Crypto Academy

Investment Strategies (Categories)

Investment Strategies

4 min reading

If you have just joined the crypto-currency market and you don't know how to invest, in this article we describe the Investment Strategies.

investment strategies

Investment Strategies (Categories)

Just like every traditional business needs a business strategy, crypto-currencies also require you to establish a strategy before investing. There are always things to look out for when investing, as well as things to implement. If you have just joined the crypto-currency market and you don’t know how to invest, then, you really don’t have to worry because this article will enlighten you on what and how to invest.  It is important to note that crypto assets are high-risk investments that if you do not adopt a proper strategy, you can lose a lot.

What strategies exist

In traditional business, when conducting a study regarding a particular company, most people apply the SWOT method which stands for strength, weakness, opportunities, and threats. When it comes to crypto-currencies, there are strategies such as HODL, Dollar Cost averaging (DCA), Golden cross/ Death cross, scalping, swing trading, and RSI divergence, and many more. However, there is no one right strategy in crypto-currencies, as a strategy may work for A, but fail for B. Therefore, it varies from person to person and depending on the time frame in which they want to invest. Every crypto-currency trader will therefore need to master what works for them and stick to it. 

The HODL strategy

The HODL strategy, for years now, has proven to be one of the most successful strategies in crypto-currencies. It simply means that you invest and hold your assets. For those who don’t have the time to stay glued to their computer, watching for price fluctuations, then HODL is the best strategy for you to adhere to. Buying low, HODL, and selling high when crypto-currency prices rise continues to be the strategy of choice for many cryptocurrency investors. What most traders do is buy more altcoins to build a hodl portfolio. For example, Stephen owns bitcoins and in order to build a hodl wallet, he buys other coins like Litcoin, Polkadot, and many others that he will later convert into bitcoins because he knows that, based on his speculations, other institutions will need bitcoins that he will eventually sell to them. But as we mentioned, crypto-currencies are volatile, you can hold a large number of coins and in the end, lose or vice versa.

Dollar-Cost Averaging (DCA)

Dollar-Cost Averaging (DCA), is another strategy that works especially for those who have the income to invest only at the end of the month. With this type of investment strategy, investors periodically allocate a certain amount of capital to build a position over time. The same dollar amounts at the same regular intervals. This simply means that instead of investing a large sum of money at once, the investor may decide to do so in small amounts at particular times of the day. 

For example, Joe has $10,000 and would like to invest $500 in bitcoins at noon every two weeks. So that means that in ten weeks, Joe would have bought $500 worth of bitcoins. This works for him because he will not lose outright, when there is a downtrend he will buy more and when there is an uptrend he will buy less. This will help him not to get too emotional about the investment as a whole. Also, there is no such thing as a time-out with the DCA because all the investable money is invested at all times. 

How to use it on bit4you

To get the best understanding of the strategies we listed above, we recommend you first test them on bit4you Demo mode. There you will have the same trading opportunities compared to Real more, except withdrawing funds. Once you registered your Demo account, you will get $100 000 of virtual funds. Therefore, you will be able to buy, sell, trade, and exchange with more than 25 crypto assets, use all available technical indicators and graphs. All this together is a great opportunity to expand your horizons and become more advanced in crypto. Besides, you can always test one more strategy or crypto coin and just have fun!

However, as we mentioned earlier, these are not the only investment strategies available. But we can say that they are the two most successful strategies so far. Other strategies like the Golden cross/death cross, scalping, swing trading, and RSI divergence can work, but these strategies are not the best for beginners. To be safe, it is advisable to start with the two strategies mentioned above.