There are a range of ways that you can trade cryptocurrencies and if you are looking for the best crypto investment strategy, you have to look into something that suits you. There are crypto investment strategy options that allow you to invest for the long term, day trade or build your own qualitative crypto investment strategy that works. Some people like to trade in strategies that are backed by data, but there isn’t much out there available so it’s important that you find the right strategy.
Data in cryptocurrency is getting better all the time. There are so many opportunities to build the right crypto investment strategy and we’ve got some of the steps for that matter below.
How to build a crypto investment strategy
- Start investing in cryptocurrencies with a plan. You need to think about what you want to test and how you want to do it. Do you know what your beliefs are around crypto and what you’re trying to find? These are questions that you have to answer. If you don’t have a plan, you won’t have the right analysis and this will have an impact on your trading results.
- Get the data. You have to obtain that crypto data to backtest your trading ideas. While cryptocurrency hasn’t been around for very long, the data is getting cleaner every single day. You need to find good quality data and it doesn’t cost much!
- Format. Moving onto formatting the data as part of your crypto investment strategy is important. Check the data for errors and then you have to format it for the platform you’ve chosen for backtesting.
- Test your ideas. Once the data is in the right software, you can then design your trading rules and test them out. Some of the knowledge you have on crypto investment strategy comes in handy here as this will help you to identify the right strategy you want to test.
Three crypto investment strategy options
There are different types of crypto investment trading strategy, and it’s vital that you note that these aren’t always sophisticated or complete. They’re simple and they have basic rules to follow. The whole idea here is to understand the type of crypto investment strategy. Three of the different systems to test include:
- Monthly momentum. This is the first system to test. You start with ranking all of the cryptocurrencies every month based on the previous year. The portfolio should be balanced monthly.
- Monthly reversals. This is a crypto investment strategy that is similar to the momentum one above. This time you will be buying the 10 worst performing cryptocurrencies every month. Your performance here will be based on a 12 month lookback.
- Trend following. This system buys cryptocurrencies when it makes the 250-day high.
Finding the right trading strategies for stocks isn’t always straightforward, but it can be done with the right planning and careful thinking. You need to consider the crypto investment strategy that works well for your investment goals.