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I always prefer short-term trading because of my own style and needs.
I usually need to have liquidity in my capital, and I take trading as an actual job, so I just can’t “invest and forget it” for months.
I need the ability to take profits quickly and on a regular basis.
However, I do acknowledge the benefits of long-term investment, especially in cryptocurrencies. With many new and interesting coins in the market right now, it sounds only logical to invest in some of them and see where it takes you.
This approach to trading is better for those who have a larger capital to risk, and those who can invest a certain amount and not need it right away in the near future. This is another reason why I prefer day trading, but more on that in another post.
For now, let’s focus on the longer-term aspects of investing in cryptocurrencies.
1. The Long-Term Mindset
Long-term trading refers to holding a position for at least months, but a more accurate description would be taking up a trade and keep it for more than half a year or even much longer.
Once you have performed your studies and have chosen where to invest your funds, you should just sit back and sort of go on with your life. The “invest and forget” term makes some sense in this way. In the cryptocurrency jargon, this is also known as "hold" or "hodl" in the slang term - you simply hold a cryptocurrency for a long time.
However, while you can ignore your charts most of the time, you then need to stay on top of any news and/or technological advancements that may impact your investment in the long-term.
2. Choosing The Right Cryptocurrency
The thing with cryptocurrencies is that you need to bet on the best offer, not only in terms of liquidity but also based on what they provide.
Let me explain.
While many cryptocurrencies - like Bitcoin, Bitcoin Cash, Litecoin or Dash - only offer an electronic payment method, there are others like NEO and Ethereum with underlying platforms that give actual value to their coins.
Choosing the right cryptocurrency requires you to deeply analyze what each coin brings to the table and decide which one has the most profitable or functional future. Or at least, the one you think will be the most successful.
As a general rule of thumb, those who really can innovate technology in different ways are more likely to be successful in the end.
3. Analyzing The Market
Since the long-term outcome of each cryptocurrency’s value depends largely on how much acceptance among users they receive and their legal status, technical analysis tends to take a second place in terms of determining where your crypto investment is going.
Technical analysis - that is, reading charts and price action - is great for short-to-medium-term trading. However, when you want to hold a position for a long time, you need to study what affects value in the long run.
With that in mind, the news is your friend. Stay on top of any crypto-news portal that you consider trustworthy and evaluate your positions based on the new information that is released and how it could affect them.
4. Knowing When To Enter and Exit
To cover fundamental analysis you need to pay attention to world events and news related to the cryptocurrency field. For example, if a news website announces a story that could increase the value of a certain digital coin, then that could be your signal.
On the other hand, once you are in a position, pay attention to any reports that may turn the tides against you. If you’re holding a long position on Litecoin and some country bans it, then you should probably start paying attention to your charts and see if it’s time to bail!
And at the end, of course, before making any trade (either an entry or an exit), you can further time each of your entries better by using technical analysis which is super useful and reliable in that matter.
Which cryptocurrencies do you hold in the long-term? Share with us in the comments below!
