Crypto Academy Season 3 | Intermediate course by @allbert –week 3: DCA to create a Portfolio

in SteemitCryptoAcademy2 months ago
Hello my Crypto Gears, again thank you for your trust, my wishes for you is that this world of cryptocurrency trading will change your life as it has changed mine.

We have quickly reached the third week of Steemit Crypto Academy season 3. This day we put aside the theory and focus directly on the practical part of this exciting world.

So Let's get started.

0.pngImage edited by me in Powerpoint

Intro

I believe it is propitious to get into the matter regarding the creation of what will be the main possession that will drive our lives from here: The portfolio. A portfolio is nothing more than the set of crypto assets that we store in our wallets. The choice of assets in our portfolio will be paramount in dictating our success and failure.

So today I want to talk about some principles and strategies that I have used in choosing my portfolio, and that I know will help you in creating yours.

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Fundamental Analysis

Within the 3 types of trading analysis, we found Fundamental analysis, which is the detailed study of the projects that support the cryptocurrencies. Such analysis will be the beginning of the creation of our portfolio.

In a world where there are thousands of options in cryptocurrencies certainly not all of them can be good ideas. Unfortunately, there are some that are not well supported or that were created without any serious objective in mind. These types of assets represent a risk for us as they can make us lose a lot of money.

This is where fundamental analysis comes in since through the study of projects we can be able to discern whether a project is good or not by ourselves. This exhaustive study is carried out through the Whitepaper.

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Whitepaper

The white paper is a document created by the developers which contains all the useful information related to the project, where it's explained its objectives, problem to be solved, function, applied technology, roadmap, goals, development team among others.

Based on the information gathered in the white paper we are able to make a value analysis and make our own judgment about a cryptocurrency; in other words, we can decide if a project is good enough or ambitious enough to invest in its cryptocurrency.

Remember that when we buy a cryptocurrency, we are buying a kind of shares of the project behind it. Obviously, you wouldn't buy shares in a bad company, in ruins, with bad business management. You buy shares in a solid company... the same principle applies to cryptocurrencies.

White paper on projects and their cryptocurrencies can be easily found at Coinmarket cap. As already seen in the class of professor @stream4u, Class

coin.pngRUNE's White paper link at Coinmarket cap. Source

Without the review of White papers cannot be a good Fundamental Analysis.

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Solid Projects and Garbage coins

As I mentioned before, the crypto world is full of options and new coins day after day, knowing how to choose between so many options is complicated and crucial for our portfolio. For such reason, I want to talk to you about the solid projects and garbage coins.

I will never tell you where to invest, but I can recommend for your portfolio to invest in solid projects. The characteristics of these projects are:

  • They have a real reason to exist.

  • They solve a problem and provide a tangible solution.

  • Have a good development team

  • Committed to invest and develop new technologies.

  • Have measurable objectives over time and a roadmap to achieve them.

In other words, they are emerging projects that aim to grow within a few years, which implies a good investment.

On the other hand, there are garbage coins, which are nothing more than coins created by enthusiasts, pranksters, or inexperienced people. The best known of these coins: Dogecoin. Do not misunderstand me, you can make money through them, but only on special occasions and under certain phases of the market, however, they are not good long-term investments because they do not have a project that supports them, but only the confidence and approval of the public.

You may not know this, but creating a token is very easy, and that in itself does not mean that a coin belongs to a reliable project. In fact, almost none of these Garbage Coins has a White paper with relevant and serious information. Some of them are just a joke or a MEME.

These garbage coins are a real risk for the portfolio, since they are very volatile, and just as one day they can be in the clouds, the other day they can fall like a sack of lead. I repeat, the value of these garbage coins is not supported by a real project, but only by Internet news and people's speculation.

Remember that what we are looking for is to create a long-term portfolio, with solid projects that grow over time.

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HODL

Actually, this word comes from Hold, however, a typo led to one of the best-known terms: Hodl. This term refers to the most basic strategy or the easiest method of trading cryptocurrencies and refers to buying a crypto asset at a price and simply holding it in our wallets to wait for its price to rise and then selling it to make a profit.

In this strategy, we are not interested in the daily changes and constant movements of the crypto asset's price, but in its long-term development. This is where fundamental analysis plays a crucial role because if we know how to choose a good project we can rest assured that no matter how much the price varies or how strange it behaves, in the end, when the years go by your coins will be worth more than when you bought them because they are backed by a solid project.

In this step after we have chosen our project and our coin we go to our Exchange to make the purchase. In my case, I will demonstrate the purchase of the Thorchain RUNE cryptocurrency through my FTX verified Exchange account. All images belong to FTX Exchange. Source

1- First of all I share with you a screenshot of my verified FTX account. (This is a requirement that I will demand from all of you in the development of your tasks).

F1.png

2- As I mentioned I plan to buy RUNE using USDT. As you can see in my portfolio I have 0.61USD in that currency from a past trade. I select the desired currency.

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3- I will be transferred to the trading window. Then I select the RUNE/USDT option, indicating which pair I will trade.

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4- The purchase window will be activated. I selected the option to buy RUNE, then I selected the option to trade at market price. Finally the amount of the operation (5.57usdt) and click the buy button.

F4.png

5- Finally you can check how the operation was closed, adding the new RUNE tokens to my wallet in the exchange.

F5.png

This is the basic operation of buying a Cryptocurrency, and it is similar in most exchanges.

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DCA

DCA or Dollar cost averaging, is an ideal investment strategy for novices or people who want to get started in the world of cryptocurrencies. Imagine you have the money, the desire but possess little experience with trading and information about how to read a candlestick chart, use indicators, understand supports, resistances, trends or perform technical analysis.

This is where DCA comes in, and consists of making purchases of the same crypto asset at equal time intervals (every week, every 15 days, every month) regardless of the behavior of the market at that time.

Purchases can be made by investing the same amount of money, or by dividing the total amount of investment in equal parts in markets that are down, thus seeking to reduce the effect of volatility.

In other words, in DCA we must repeat the purchasing process learned in the previous point as many times as we plan to divide our total investment, always at equal intervals.

Another benefit is that it reduces the impact of making an entry at the wrong time, something that is very common among newcomers. Imagine you have 100USD which you wish to invest in a cryptocurrency. If you decide to make a single purchase, there is a risk that you make it at a time when the asset is particularly expensive, then the price could fall and you would lose your investment.

If on the other hand, you divide the 100USD into 10 purchases of 10USD each, you would be spreading that risk by making spaced purchases at equal time intervals. Since if you make the first purchase at the wrong time of overpricing, prior to a downtrend (which you do not foresee), you still have 90USD that you can spread over 9 more purchases at a lower price.

Upon completion of all trades, we would have an average purchase that can compensate for any rookie judgment errors in locating an entry.

Let's look at the following example or drill:

T1.pngRUNE/USDT chart, 1D. Image taken from Tradingview, Source

As you can see I have made 8 trades spaced at one week each. On the chart, you can see the day it was done and the approximate price of the asset at that time.

The first trade is what I call a bad entry, it was made when the asset was worth about 20usdt, however it then fell sharply, continuing to trend week after week. Similarly, week after week buy trades were made. By the end of the eighth week, we were able to average an asset value of 10.7usdt, which will be the value against which we will compare profit and loss.

In other words, this DCA strategy is similar to if we had made a single purchase at one point when the asset price was at 10.7usdt.

Note this: if we had made a single investment at point 1, on May 19, what would have happened?; we would currently be facing a loss of more than 70% from the current price.

On the other hand, due to our strategy, the level of loss with respect to the current price is less than 40%, and in some cases may be much less or even be in profit... regardless of the bad run we had in the beginning.

Pros

  • No specialized knowledge is needed.
  • Good strategy to be used in bear markets (like the current one).
  • It is a mechanical and constant process where emotions do not come into play.
  • It is a good saving and portfolio-building strategy.

Cons

  • It is a strategy intended for the long term, so it does not yield dividends instantly.
  • On some exchanges, it may carry higher fees, due to multiple trades being made instead of just one.
  • It does not work in bull or sideways markets.

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Conclusion

I must conclude by warning that every trading operation carries risks in itself. All the measures and strategies we adopt serve to mitigate those risks but not to eliminate them entirely.

That is why it is always recommended to possess good risk management, performing the required fundamental analysis without getting carried away by the opinions of others or trending news.

On the other hand, it is essential to understand that any investment we make must be made with money we do not need in the short term, since generally these holding and DCA operations are intended to generate long-term profits.

Homework Task (Season 3/Week-3)

Before starting your answers this week, make sure you have read this publication at least twice and make your own research in order to understand the concepts.

1-Select two Crypto, perform fundamental analysis, and based on your fundamental analysis explain why you chose them. Exclude BTC, ETH, RUNE. Develop and justify your answer. Be original.

2- Through your verified Exchange account (screenshot needed), make a real purchase of one of the cryptocurrencies selected in the first assignment and explain the process. The minimum investment must be 5USD (mandatory) and must present screenshots of the verified account and the whole operation.

3- Finally, make a simulated exercise, using the DCA method to perform the purchase of two assets and present charts showing the data of days in which the operation was performed, price of purchases, average price, sell point, percentage of profit or loss. (include screenshots)

Guidelines

-Make sure you post in the Steemit Crypto Academy community.

-Your article should be at least 300 words.

-Refrain from spam/plagiarism, it won't be tolerated. This task requires screenshot(s) of your own experience. Use images from copyright-free sources and showcase the source, if any.

-This homework task will run from 00:00 July 12th to 23:59 July 17th, Time UTC. (7:59 pm hora Venezuela)

-Users having a reputation of 55 or above, and having a minimum SP of 250(excluding any delegated-in SP) are eligible to partake in this Task. (Must not be powering it down)

-Add tag #allbert-s3week3 #cryptoacademy among the first five tags in this order. You can also use other relevant tags like your country tag. Also, tag me as @allbert in any part of your post.

-Those who include the real examples/screenshots add a watermark on it with your username.

-Please don’t leave your homework link on the comment section unless your post hasn’t been graded within 48 hours.

Feel free to join the comment section if you have any doubts about Homework Task.

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Cc:- @steemitblog @steemcurator01 @steemcurator02
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Hello professor I have a question for you, the second question you asked about buying a token from a verified exchange,, in Nigeria here crypto exchanges are banned you can't buy from exchange but you can buy through P2P system in this case what should be done....

Я удивлён! И поверьте, в любой точке мира можно купить криптовалюту! Главное - захотеть!

 2 months ago 

Can You Buy trought a wallet?

You can't buy or sell through wallet, crypto exchanges is banned by federal government of Nigeria....

 2 months ago 

How could you do last week's homework if Exchanges are banned?

 2 months ago 

I think you can buy using Binance exchange, and you can fund your Binance exchange using P2P.
It a simple logic..

Buy USDT or BUSD using Binance P2P, then you can use the USDT purchased to perform the transaction for the assignment.

Cc: @allbert

That's a good one I will try that out...

 2 months ago 

Great question

You can still buy crypto using p2p method on Binance.

I've been trying this with Binance and it was a great experience. I hope p2p is not yet barn over there

 2 months ago 

Hola profesor, aqui mi entrada https://steemit.com/hive-108451/@sputnik1/temporada-3-de-crypto-academy-or-curso-intermedio-de-allbert-semana-3-dca-para-crear-un-portafolio-por-spunik1

debo a clarar que mi trabajo fue publicado unos minutos antes de finalizar el tiempo límite. Tuve poco tiempo para hacerla y estuve trabajando en ella, incluso una pregunta quedó inconclusa (desde mi punto de vista) por falta de tiempo, aún así decidí publicarla, espero pueda aceptarla. Saludos y gracias.

 2 months ago 

My own question is on the 3rd task

make a simulated exercise, using the DCA method to perform the purchase of two assets and present charts showing the data of days in which the operation was performed, price of purchases, average price, sell point, percentage of profit or loss. (include screenshots)

Are we to perform a real transaction on exchange, or we can make use of Tradingview site?

 2 months ago 

Same answer. But only in 3rd question. 2nd has to be real, and you must prove the account or transaction is yours and is real!!!

Hello professor @allbert

As you can see I have made 8 trades spaced at one week each.

Carefully looking at this, the trades are actually spaced 6 days apart.

Kindly check it, it's once every six days and sometimes twice in seven days depending on the candle you start counting from.

Thanks for the course, I like this DCA idea. It's similar to my personal alternative for stoploss.

@jehoshua-shey, you are very observant. I also discovered that some trades were spaced 6 days apart. However, it's only two I spotted. The first is from May 19 to May 25, which is 6 days. The second is from June 1st to June 7th, which is also six days. Every other six trades apart from these two is 7 days. IMHO, I think a week description in the explanation is not out of the box.

It's okay. Thank you so much.

Thanks bro

 2 months ago 

I'm counting first day too.

You are right prof.

 2 months ago (edited)

I'm counting first day too mate. If You have a little variation of one day it doesnt matter for much authors.

I'm my case I took an extra day in some cases in order to be in line with day marks in the chart.

 2 months ago 

Looking forward to participate

Hello sir @allbert,
Pls I'm interested in doing this homework but the 3rd question is somehow. Pls how can I get the DCA charts for my Binance account

 2 months ago (edited)

You can get it from Tradingview if You want. Only for 3rd question. You must make 2nd in a real Exchange

Yeah, I understand the rest.

Thank you sir

 2 months ago (edited)

Buenos días profesor @Allbert saludos, tengo una duda con respecto a la línea del precio promedio.

La pregunta es la siguiente esa línea sería como una especie de resistencia para salir o es que técnicamente se establece por algo.

 2 months ago 

No. La línea la dibujé únicamente para efectos pedagógicos. Para que se vea el precio promedio.

Lo que hice en el ejemplo equivale a qué hubiese hecho una sola compra en cualquier lugar que la línea toca el precio.

Claro está que es imposible adivinar el futuro. Por eso se hace el DCA

Perfecto amigo.

@allbert que variacion de tiempo recomiendas para realizar la compra de la pregunta 3, del metodo DCA, podria usarse, 15min a 1h? cada inversion?, (viendolo como un ejemplo), podria implementarse de esta forma para esta pregunta?.

 2 months ago 

Depende de a qué intervalo deseas hacer tu compra... Si lo quieres hacer semanal recomiendo diario.

Que sea en una timeframe que te permita mostrar las fechas y días.

Can I do show my investment portfolio using binance?

 2 months ago 

Of course. But the last question can be Made in Tradingview... Only the third question

Ok

Do we actually make trade in number 3 or just give an assumption?

 2 months ago 

my friend, make a simulated DCA operation. We only have one week so is not enough time to make a real extended DCA. You can only make the first purchase in question 2

Hey @allbert I have question. In the 3rd question of this assignment you asked to demonstrate the DCA method to purchase asset at intervals. In this question we only have to show an example with explanations, right? Or do we have to make real trades?

 2 months ago 

Just, examples and explanations, because to do real DCA we'd need several days.

Thats what I thought. Thank you. My assignment is on the way

Also I can use any exchange platform for this question, right?

 2 months ago 

Yeah.

Mi tarea gracias!

Salodos amigo y profesor @allbert aqui mi entrega, un muy buen tema que no conocía y aprendo hoy, muchas gracias.

https://steemit.com/hive-108451/@juanjo09/crypto-academy-season-3-week-3-homework-post-for-allbert-or-dca-para-crear-un-portafolio

Buenas noches profesor @allbert muchas gracias por su clase y por compartir sus conocimientos con nosotros. Adjunto mi tarea

https://steemit.com/hive-108451/@minikay/steemit-crypto-academy-or-season-3-week-3-or-dca-to-create-a-portfolio-or-by-minikay