There are a lot of different moving parts to consider when setting up a trading plan. The factors that play a role in your trading plan are:
- trading experience,
- your available time,
- your risk profile, and
- what currency pairs you want to trade.
Let’s take a look at how your trading experience can influence your trading strategy. If you’re a complete newbie to crypto trading, you may want to stick to simple orders and straightforward signals - relying on analysis drafted by expert trades can be of great use here. Don’t worry about crafting complex orders, algorithms, or opening up your old statistics textbook - just focus on getting a feel for the different levels and signals, so you can start to have an intuitive feeling after just glancing at a chart.
Once you’ve got a few trades under your belt and you’re ready to dive deeper, it may be worth it to start looking more deeply at charts and indicators, as well as playing around with more advanced orders. You can start to vary, or increase, your risk profile by using trailing stops and adding positions. For newer traders, just stick to standard stops and set clear profit targets.
Profit is Time Plus Risk
Another commonly overlooked, but a crucially important factor is how much free time you have for trading. If you trade as a hobby, or just as a side gig for some extra money, then you probably won’t be able to continuously monitor the market and adjust daily. In that case, your trading plan should work with your limited time and possibly work on a longer-term approach where you can leave trades open for a few days.
On the other hand, scalp traders want to open trades on a very short-term basis, hours or even minutes, and generate a large volume of trades over that span. An approach like this would typically require a large time investment, so make sure you can set aside the time before using that sort of trading strategy.
Your risk profile, as mentioned in a previous article, is also a major factor in developing your trading strategy, and may play a big role in which coin pairs you’ll want to trade. For example, if you feel comfortable with large amounts of risk, then you may want to trade lesser-known or altcoins with high volatility. But if you want to play it safe, then it would be best to stick to well-known and liquid coin pairs, such as BTC/USD, ETH/USD, LTC/USD, and so on. Typically, the less trading volume a coin has, the riskier the trade.
As always, preferences vary and being able to pinpoint your own preferences, set clear profit targets, and understand your available time and risk will allow a trader to construct a profitable trading plan for themselves. Don’t forget that trading plans are not set in stone, and as these factors vary, you may need to re-examine your initial plans and adjust them accordingly.