing this technique. 

Here are the pros and cons of day trading strategy: 

Pros 👍
  • It offers protection from overnight risk.
  • The volatility of day trading can yield profitable returns.
  • Availability of multiple strategies.
Cons 👎
  • Day trading involves constant monitoring since returns are made within a short period.
  • Like many short-term trades, it is very risky.
  • A high level of research and knowledge is required.

2. Swing trading strategies

What is a swing trading strategy? A swing trading strategy is a speculative strategy that centers on making smaller returns over a short timeframe. This strategy makes use of technical analysis to identify market entry and exit opportunities. Technical analysis is a common tool in trading used for making predictions in the market. It employs previous market data and charts to foresee a possible outcome to occur in the market.

Unlike day trading strategies, swing trading could last from days to months so you don’t have to constantly monitor the market. For this reason, it is often seen as an easier alternative to other demanding forms of trading. 

A high probability swing trading strategy would be the obvious no-brainer buy low and sell high in an uptrend, buy high and sell low in a downtrend. This is the fundamental rule of trading. You can look at it from the standpoint of cultivating cattle. You buy them when they are young and tender and sell them when they are mature at a higher price. However, the reverse is the case in a downtrend. Downtrends are characterized by the decrease in the price action of a security with time. In this case, an investor sells securities at a lower value than it was bought as the price action decreases thereby making a loss. 

Here are the pros and cons of swing trading:

Pros 👍
  • It does not require as much time and attention.
  • Sufficient profit can be derived from a single trade.
  • Swing trading enables easier market analysis leading to more relaxed decisions.
Cons 👎
  • Since technical analysis is a very important factor, a wide knowledge has to be involved. 
  • Overnight risks can be a threat as the market could make a drastic turn while you are asleep.
  • Capital is tied a lot longer than day trading.

Automate crypto trading
Join Vestinda Private Beta

Get FREE access

3. Scalping Trading Strategy

What is a scalping trading strategy? A scalping trading strategy is a technique that focuses on making returns from small fluctuations in the market and reselling at a fast rate. To properly understand this concept, we will be digging into what scalping means. 

What does scalping mean in trading? Scalping involves making as many profits as possible with high trading volumes. Although profits may be relatively small, the trading of many securities at a fast rate could account for its accumulated high returns. 

Scalping trading is a very competitive space that requires immense discipline and attention. A huge loss could destroy all the profit a scalper has previously worked hard to make. Hence, the goal in scalping is to keep profits relatively higher than losses. Market making is a scalping stock trading strategy used in the market. In this strategy, scalpers simultaneously place a bid and offer on a stock. This method is highly competitive and difficult to keep up with as scalpers have to compete with market makers. Another scalping strategy requires buying several securities and selling at a slight price movement. 

We should not neglect the fact that scalping has a high risk and can severely damage a trader at a wrong move. Suppose a trader does not have a stop-loss order or an exit strategy, they might face serious risks. This begs the question: do scalp trading strategies work across markets? The answer is yes! Scalping strategy can be very beneficial if you are well equipped with exit strategies. 

Here are the advantages and disadvantages of scalping:

Pros 👍
  • Scalping can yield very high returns with the right exit strategies.
  • It allows for the trading of several securities daily.
  • High movement in the market is not a cause for attention in scalping. This strategy centers on smaller timeframes with a relatively smaller individual trading profit. 
Cons 👎
  • Short-term predictions can be extremely difficult.
  • A consistent profit is needed to yield great results.
  • Regular monitoring is required. 

4. News trading strategy

What is news trading? News trading is a technique of trading where press releases, social and economic announcements are used to make investment decisions. The news plays a huge role in market trends which is why traders use news announcements to make trading moves. A news trader is always up to date with the news and economic reports because any slight announcement could affect the market drastically. But the effect of the news on the market is often short-lived so a trader has to fully utilize the news trading strategy in the moment. 

For a trader to be successful in news-based trading, they need to understand how to parse news to build a trading strategy. This involves planning strategies beforehand and recognizing if the announcements are worth acting on. 

Here are the pros and cons of the news trading strategy:

Pros 👍
  • News trading yields high profit since the effect of the news on the market can be very influential.
  • Trading the news does not last for a long time. Hence, monitoring one trade is not necessary as you will exit quite fast.
  • News trading can be carried out automatically.
Cons 👎
  • A trader might make wrong predictions leading to a loss.
  • Some brokers deceive traders on news announcements to fuel transactions. 
  • The opportunity to trade the news does not come frequently.

5. Buy and Hold trading strategy

What is the buy and hold trading strategy? The buy and hold trading strategy deals with buying securities at a low price and keeping them for months or years before selling them. It is known to be a long-term and safer form of investment. The buy and hold trading strategy is a preferable form of investment for investors that don’t have time to constantly monitor the market or engage in technical analysis. 

Here are the pros and cons of the buy and hold trading strategy:

Pros 👍
  • The buy and hold strategy reduces risk. Since there is enough time to manage your portfolio and work on strategies, the risk is reduced. 
  • It offers lesser trading costs as frequent trading is minimized. 
  • Frequent monitoring and attention are not needed.
Cons 👎
  • It takes time to yield profit.
  • Liquidity is limited since the ability to withdraw money for short periods is halted.
  • It does not give a trader the chance to be flexible. 

Now that you understand the different trading strategies, you can implement the one that suits you in your investment. Deep understanding is needed before employing any strategy so this article about top 5 most popular trading strategies can always be a useful tool. Ensure to weigh the pros and cons before delving into trading strategies so you won’t be found wanting. 

/by