Cryptos 101

My 7-day course on how to lose money on crypto

Day 5: What my robot taught me

My guess is that a few days of staring at the computer screen every free minute and trying to puzzle out what is going on will be more than you can take. So you cast around for something that will indicate what is happening wihout your having to give it all your attention. Enter the robots.

In my case this meant cryptohopper, an Amsterdam-based web-based bot (nothing to download to your computer) despite its Australian kangaroo logo.

CRYPTOHOPPER OFFERS A ONE-MONTH FREE TRIAL

This was the bait. And it is a good deal. You can try out bot trading with 15 tokens (the full version has 75 maximum) and you don't have to put in any cash to play with investing. When you feel confident enough, you can switch it on for real trading.

It has lots of short videos explaining how to set things up, a straightforward interfacce and lots of add-ons.

HOW THE BOT WORKS

What my bot does is check cryptomarket trends every few minutes, then using technical indicators to carry out automatic trades.

One of the major pieces of advice from the YouTube non-advisers is to get your emotions out of investing. That's how gambling becomes trading. Bots certainly do that. The question then becomes: which stocks to choose?

THE PROBLEM WITH SOLID INVESTMENTS

Here my views differ from sound investing principles. IOTA and XLM (Stellar Lumens) may be the most interesting long-term crypto projects. But their movements are long-term and don't attract speculators. So their prices are low and so is the volatility of their movements.

REMEMBER YOU CAN'T DO A BIG SHORT

What you as a trader want, as in the stockmarket to be frank, is investments with high daily volatility. This is where you can quickly cash in winnings. You can't really bet against a stock as you can in many exchanges, since "shorting" — betting the price will go down — is not part of the main crypto world yet (big investors can currently make hedge investments of this sort in the U.S. and for some tokens you can do it on BitMEX).

SO WHAT ARE GOOD TRADING TOKENS?

At this level, it's difficult to tell which are good trading tokens as distinct from well-founded projects, even if you know how to read and judge white papers, can judge the quality of the management teams, or how close a "utility" coin is to being useful. I allow my bot to choose all coins to monitor and deal with as it thinks fit.

CASH OUT PART OF YOUR PROFITS

What several people do is put part of their investment (50%, say) into long-term projects they like and use the rest for speculation. The other strategy I practice almost religiously is to take out part of my profits each day (again half once it has gone above 5%).Sometimes, if I am feeling particularly confident or brave, I put it back into some other crypto.

DON'T GET TOO COMPLICATED

You can calculate the amount more mathematically but I don't have enough invested to get complicated. Likewise, you can carry out risk balancing -- investing less in more volatile cryptos to even out the overall risk -- but for small sums I simply set the bot to invest the same amount with each buy and leave it to do its stuff from that point on.

DO YOUR HOMEWORK

But I still have to go back to the bot every few hours to check which investments are losing money and sell them off (in my case it's 2.5% — a 40-trades risk — with the thought that most of the money will remain (97.5%) that can be more usefully invested in a new token whose indicators are interesting.

WORK WITH THE DEFAULTS

My bot is set to carry out readings every 2 minutes but that can be changed if you want. I just accepted the default. It has regularly given me 3% profits or more daily, when the market is feeiing good, but that has nothing to do with my skill.

Just to be completely transparent, I have a $100 a month subscription. I paid for one year easily in less than a week from earnings during my first month's trial. I set the configuration to monitor 38-75 tokens (I switched between them while testing the bot), made use of the best configuration option for technical indicators for all the coins (very easy to do), and added a $6 a month successful signals watcher to carry out trading as well.

I am not sure whether to continue this and will probably stop it as a test, but it is very easy to check on its performance with wins and losses. For information, it's MinngHamster by the way. It claims 58,475% success, but it hasn't produced that for me yet. Its recommendations also often relate to other exchanges.

HOW MUCH TO INVEST

One of the major pieces of advice everyone, including the sharks, will give you is (I have said) not to invest in cryptocurrencies more than you are prepared to lose.

That strikes me as nonsense. Why bother to invest at all if you are not prepared to risk it? It may be a good brake on your enthusiasm but if you invest $100 and get back $1000, you are going to ask yourself why you didn't invest à1000 in the first place. That's the kind of calculation you can make.

LEARN FROM THE CRYPTOBILLIONAIRES

The cryptobillionaires who put hundreds of millions into tokens aren't doing it because they are ready to lose their cash. Their calculation is that the risk is worth it, and if things go wrong, they will be able to bail out before losing all their money. When you bail out depends on your appetite for risk. You get to feel like a real gambler.

THE QUESTIONS TO ASK

If you look back at the crypto returns over one month, you may have to ask yourself whether you are ready to lose, at least temporarily, 48% of what you invested. In other words, how likely is it that a token's price will turn around and make enough to compensate for all the losses elsewhere?

MY ANSWERS

My momentum trading would have lost me 34% if I had been doing it. In fact, I left the bot take the risk. I kept half my stake in long-term investments and 25% in cash on an exchange to act quickly if the opportunity arose. So I finished the month 2.5% down. At this rate, I can stay in the market for 50 months before losing all I put in.

CRYPTOS VS TOP STOCKS

If I had put $200 into each of Zachs' recommended top 200 coming stocks at the start of 2917, I would have invested $41,000 that on 17 June 2018 would have been worth $51,583 (23.4% more or about 15% annually). I'd prefer 3.4% a month without worry.


 

You have finished Day 5 of my crypto investing course following up on superforecasting cryptocurrencies (I never found a way)

This is not what I call financial advice,

Day 1: Get some tinkerbell tokens and HODL
Day 2: Pick something that will be useful
Day 3: Now Trade!
Day 4: Technical Analysis: Chart your way down

TOMORROW: LOOK MA, NO ROBOT!