The cryptocurrency portfolio management method we will be using involves tracking multiple assets across different exchanges with each currency representing one underlying asset class. Utilizing this method we will be using leverage to generate profits in a volatile market. The strategy is very simple in that we will be opening orders with the primary goal of profiting on the arbitrage opportunity between market prices. Having a large number of assets involved in the portfolio can add significantly to the profitability of the strategy due to the leverage provided by margin trading. We will be utilizing several automated strategies to accomplish these goals.
Our overall strategy will include opening orders to profit on minor price differences across exchanges that have a low risk factor. We will use multiple exchange methods in the form of spread trading and arbitrage to take advantage of small market movements. The goal is to utilize leverage on multiple assets over time through opening orders in different markets.
1. Spread Trading :
We utilize the spread trading method to enter positions at a desired price. The spread trading method is used by many traders and is the most common form of trading employed in foreign exchange markets. Spreading involves buying and selling a given asset simultaneously in two different markets. The purpose is to trade the asset at the requested price while profiting from the difference between the purchase and sales price. It is very important to be aware of the current market price of the asset you plan to spread trade. By monitoring the market we can determine which pairings offer the desired spread. There are several ways to trade spreads including limit orders, stop orders, and limit orders.
2. Margin Trading :
We will be utilizing margin trading for our portfolio by using leverage to multiply our profits. Margin trading involves borrowing money from your broker utilizing the balance on your account to create more buying power. By using leverage we can essentially use smaller amounts of initial capital to generate profits. It is important to be aware of the risks involved in employing margin trading in your portfolio because losses are multiplied according to the amount of margin used. It is also important to understand the risks of shorting because shorting involves borrowing from your broker and potentially incurring a loss on your capital.
3. Arbitrage :
Arbitrage trading involves taking advantage of the price differences of two similar assets to generate profits. The purpose is to buy cheap and sell expensive and make profit when the price differences are minuscule. It is important that you are able to identify the correct pairings for this method to be effective in cryptocurrency portfolio management. Arbitrage opportunities are present everywhere, it is our job as traders to identify them before they evaporate. This method is still profitable in volatile markets because the volatility allows for prices to fluctuate wildly.
4. Short Selling :
Short selling is the exact opposite of arbitrage. The purpose of short selling is to borrow from your broker and sell a security for a price higher than the current market price. The reasoning behind short selling is to profit from the decline in value of a security by borrowing the appropriate amount. Short selling requires that you are informed about what your broker permits and that you understand how securities move downward on their own before we will recommend this method as part of our strategy.
Binocs is a crypto tax software and portfolio management platform which is developed for cryptocurrency traders to manage their portfolio and monitor their performance. It is easy to use and operate, delivering a unique feature that allows traders to monitor the performance of their trades in the form of live charts and graphs.