Cryptocurrencies are an ever-evolving market that presents attractive opportunities for those involved in trading. But what is the right approach to make the most of these opportunities while keeping risk under control?

We discussed this in this new interview with Debora Rosciani, journalist and host for Radio 24 (IlSole24Ore Group), Italy's top financial radio station.

In addition to explaining where the approach suggested in the interview comes from (which, as you may have guessed, is based on systematic trading and, more specifically, the UngerTM Method), we also offer several useful tips for applying it correctly to crypto.

By watching this video you’ll discover:

- The features that make cryptocurrencies perfect for systematic trading 

- The best strategy for leveraging these features

- The parameters to consider when choosing which cryptos to apply such a strategy to

Enjoy 😎

Transcription

Debora

Trading on cryptocurrencies, what's the correct approach? We'll talk about this with Andrea Unger, the only 4-time world trading champion.

Welcome back! Today we're going to be talking about cryptocurrencies. Cryptocurrencies represent a major trend and innovation, leading central banks to also work on their own digital currencies. We're talking about a highly engaging technology and an investment category in which we're wondering how much and in which manner we should invest.

When we talk about crypto perhaps not everyone has a clear idea of the financial structure behind this sector. Too many people think that it's an investment instrument identical to all the others.

I'd like to share with you a recent statement by Fabio Panetta, a member of the Executive Board of the European Central Bank, who said, "Crypto-assets don't just represent a high-risk speculative investment. They even pose a genuine threat to financial stability. So, we must take action to bring crypto-assets back into a clear regulatory framework that today is still missing." So, this appears to be an outright attack, if we can call it that, towards the 10,000 crypto assets currently in circulation and have a total value of $1.3 trillion.

But they lack the fundamentals. They're frequently used for illicit purposes, have high volatility in terms of price, and in many cases, Panetta said, are subject to embezzlement. So, we need to clarify what kind of market we're talking about and especially today we're talking about crypto trading. And obviously, we’re going to be doing that with Andrea Unger, the only one to have won the world trading championship four times in the Futures category. Andrea, welcome back!

Andrea

Hello Debora! Good morning everyone!

Debora

So, the purpose of our webinar is to explain to our audience that cryptos allow for diversification but we need to be very clear about some aspects.

At this moment, moreover, crypto has captured the attention of investors who were previously interested in other markets, such as for example Forex. Today they're shifting towards this world.

So, what approach does a professional trader have towards cryptocurrencies? Besides the fact of being prepared for the most negative scenario that may occur as a result of this investment, thus being emotionally ready, this is, let's say, a basic requirement for an activity like yours. What's next?

Andrea

Well, as a trader, I take advantage of all that is "good" in the crypto world, which today is volatility, or rather the movements that each of these currencies make. They are significant movements, not necessarily directional in the long term but sufficiently wide in the short term, and that allows me to, you know, ride these movements enough to make a profit when I do go in the right direction.

So, here's the deal. As I said, I don't know if a crypto has a certain value and therefore the promise of going who knows where. But if I see that it does move, I’ll use my skills to enter or exit a moving market according to the rules that I always follow for all markets, in the end, there is no difference. It just moves more.

You made an analogy with the Forex earlier. Indeed, I would compare crypto to what was the world of commodities in the 80s, with all due proportions. In those years, commodities, and I'm talking about futures on crude oil, gold, grains and so on, in that period had very large movements. I don't know if any of our listeners are aware of it now, but there was a group of traders, known as the "Turtles", who made an experiment by working on those markets with some quite simple rules. But by following those rules, one of the two gamblers who had put this whole thing together wanted to see if it could be possible to be taught how to trade in a certain way and be profitable. This group managed to bring home really remarkable results thanks to those rules, in a market that, however, you know, was suitable for that kind of trading.

They were trading with a breakout approach, following the trends when prices broke through certain thresholds. And so you follow the trend enough to bring home some money. And the same thing happens in the crypto world today. 

Those rules, which were used so successfully by that group of traders in the past, now would no longer bring the same profits they did back then on commodities. On the contrary, they would make whoever would implement them suffer a lot. They can be a good starting idea to work on, but they aren't useful in today's commodity markets… However, those same rules still work in the crypto market!

I mean, in the next twenty years they probably won't work on crypto anymore, at least to the extent that they can work today, but today they work on the crypto market due to the way in which it is currently moving.

So, once I find which instruments inside the crypto world are liquid enough so that I'm not left with the short end of the stick if things go wrong, I want to have a market where I can always easily find a counterparty to buy from or sell to. And a liquid market allows me to do just that. On the other hand, an illiquid market with few players exposes me to this risk. So I don't want to risk having to exit and not finding anyone to sell what I have to sell at that moment there.

So, if there is enough liquidity, and I can see this from the volumes, and the movements are large enough, I'm willing to study that crypto with my usual approach. I develop some strategies that I automate, or in any case that I can put into place by sticking to some specific rules that set ahead of time and that tell me what to do in different scenarios. This is the reason for not remaining at the mercy of events. I establish the rules before, then I put the system to work, I receive the real-time data of what the market is doing, and based on those rules, I take action. I'll buy if this happens, I'll sell if that happens, and I don't think about it anymore.

Of course, I can check how the rules would have worked in the past based on the historical data available. As for crypto, this is something that can be done today. Up to a few years ago, instead, cryptos offered very limited historical data on which to base decisions and so it was much more random as a result. I didn't approach cryptos for a long time, so for sure I'm not one of those who bought bitcoin in 2011.

But now that there's the opportunity to do what I do, I'll do it. What is the risk? The risk is to lose, as in all things, but I know how much I'll lose and I can decide in advance that what I might lose is fine with me. It's calculated risk, let's say, as I do in my job every day. In the sense that I trade on normal and regulated markets. I can lose there as well, sure, but I know how much I could lose.

Even in case of tragic events like the Euro-Dollar gap or other things like that, I still have a plan that will decide what to do. Maybe I'll lose a little more than I thought if there are particularly turbulent conditions, but I'll always remain in a condition where I can still get to work the day after. This is what's important to me.

Debora

Exactly. Andrea, if I were to tell you what the degree of attention to this world by my listeners is, I can undoubtedly say that they are much more attracted to cryptocurrencies than they have been in the past when investing in the Forex or in CFDs, which were perceived as being a bit more complicated. Paradoxically, if you find a platform that you like, that convinces you, and on which it's easy to open an account and invest, cryptocurrency is preferred. Apparently. This is my feeling based on what listeners tell us on Radio 24.

Wrapping up Andrea, what are we talking about when we talk about the Unger Method applied to systematic crypto trading, so let's end our talk with some so-called instructions for use.

Andrea

Well, the Unger Method is, as I've always said, a common-sense method of developing trading systems and approaching the market. I do it numerically, and when I say "numerically" you shouldn't be afraid and think, "Oh my Gosh, now he's going to bring up NASA numbers".

It's a step-by-step method that plans what needs to be done. It verifies strategies based on the past trends to hypothesize how they may perform in the future, thus studying the market trends. This is for both traditional systems and other forms of investment where there are edges to be discovered in favor of the investor that must be evaluated and then schematized, to build a plan.

So the Unger Method takes all the pieces, lines them up and decides what needs to be done. It decides this before it puts money anywhere. When it invests, it already has everything clear about what must be done, let's say.

Debora

Let's close on this conversation with Andrea Unger who has shared with us the correct spirit, the right one, the one suitable for investing in this very complex market. But it's a constantly evolving market and I think that we can say that this will certainly not be the last of our conversations on this topic. Thank you and keep up the good work!

Andrea

Thank you and goodbye everyone!

Debora

Before we say goodbye, here's a last service announcement. For all the people who'd like to delve deeper into the concepts we have explored during our conversation, you can order Andrea Unger's book, "The Unger Method," which is available on the Unger Academy website. You'll receive the book at your doorstep. It's free, and you only have to cover the shipping costs: so happy reading, everybody!

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