How to Make A Crypto Trading Plan

Whether you’re a long-time cryptocurrency enthusiast or you’re brand new to the world of crypto trading in Australia, a trading plan can be an invaluable tool. A crypto trading plan can help you define your goals, set boundaries, and easily keep track of your investments. Without a trading plan, crypto traders in Australia are at risk of making significant financial decisions based on emotions and the shifting trends of the daily cryptocurrency market (a dangerous mix!). 

But what exactly is a cryptocurrency trading plan? How can you make an effective crypto trading strategy? And will a trading plan make it more difficult for you to take advantage of new opportunities for crypto trading in Australia?

What Is A Crypto Trading Plan? 

According to global finance guide Investopedia, a trading plan can be defined as a “systematic method for identifying and trading securities that takes into consideration a number of variables including time, risk and the investor’s objectives”. It acts as a basic framework that will guide you in your trading decisions. For this reason, a trading plan should be well-researched and tailored to your specific circumstances.

For crypto traders in Australia, a trading plan may outline how much a person will invest and what triggers they'll use for buying and selling cryptocurrency. It will also state what types of cryptocurrency they’ll be willing to trade in and which crypto brokers in Australia they’ll use to complete their trades.   

Why Do I Need A Crypto Trading Plan? 

It can be hard not to get emotional when you’re engaged in crypto trading in Australia. Any sudden changes in the value of a cryptocurrency can make it tempting to abruptly buy (or sell) without taking time to consider the consequences. But with a crypto trading plan, emotion is removed from the equation. With your triggers for buying and selling clearly written down, you won’t be as tempted to make rash or sudden decisions based on emotion. Instead, you’ll have a clear and logical contingency plan in place to help you deal with sudden changes in the market. 

A crypto trading plan will also help you avoid some common pitfalls that may affect crypto traders in Australia. For example, you may decide in your crypto trading plan that you will only engage in trades when you are in a clear and alert frame of mind. Or you may stipulate that you will only trade with cryptocurrency brokers in Australia that have an established industry reputation. 

How To Make A Cryptocurrency Trading Plan in Australia

Even if you’re very new to crypto trading, you can still put together a comprehensive trading plan. The key is to do thorough research as part of a systematic 3-step approach: 

1. Investigate patterns in the market: You don’t have to be a mathematical genius to identify basic patterns in the cryptocurrency market. Some trends occur pretty regularly and are easy to spot – others may be more subtle. But there is plenty of information available online that can be useful for investigating market patterns. Cryptocurrency brokers in Australia may provide data on recent cryptocurrency movements as well as detailed information on popular cryptocurrencies such as Bitcoin, Ripple and Ethereum. Crypto brokers in Australia that offer a truly diverse trading platform will also be able to educate you on more obscure cryptocurrencies like Dogecoin, Stellar and Cardano. The more research you do, the easier it will become to understand what your trading options are, what levels of risk are involved and how you can go about achieving your short and long-term investment goals.  
2. Write it all down: In addition to outlining some basic, self-imposed trading rules (e.g., only using registered crypto brokers in Australia), you can now start to formulate the details of your crypto trading plan. This should cover two basic elements: when you will buy and when you will sell. For example, based on your research, you may decide to immediately sell your Bitcoin should the price drop below a pre-determined value. This kind of strategy is designed to prevent significant losses. Or you may choose to sell a certain percentage of your cryptocurrency every time the price increases by 25%, with the profits to be reinvested. Remember that while it’s always a good idea to seek expert advice, the details of your trading plan won’t necessarily be the same as someone else’s. Your plan should reflect the level of risk you find acceptable and the level of skill and experience that you currently have in crypto trading. 
3. Give yourself a trial run: Once you have a plan in place, try engaging in a trial run to test out how your trading plan may perform under real-world conditions. You can do this by using historical data to see how your crypto trading strategy would have played out if you had it in place a year (or more) ago. Or you could try applying your new crypto trading plan using hypothetical trades and pretend investment, just to give yourself some time to practice. A trial run will help you to identify any areas of your trading plan that may need adjusting before implementation.