When is it good to step into a new coin? How do you decide which coins to invest in? And how can bots help make these decisions based on current and past market developments?
In this interview, we talk about these topics with our expert Ronald van Woensel.
Which Diamond Pigs strategies use fundamental analysis and trading using bots?
“We offer a diversified selection of strategies that our clients can choose from. Not all our strategies use trading or fundamental analysis. We have strategies that hold a collection of coins for long periods, like our Berkshire Top-10 strategy, but we also deploy fundamental analysis and trading on a number of other strategies, like our Duroc and Jinhua strategy. Here we focus on the methodology used by those 2 strategies.”
What do you do before deciding to invest in a coin?
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“First, we do fundamental analysis. With this analysis, we aim to find which coins are most lucrative. Which will have the best opportunities?
To find out we go through a checklist:
1. Is the coin backed up by a good product, a good project team, and/or a valid use case? This depends on the type of coin (utilitarian, development project, etc).
2. Which investors are behind the coin?
3. How often do they contribute to their code repository, and what quality is it?
4. What markets are they active in? Are they active in gaming, DEFI, etc?
5. Is there an active community around the project? We follow this community closely for a while to get an indication of the sentiment.
6. What are the market specs, like trading volumes, market cap, total coin supply, etc.
For example, we don’t want the coin to be like a clone of BitCoin. We look for coins/projects with a unique offering and a good vision.
Subsequently, we make a list of what coins we would want to get into. And then we start analyzing.”
What do you analyze, in order to choose the right coins?
“We focus on discovering the trends over the past. When are they up-trend? Do we analyze the up/downtrend cycle of a coin, and possible entry and exit scenarios? There are signals that indicate when the best moments are to get in. They determine when it’s smart to start buying. You do have to accept that a coin can still go down. But that’s part of the game.
And then it’s time to start determining when to sell. We are currently working on implementing bots because they can assist in developing a strong trading strategy and automating trades, which helps to scale for our clients.”
How can bots help determine a good trading strategy?
“You may already be following the candlestick figures of the coins you trade in. Bots can pick up signals that help decide the next move. Such as, when a downward trend is ending, a bot can pick up the signal. However, for selling the bots would use different indicators such as: calculating potential loss, and potential time loss. The criteria for selling can be very different.”
How do bots gather the right information?
“Currently the basis for the bots is historical price data. However, every strategy requires a different system of analysis. We use advanced analysis methods to determine the best approach for each coin that we would like to trade.”
What are the benefits of using bots?
“There are quite a few benefits that bots bring to trading:
– Trading bots are active 24/7 continuously
– They can buy and sell a lot faster
– They can respond to fast market sell-offs
– They can monitor large amounts of coins at the same time
– They can stay out of the market during downtrends and thus limiting losses
All these advantages should result in better performance compared to the buy-and-hold of a coin for a long period of time.”
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