Cost averaging strategy
Consider the cost averaging strategy. The cost averaging strategy is a very popular strategy in which an investor buys assets with a certain frequency, regardless of the price - the investor simply ignores the market situation and does not try to find the ideal entry point.
This strategy works as follows: suppose an investor has $1,000 and he wants to invest this money in Bitcoin. In this case, there are two options. The first is to invest the entire amount at once in the hope that a new phase of the bull market will begin immediately after that, and Bitcoin will begin climbing to its new maximum values.
The second option is to divide the amount, for example, into 10 parts of $ 100, and invest in Bitcoin with a certain frequency, regardless of what levels it is at at a given time. The frequency of purchases can be any: every Monday or the 1st day of the month, this is the investor's choice.
Of course, the best option would be to simply buy the bottom, wait for the asset to grow and fix it at the very highs and repeat it forever. In theory, it seems easy to redeem the bottom. But in practice, everything happens differently, because it is difficult to understand exactly when an asset has reached its minimum values, even for professional traders.
In addition, if there is a bearish trend in the market, then it is almost impossible to buy cheap and sell expensive. If the investment is calculated incorrectly, then the investor can lose a significant part of his money, and on the contrary, investing according to the cost averaging strategy, during a bear market, lower prices lead to more assets being acquired.
For example, for $ 1,000, an investor buys 100 tokens in one lot for $ 10 each. Or he allocates $25 each week and gradually buys the same tokens over the next nine months. By the end of the year, if the price remains the same, in the first option the investor will remain with his money, in the second option the investor will be able to make a profit, because during the bearish year there will be a purchase of tokens at different costs, which will eventually average the total purchase amount.
So, the basic principle of the strategy is to buy with a certain periodicity for a certain amount over a certain period of time.
The strategy is safe and psychologically comfortable, especially for novice investors. It does not cause negative emotions due to the fact that the trader did not guess the entry point. It smooths out volatility and all the market noise that prevents rational decision-making. This strategy develops discipline, because it does not allow for joy to buy more when the asset is growing and in a panic to get rid of the asset when the price of it falls.
Rejection of margin trading
In fact, there are dozens, if not hundreds of trading methods. But if we are talking about a safe strategy that eliminates the loss of time, nerves and money, then this is trading without leverage on the spot market. Any derivative markets, complex investment products or Forex, imply trading using marginality. That is, buying for $ 1,000, of which 500 is borrowed, the trader risks losing the entire deposit when the asset price drops by 50%. When buying with your own money, you can lose them on the spot only if the price is reduced by 100%, and this is almost impossible.
On some platforms, x100 or even x1000 shoulders are provided. In this case, the fluctuation of the exchange rate by 0.1 1% may cost the trader a fortune, and the price, according to Murphy's law, will definitely go towards the liquidation of the deposit.
Another method of safe trading is diversification by assets, platforms and currencies. For example, having $ 1000, you need to divide the amount into 2 parts for different exchanges by buying coins for $ 100, for example, Bitcoin, Ethereum, USDT, Solana, Ripple. If the exchange or a separate currency goes bankrupt, the investor will not lose all his savings.
If the entire amount is in some shitcoin, which turns out to be a scam, what is the probability of losing all the money? And yes, it is not worth investing more than 1% of the deposit in assets whose future is vague and doubtful.
There are also more interesting ways to reduce the time that a trader spends at the trust management terminals. This method is well developed in the USA, where a lot of funds take money from investors and invest in certain assets. As a rule, such funds have a manager who decides which assets, at what prices and when to buy. The investor is exempt from making a decision on investing his funds, but the risks remain.
The manager receives a percentage of the profit for his work, often his decisions are unreasonably risky, since anyone wants to earn more. The Fund and the manager himself, in case of losses at the end of the year, will not reimburse them to the investor. And the fund may also go bankrupt, and it will be difficult to return the money.
The analysis of profitability in the markets was carried out, and it turned out that fund managers for a long period of investment lose to funds that buy up a wide market actually using a strategy of averaging and diversification.
Traders often receive offers to trade using special signals in their personal messages. For a certain amount, some professionals offer signals that will help you earn. We will not consider this method of trading, since in most cases the signals will be unprofitable, and professionals will turn out to be ordinary scammers.
Programmers are developing special software that can trade instead of a trader, making hundreds of transactions per minute. Using such an exchange robot, you can not spend time at the terminal, trading will go on by itself. However, it is not easy to find a good bot, and those that are sold on the Internet are not always trustworthy. Moreover, the use of a bot does not guarantee profit, and the program needs to be periodically interfered with for adjustments.
History knows only one case when a trading program has made a profit exceeding the market average (about 9%) for a long period of time.
Citadel Foundation: founded by mathematicians, scientists and programmers. They developed an algorithm that successfully traded on the stock market. At first, the fund accepted money from everyone, but then the fund was closed to external investors, and trading was carried out only with the money of old customers or the developers themselves. The secret of the trading robot's success has not been revealed yet!
If you want to trade around the clock
All of these strategies are suitable to make the investor's life simple and calm. What should active traders who want to constantly buy or sell something do?
The simplest and most correct thing is not to do it ever. You can't make deals because of boredom and a desire to do something. But if the money is already burning hard in one place, there is a safe solution for impatient traders: 90% of the total deposit amount is inverted using a safe strategy, and the remaining 10% is used for speculative trading. But there are rules here, too, for example: with a daily change in the allocated amount by more than 10%, stop trading. This means that with a deposit for trading of $ 100, if the amount on the trader's account is more than $ 110 or less than $ 90, trading ends on this day. This method allows you to avoid instant bankruptcy of the trader and gives him time to realize why it is impossible to trade this way.
Let's summarize the results. How to trade safely and not sit at the computer for days, wasting your time and health? There is a solution:
- Use an average investment strategy, investing part of the funds every week or month;
- Do not trade using borrowed or last-minute money. The investor's means of living should be safe;
- Don't put all the eggs in one basket. You can always buy 5-10 different cryptocurrencies, preferably from the top by capitalization;
- Do not trade shitcoins and complex products that are not clear to the investor.
- You can speculate, violating the rules, only a small amount, with a limited limit on loss or profit.
Using these simple methods, you can reduce the time for trading to a few minutes a day, and the emotional stress of investing will be the same as when paying for communal services or ordering food at home. Take care not only of your money, but also of your time along with your health, such assets, as a rule, are never replenished.