Looking to succeed in bitcoin trading?
One great way to make this happen is to listen to those who have already succeeded in this brave new investment world.
A perfect example is Tim Enneking, a hedge fund manager who holds the all-time annual performance records for both funds (5,556.39 percent) and also for funds of funds (356.68 percent).
How does Enneking achieve such stellar results? What is the secret to his success? In this article, Enneking, currently managing director of Crypto Asset Management, shares some valuable tips for newer investors.
A Cautious Skeptic
Enneking first got involved with trading digital assets when he started running The Bitcoin Fund, the first digital currency fund ever created. Very shortly after the fund’s inception, its creators asked Enneking to manage the entity.
“It is an index fund,” he noted, meaning that the fund is indexed to a specific asset, in this case, bitcoin. Basically, when investors subscribe, this fund purchases bitcoin. Alternatively, when investors redeem their interests, the fund sells.
Even though he was running a fund involved in the purchase and sale of bitcoin, Enneking remained skeptical of the digital currency, believing that fiat currencies had a far more solid foundation.
“In my mind, fiat currencies set the bar very high,” he stated. “Everybody accepts them, they are used widely, and people use them for transactions all over the planet. I didn’t think bitcoin set the bar nearly as high,” Enneking added.
He started taking a closer look at bitcoin in an effort to get a better handle on the digital currency.
“I dug into every kind of historical financial scam in detail,” said Enneking. “I concluded that bitcoin didn’t line up with any type of scam.”
“I didn’t see anything clearly wrong with it,” he stated. As a result, “the bar of bitcoin rose a bit.”
Then, Enneking began delving into fiat currencies. He notes: “Since Nixon completed the process of taking the U.S. dollar off the gold standard in 1971, and every other country followed suit, fiat currency was backed by nothing.”
A New Beginning
After coming to the conclusion that bitcoin would have a role to play in the financial sector, Enneking started looking into more active management. After reviewing his options, he decided to take a fund of funds he had created, Tera Capital Fund, and convert it to a digital currency trading fund.
Tera Capital Fund, which was based in the Cayman Islands, broke the all-time annual performance record for funds of funds with a more than 300 percent return.
Looking to manage a fund in the United States, Enneking created his latest fund, Crypto Asset Fund.
As for what motivates him to manage digital currencies instead of other assets at this point, Enneking emphasizes that the space is fresh and interesting. Because the space is so new, its participants have the opportunity to make history.
“We introduced the first fund, both globally and in the United States,” he notes. “We introduced the first index class. We’ve now introduced the world’s first crypto-denominated share classes.”
How can newcomers to the space potentially enjoy great success? Enneking provided several tips.
Take Your Time
If you are new to bitcoin trading, proceed slowly, Enneking advises. Plan every move carefully, and do not be impulsive. Just because you have money in your pocket and you are interested in bitcoin, that does not mean it is a good time to invest. Take your time, and find the perfect place to enter the market.
Analyze The Market
If you are looking for some practical ways to find your entry point, there are a few different approaches you can use.
Fundamental analysis, which evaluates bitcoin’s key price drivers, can prove helpful. Using this method, you can evaluate the digital currency’s key fundamentals and get a better sense of whether it is undervalued or overvalued.
Another technique you can use is technical analysis, which looks at key technical indicators like price movements and trading volume to assess market sentiment. Armed with this information, you can find the best time to invest.
However, even if your technical analysis tells you it is a great time to buy, do not make your purchases all at once, says Enneking.
“When it is a good time to invest, stage in,” he says, meaning that investors should phase themselves in gradually.
For example, if you wanted to invest $10,000 in bitcoin, you could buy $1,000 a week for 10 consecutive weeks. Alternatively, if you wanted to take things a bit more slowly, you could invest $1,000 every month for a period of 10 months.
Other Solid Investment Principles
In addition to covering these basic investing points, Enneking provides several other investment principles that traders can follow. By leveraging these rules, you can not only increase your odds of meeting your investment goals but also save yourself some anxiety.
Do not Check Your Investments Every Day: If you are a new trader, cultivate the discipline of not looking at your investments every day, suggests Enneking. The fact that digital currencies trade 24 hours a day complicates the situation, as it is impractical for any investor to constantly watch the markets. If your position is solid, hold onto it.
Be Patient: When it comes to digital currencies, no matter what position you take, it will eventually be right, notes Enneking.
For example, suppose that bitcoin is trading at $3,500. If you want to take a long position on the digital currency, thinking it will go up, you will eventually be right. In contrast, if you want to short the asset, thinking it will fall in value, your prediction will eventually come true. The moral of this story is be patient. Do not be phased by the market’s volatility.
Use Stops for Bitcoin Investing: Because bitcoin trades 24 hours a day, you can increase your chances of meeting your investment objectives by using certain tools like stop-loss orders to profit from the market’s fluctuations. Basically, stops automatically execute trades when an asset hits a certain price.
For example, if bitcoin is trading at $3,500 and you want to limit your downside risk, you can set up a stop-loss order that sells your bitcoin when the currency falls to $3,200.
Alternatively, you can set up a trailing stop, which automatically adjusts to the market’s price movements. For example, if bitcoin is trading at $3,500, you could set up a trailing stop that places a sell order when bitcoin falls 10 percent from its peak.
However, investors should phase in and phase out when using stops, emphasizes Enneking.
In other words, if you own 10 bitcoin, do not put in one trailing stop for all of these holdings. Instead, you could put in five separate trailing stops for two bitcoin each.
“People shouldn’t be all in all the time,” he cautions.
If you are new to bitcoin trading, it is useful to get a sense of which sources of information are helpful.
CoinDesk, CoinTelegraph, and CryptoCoinsNews are some of the best industry-specific sources of information, recommends Enneking. “Keep an eye” on Bloomberg, Forbes, and CNBC,” he adds.
He advises newer traders to stay off Reddit and blogs, emphasizing that it is difficult to tell what information is valid.
Summing It Up
If you are just starting out as a trader, there are several tips you can follow to increase your chances of success. Move slowly, counsels Enneking. Find the right entry point, and phase yourself in gradually. Once you have a position in the digital currency markets, do not check it every day.
Check the right sources for information, as doing so can mean the difference between success and failure. Finally, you can leverage tools like stops to help you take advantage of the market’s volatility.
Digital currency investing can be complicated. If you are looking for more information on this subject, subscribe to Bitcoin Market Journal today.