Crypto trading – The main goal of the medium-term strategy
The medium-term cryptocurrency strategy is a key component of our overall strategy. The main goal of the medium-term strategy is to catch safe, proven trades on the main trend with risk control for each transaction. If in a long-term strategy it is important to gather a large position competently and keep it at all times, the medium-term strategy is clear point shots with the same size of positions and the same risks for each position. A fair question arises – why do you need such a strategy, if it is better to gather a big position and wait six months (for example). And the movement is less and the profit is more.
Of course, in the case of a correct understanding of the market and 100% competent action, a long-term strategy is more profitable. However, in cases of error or abrupt change in the market situation, the long-term strategy becomes ineffective and begins to lose the deposit and the nervous system. Surely, if you are a fan of the game “either pan or disappeared” – the medium-term trading strategy is not for you. Though, our goal is to obtain a stable average return on the cryptocurrency market, even in cases where one or more strategies are unprofitable (in some specific trading situations).
The main thesis of the medium-term trade strategy
To ensure that the goals of the medium-term cryptocurrency strategy are met, we use the following tools:
- Enter the position only after the retest of the liquidity level;
- Trade only secure cryptocurrencies that are at least in the top 50 in terms of trading volumes;
- Entry into each position is accompanied by automatic stop orders;
- Ratio of potential loss (stop order) to potential profit (take profit) not less than 1/3;
- Selection of a position can be only after a break-even stop order has been issued for the previous position;
- Limits are set for the maximum loss, which can be a strategy for a month. When the maximum loss is reached – trade stops (why do we need to give a deposit to the market?);
- The minimum target for a medium-term trade strategy is 15%;
- The maximum stop order is 10%.
The main disadvantages of the medium-term cryptocurrency strategy
If the advantages of this strategy (security, maximum control, relatively good deposit mobility, takes little time) we have already described above – it’s time to talk about the disadvantages:
- Omission of trading situations due to lack of entry points or stop operation (unprofitable or break-even)
- Maximum risk control reduces the profitability of the strategy
All the disadvantages of this trading strategy are solved due to the advantages of long-term strategy. Therefore, it is better to trade medium-term trading strategy in combination with others.
An additional goal of the medium-term strategy
If this trading strategy is used in pair with the long-term – it is worth mentioning another goal. The fact is that when forecasting global price movements, there are always critical points where the main scenario may become irrelevant. It is at such critical points in the medium-term strategy that counter-trend agreements should be opened to hedge the main position of the long-term strategy. For example, the main goal of the long-term strategy is Bitcoin fall to $20,000. However, on the chart we see that in the range of $29,000 a local growth wave can begin within the global consolidation of $29,000-$60,000:
Thus, in case of a long-term forecast error, we will save part of the profit due to the counter-trend agreement on the medium-term strategy. And in the event of a continued fall of the Bitcoin price, we will receive a controlled loss (fee for insurance of the main position).