My ICO trading strategy

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Adriaan Admin

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Jan 30, 2018
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#1
As we all already know investing in ICO's is risky business: many scams, many failing projects, just too many projects coming out, regulators cracking down more and more. Also many ICO's are now pulling back to private sales, ICO pools and soon just be fully compliant with security laws. This means that the whole ICO investing business is very likely to change significantly and also, as soon as profitable strategies are being recognized by most participants, the expectations will already be priced in by the market and the former patterns that you could capitalize on, are going to change or won't apply at all anymore.

In early 2017 you could almost not miss with any ICO, because almost all of them (even the blatant scams) went up 10x easily, and a measily 3x was considered an underperforming ICO. Later in 2017 it became already a little harder and the percentage of coins that didn't even get to the ICO price for a period of time, increased. Many of those eventually got a rally after all when the late 2017 final altcoin bull run made everything soar.

For the current 2018 ICO market also applies that eventhough there was a boom of ICO's being held and records of capital raised (first half of 2018 brought as many ICO's and double the amount raised (almost $14billion) than the whole of 2017!!!), because of the crypto bear market, it has been quite difficult for ICO tokens that were listed to be able to reach the massive gains in the initial listing pumps like we saw in 2017. Of course there were some exceptions that did extremely well upon listing, but many had to be satisfied with more modest gains and a .majority would be trading at a loss almost instantly. The bear market made it also for ICO investors extremely hard to make a quick gain. And most are now hoping and waiting if their project will "go to the moon" after all later down the road and hopefully not die off before (and realistically most will die eventually.

And there can be only so many in the top 100 coins from that monthly 100 ICO's. Based on the average ICO fundraise, which is $25 million and the ICO price is about the same as the exchange price, which means your marketcap is also around $25 million, at current market your project will be in the lower of the top 250. A 10x gain would shoot the coin in the top 50, and a 40x gain is going to get you in the top 20. If your coin has a higher fundraise, that also means that the market cap at exchange price = ICO price, is going to be a lot higher, which means a lower short term upward potential: a 50 million ICO with a 50 million marketcap can "only" go as high as 20x to land in the top 20, so investors should not dream of short term 50x-100x gains, and the projects that do make double digit growth are extremely rare nowadays.

Indeed, it is difficult times for the quick coin flipper because picking the hot gains is not that easy any more and those gains are not that hot anymore.

And if you say, I am in this project for the long run, of course that is great that you believe in your project, but the competition on the ICO and crypto market is huge as I described before, and if the project is not visible long enough in the top 100, investors lose faith, price drops more, team gives up/fails/runs off with funds, you'd better be diversified in a lot of projects and hope at least 1 of those will do "something". Meanwhile, while your funds are stuck in losing investments, that you don't wanna sell at a loss, the rest of the market may go up without you onboard.

So cashing in early gains is important to have your initially invested funds free again to invest in other/new projects and/or put even your profits at work again and that multiplying and diversifying. Another important reason for locking in early ICO profits is the common fact seen so many times in 2017 and as well with the few winning projects in 2018, if the early gains of the ICO from exchange listing are massive, the well known hockey stick pattern, those gains are 9 times out of ten at least, very soon corrected back to reasonable levels, without ANY certainty that it will ever (and if, WHEN: months, maybe years and indeed mostly never), giving back most of those gains.

What do I wanna achieve: diversify my risk over more projects, lock in early gains to lower my risk on any project and secure gains when made, have my investment (with or without gains) available as soon as possible for re-investment and exposed as short as possible to any high risk ICO.

WIth all that said, I would like to share my ICO strategy with you, which has been both protecting my investment capital and helped me lock in profits on ICO's before the almost inevitable corrections occurred. I am not going into much detail of my selection process of potentially successful ICO's, but I will tell you that an important has always been to at least trying to identify the following:

-Enough hype and real demand for the project's token/coin and that this demand is significantly higher than the amount of tokens that are being sold. This means that I need to estimate if the total amount of investment that all investors wanna make is significantly higher than the amount of capital that the ICO is trying to raise. A limited whitelist helps, large social media attention, large numbers in the project's channels like Telegram can all be signs that add to the total equation. Also a high profile project is interesting, with media coverage, well known partners or high profile team members all help. Easier said than done, I know, and there is really no cookie cutter formula to identify that with certainty and you won't be able to get it right every time of course.

Keep in mind that for the short term strategy I do not necessarily evaluate the long term prospect of the project; this is only a secondary requirement that will make me decide to keep a small portion of the tokens AFTER I locked all my first profit levels. Most important are the hard cap, token distribution, difference between lowest and highest price during sale (should not be too much), how many "free" tokens (bounty tokens, airdrops) are going to be on the market (cause sell pressure). And I need to have the idea that the project will be willing or be able to at least get the project listed on some of the higher end exchanges; not all teams are able to succeed (because the exchange listing process is pretty difficult and competitive) or don't care enough (or just outright scams that don't even have the intention, and will just run away with your money). Just giving some broad ideas here, it is mainly guessing and trying to make some estimations and assumptions.

Because in any ICO the risk is so high of failure or even exit scam, I never put all eggs in one basket or go all in on any ICO. As a rule of thumb between 10-35% of my "ICO investment capital" i put in any individual ICO.

The next IRON rule is that I sell 1/3 of my ICO tokens once my first predefined price goal has been reached. And I will make sure that that amount of tokens is in a limit sell order as soon as (literally the minute that) the trading for that token goes live on the first exchange, because that is the highest chance that the first big wave in price action will occur, IF it occurs.

My first price goal is always at least 3x my ICO price (in ETHER if I made the investment in ETHER) and I will sell 1/3 of my tokens. At this point I have 100% of my principal investment back and I can ride the rest of the potential wave without any downside risk. Another big advantage is that I have my principal immediately back and available for the next potential investment (I hate it if my funds are locked up too long in any investment before I can take money out again). In some extreme cases where I feel very confident that there is way way way more demand for a token than there were offered for ICO sale, I might choose to set my first 1/3 sale at a 5x ICO price limit sell order. In such case that that succeeds, I would have my principal back + a decent profit and STILL 2/3 of the tokens in my possession.

Next price target is usually 10x at which I sell once again 1/3 of my tokens: this all 100% profit that I lock in and then I still have 1/3 of the original token amount left. I tend to submit the limit sell order on the exchange as soon as the first order has filled. Your price target might hit only shortly and if your order is not on the exchange because you were sleeping when it happened or you were just to late due to a variety of reasons, you may miss that price and you'll never know if it goes back there again or even when if it does. I have missed such a price target in the past, just because I was a few hours late and it has never been back anymore since then.

What to do next with the remaining tokens depends a lot on how I feel for the project. If I am long term believer in the project, I might decide to HODL the rest. If I am only for a quick flip and don't have a specific good feeling for the long term perspective but am only in it for the short term hype, then I may decide to sell either 50% or 100% at 20-25x, and if I still have tokens left, the rest maybe with a trailing stop loss that i manually readjust as long as the price goes up even further, where the trailing stop should be filled once the price starts to correct.

Sure, you might be selling a lot of your stack prematurely in those rare cases where the ICO goes 50-100x, but the chances for that are so small to happen in the short term and you'll never know if that will ever happen in the long run, but the idea is that I am able to have a higher velocity of my profits and principal becoming available faster and being able to invest more often and in more projects. Hoping for that 1 jackpot coin that will make you a millionaire is not likely to happen and the chances are even looking worse for the times to come.

I will add a short summary in the comments!!
 
Last edited:

Adriaan Admin

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#2
In short the strategy looks like this:

1/3 of token amount in pre submitted limit sell order for 3-5x (my) ICO price (in Ether or BTC)
Next 1/3 of original token amount in pre submitted limit sell order for 10x (my) ICO price

Then for the remaining amount (1/3 of original):

OR: HODL the rest in case of long term confidence in project (and optionally, occasionally sell smaller parts to lock in profits on the way up)
OR: sell 100% of remaining token amount at 20-25x ICO
OR: sell 50% of remaining at 20-25x and the other 50% with a trailing stop loss on the way up.

As you see there is some flexibility to adjust for each individual project but I try to be as disciplined as possible to remain within the framework and boundaries of the strategy.

As said this is the broad strategy that I might have used in the past and would use if I would invest in ICO's in the future; in no way it is a recommendation for you to do the same thing, let that be very clear!!
 

Adriaan Admin

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#3
I do have to add that I have become really really picky with ICO's that I might participate in, because I hate to give back earlier gains to a new project if it fails to boom or have my funds lock in too long before. So if there isn't anything that I really think (not hope, but rationally considered), then I prefer to have my money on the sideline or just in major coins. Not even sure how long ICO's stay profitable even in the long run, especially if regulations are really coming out. Which is why I really believe that if I would be invested in any ICO now, I would make myself very sure to benefit from the first exchange listing rally if it occurs.
 

stellarowl12

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Jan 30, 2018
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#4
Amazing insight. Personally I havent been investing in ICOs since last year because it's just too much of a hassle for U.S.-based investors. But if I did I'd probably follow your strategy!
 
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