Making money by trading Bitcoins, Litecoins, Darkcoins and other virtual currencies is a profitable business. But it has a high risk for people who have no strategy and just randomly trade. In the long run they will surely lose their investment. But I managed to double my Bitcoins in 3 month with a trading strategy that I am about to share with you!
I made up a rather complex but very effective trading strategy that will always work, if applied correctly. You will be able to trade virtual currencies with (almost) no risk and you will know how much exactly you will earn every time. I have programmed a trading bot in PHP for the CEX.IO market that does this automatically and I will publish the source code for free download!
The basic concept behind the virtual currencies trading strategy is quite simple:
- You calculate how much you can earn from a trade.
- If the profit is more than 0, and if it is enough for you – then you trade. If the profit is not enough, you skip.
- You wait a few minutes and start from point 1.
I am lazy and I don’t like to calculate at Step 1, and I don’t like to repeat thing over and over. The bitcoin trading strategy requires some simple math every time you trade and that is why I use a bot to automate the process.
The idea behind the bitcoin trading strategy
To explain how my strategy works I will build up the idea in steps – starting from the basics
Imagine that you have 1 Bitcoin. You sell your Bitcoin to buy Litecoins. You sell the Litecoins to buy Darkcoins. You sell the Darkcoins to buy Bitcoins. If you pay no transaction fees and taxes, at the end you will have 1 Bitcoin again.
So basically you trade:
1 BTC → LTC → DRK → 1 BTC
The statement in Step 1 would be correct in a perfectly balanced, high demand market with no taxes. But the real market is not like that. Imagine that the market has no taxes but the supply and demand on the market will change over time and this will cause a dis-balance in the prices at certain moments. So at the end of the trade you will not get exactly 1 Bitcoin. You will get a little more or a little less. For example:
1 BTC → LTC → DRK → 0.998 BTC (in this case you lose a little)
But you can trade the currencies in another sequence and earn a little bitcoins
1 BTC → DRK → LTC → 1.002 BTC (in this case you earn a little)
So there are 2 ways to trade your Bitcoins and in the first case you lose a little and in the second you earn a little. You can check the prices on the market and calculate in which case you will earn, and how much exactly. If the profit is enough for you – then you can trade. Then you can repeat many times to earn more Bitcoins!
The statement in Step 2 would be correct in a high demand market with no taxes. But the real market has some trading fees.
But you can still make profit. Lets assume that you choose to trade:
1 BTC → DRK → LTC → 1.002 BTC
In this case your earn 0.002 BTC, before trading fees
You can calculate how much are the trading fees:
For example the fee could be: 0.01% for transaction, and you have 3 transaction.
Fees = 3 x (0.01% * 1 BTC) = 0.0003 BTC
You subtract the fees from the earnings and in this case your earn 0.002 – 0.0003 = 0.0017 BTC.
The statement in Step 3 would be correct in a high demand market, which changes slowly. But the real market changes fast! What you want to trade is:
1 BTC → DRK → LTC → 1.002 BTC
But while you trade the Bitcoins to Darkcoins, the price of the Litecoins has changed and has ruined your strategy. What you actually get could be:
1 BTC → DRK → LTC → 0.995 BTC
But there is a simple workaround. You need to have 3 BTC:
1 BTC + Darkcoins of value 1 BTC + Litecoins of value 1 BTC = 3 BTC
This way to can make 3 transactions at once, without waiting:
1 BTC → DRK
Darkcoins of value 1 BTC → LTC
Litecoins of value 1 BTC → 1.002 BTC
These 3 transactions will be practically an equivalent of the initial idea, but you run them simultaneously. The combination of these transaction will give you the profit in Bitcoins.
Final notes on the trading strategy:
Lack of supply and demand can ruin your strategy. If there is nobody to buy your Darkcoins in the next 15 minutes, the price may change and ruin the deal. Choose currencies that have a stable supply and demand.
You have to act fast because if you calculate your profit for 2 minutes, the market may change! Make use of a trading bot.
You can use this strategy with any currency. Good luck!