Before starting cryptocurrency trading, an investor should determine a trading strategy that suits him. This was stated by trader Ilya Meshcheryakov during the online conference “Bitcoin 2020: New Horizons” on ForkLog Live’s YouTube channel.
According to him, investments in cryptocurrency are the best among available alternatives for earning money, and through trading they achieve greater efficiency in the long term.
Meshcheryakov noted that with hodling, the probability of losing invested capital tends toward zero, unlike trading, where capital losses are extremely high.
“No matter how well you trade, you can’t beat a rising market. The very structure of trend movements is pullback-free, and catching a correction and trading it is fairly difficult. It depends more on luck than on skill,” he said.
Against this backdrop, the expert advises novice investors to start not with market analysis but with an analysis of themselves.
“There are no bad investors, there are those who choose the wrong strategies. Without assessing the investor profile, any profit is short-term in nature and will subsequently be offset by losses,” he explains.
The main market participants are traders who trade short term, cycling through setups, and investors. The latter form portfolios; their aggregate risks are not centered around a single trade but around the overall collection of coins. Some people use both strategies—”trading + investing”—comparing their effectiveness.
“A new market entrant needs to assess their risk tolerance: how calmly they tolerate drawdowns. Since investments have a definite time horizon within which they will yield results, and it is impossible to hurry it, perseverance and discipline are important. The level of preparation and the time devoted to the portfolio matter,” Meshcheryakov said.
Any investment portfolio is divided into three parts:
- Conservative, comprising 30% to 80% of the total portfolio and delivering fixed income and low risks;
- Aggressive – from 0% to 30% – contains instruments with potentially high returns and high risks. It operates on the scheme “either you go to zero, or you make 100x”;
- Balanced – from 20% to 70% – maintains a balance between risks and returns.
When selecting a coin for investment, one should study the project’s aggregate information, pay attention to chart patterns, consider its exchange rating and trading volumes, and, where possible, compute fundamental indicators for projects with open reporting.
Fundamental analysis involves calculating the intrinsic or fair value of a coin and comparing it with its market price: if the asset’s price is below that value, it is undervalued and may rise in the future; if higher, it will fall.
“Choose coins by a combination of factors, but settle on what you understand well. Remember the limited capabilities of fundamental analysis,” noted Ilya Meshcheryakov.
The investor should accept that token value is linked to a company’s valuation, not consider Bitcoin’s influence in the long term, and assume that the market will act reasonably, and that the aggregate of force majeure events tends toward zero.
The trader also reminded of the importance of risk management, which should be calculated for the portfolio as a whole rather than for a single coin.
“In the event of a market reversal risk, you can close the portfolio or open a hedge short on Bitcoin. Risk up to 20-70% is considered satisfactory,” the speaker added.
In Meshcheryakov’s subjective view, the most promising coins for investment are Ethereum, EOS, Bitcoin Cash. However the expert recommends forming a portfolio with more than three coins.
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