Our recent guest article about investing in crypto currencies led some of our readers to ask the question – can Automatic Investment Management (AIM) be used with cryptocurrency trading like Bitcoin?
Yes it can!
In fact, AIM is the perfect strategy to profit from the volatility of Bitcoin & other crypto currencies.
Here is why. Then I will explain how, at a high level.
WHY AIM IS A SAFE AND SMART WAY TO TRADE WITH CRYPTOCURRENCIES
Crypto currencies are extremely volatile and are therefore meant to be bought and sold. Just ask the people who didn’t sell Bitcoin when it was at $20,000 and held it until it was down to around $3,000.
If you want to make big profits from Crypto currencies then you must actively sell them when they are high and buy them when they are low. AIM is the reliable, scientific method to always buy low and sell high. So that is why AIM is the smart and safe way to guide your trades with cryptocurrencies.
HOW TO TRADE CRYPTOCURRENCIES WITH AIM
First, please understand that I can’t explain everything about AIM in one blog post. My first book about AIM was over 300 pages. My most recent and third book about AIM (AIM for Millions with Stock Options) is almost 100 pages with lots of spreadsheets and screenshots. But I will give you a high level tutorial for what you do.
First you use the 50% CASH feature of AIM. Establish an account where you want to trade your cryptocurrency where you can also keep a cash balance.
Next you want your initial buy of your cryptocurrency to be at a good (low) price. For stocks and LEAPS I recommend finding one at or near its 52-week low. Buying low and selling high is the key to profitable investing! It is very simple and scientific but that isn’t what most investors do. They let the emotions of fear, greed, or what other people say make their trading decisions for them instead. That is where AIM proves itself.
After your initial buy you need to calculate the prices for your next buy and sell. And how many “coins” to trade at each price.
A good rule of thumb with AIM is to wait till your price goes down 33% before buying. So if you own 10 coins you bought at $10,000, then AIM would tell you to buy 3 more if the Crypto coin goes down to $6,500 and would tell you to sell 3 coins if it went to $15,000 a coin. This is easy to do because is set up with half your money in coins and half in cash. So if you own $100,000 in Bitcoin, then you add $100,000 for cash and start with $200,000.
Below is an example with Bitcoin. One important tip is that whenever you make two buys in a row it means you are in bear territory. You need to adjust your strategy for your next buy. That is when I move to my Bear Strategy so you never run out of cash.
You will see that 2 buys have created a sell of 5 coins at your original purchase price that will be profitable because your break even point is much lower than $10,000 a coin.
You may be concerned that the total portfolio value (the far right column) has gone down significantly from August to October. A drop of 32% to be exact. But look at the price of Bitcoin – it has fallen from $10,000 to $4,000 or a 60% drop! Your 1/2 CASH feature of AIM has reduced your possible loss by half. And your ownership of Bitcoins has increased from 15 to 23 (or 53%) along the way! So when (or if) Bitcoin prices rebound to the starting price of $10,000 your portfolio value would become $342,000 ($10,000 X 23 = $230,000 + $112,000 CASH = $342,000). That would be a portfolio increase of 14%.
Final point: you need to recognize that unlike the LEAPS I normally talk about, cryptocurrencies can go to absolute ZERO in value! The only way for a stock or LEAP to go to zero is if the company goes out of business. That is certainly possible but not for the companies I talk about. Not overnight or even within the period of our LEAPS contracts. But you can’t say the same about cryptocurrencies. So you shouldn’t ever invest money in cryptocurrencies that you aren’t prepared to lose completely.
I hope this article shows you why (and how) AIM is a smart and safe method for trading in the very volatile and unpredictable market of cryptocurrencies. To learn more about this spreadsheet and investing with AIM, look for my books on Amazon, browse around my website, or go to my Free Offers page where you can find some special offers to learn more from me.
DISCLAIMER: Jeffrey Weber is not an investment adviser and gives only his personal view and opinion, never making any investment advice or recommendation to buy or sell specific securities. Investors in financial assets must do so at their own responsibility and with due caution as they involve a significant degree of risk. Before investing in financial assets, investors should do their own research and consult a professional investment adviser.