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Investment Plan

This is an investment plan, per the standards listed on the Devcoin Bounty Now page under the Investment Business Plan section.

Altcoin Day Trading

As you may already know, many members of the Bitcoin Talk Forum day trade with altcoins on sites such as Cryptsy and Vircurex. Posts are made about the meteoric rise in price of various altcoins, from Quarkcoin to Dogecoin. This investment plan is about utilizing forum posts, arbitrage between exchanges, and recurring patterns to take advantage of short-term gains of alternate cryptocurrencies.

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Using Forum Posts to Your Advantage

The recent attention given to Dogecoin is an example of how positive forum attention can correlate with price increase. When the number of forum posts started nearing triple digits, and the posts were all positive (not posts like 'premined scam!', etc., etc.), the value was bound to increase. And sure enough, its price jumped 300%. Also, when the Stablecoin rebirth was completed, Stablecoin's price jumped from 0.00009 BTC to 0.00018 BTC per coin. The fervor has died down, but those who had bought at the announcement of the rebirth made a bundle.

At the moment, I would recommend investing in Earthcoin, as its forum “ANN” topic has over 120 posts, and as time passes (the later posts), posts get more positive. It has been rising gradually and seems to be a good investment.

Arbitrage

ar·bi·trage - ärbi-träZH (noun)
the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.

If you've ever seen the prices for one bitcoin across different exchanges, you probably know that they are never usually the same. For example, the BTC-e price for one bitcoin is usually lower than the localbitcoins and Mt. Gox price. If you bought a bitcoin at BTC-e, then sent it to Mt. Gox and sold it, you would have made a profit through arbitrage. “True” arbitrage is a risk-free investment (so you could say it is technically not an “investment”), but with deposit confirms and withdrawal fees, there is a small risk. You can make a profit with arbitrage through alternate cryptocurrencies, like bitcoin. There is a handy arbitrage tool at cryptocoincharts.info, but a quick scan of markets of the websites of two exchanges is easy too. Say that you go on CoinEx and Cryptsy, and you want to buy LTC, and see that the price for 1 LTC is 0.03 BTC/LTC on CoinEx and 0.035 BTC/LTC on Cryptsy. Now, check the stability of the prices. Evaluate past data on the charts provided by the exchanges. Do you expect the price to rise, stay, or fall? (Usually, if the price rises, it will rise on both exchanges due to arbitrageurs like you! See The Law of One Price) I am asking this question because deposits take confirms before you can trade, so “true” arbitrage is not possible. If you expect the price to rise or stay, buy LTC from CoinEx, send it to your account on Cryptsy, and after the deposit confirms sell the LTC on Cryptsy. You will have made a profit of at least 0.005 BTC per LTC bought, minus withdrawal fees. Now, to continue the cycle, send the BTC you got from selling the LTC to your CoinEx account and repeat the steps outlined above. I use CoinEx and Cryptsy as well as BTC and LTC as examples. The basis of the process is to buy a cryptocoin from an exchange with a lower price for that cryptocoin than another exchange, and then sell the purchased cryptocoin on the other exchange. To keep risk as low as possible, make sure that the price of the crypto you are buying will not fall.

An example of differing bitcoin prices between exchanges:

Recurring Patterns

Sometimes, there are short-lived patterns which you may find while altcoin trading. For example, as of this writing, you can see the ups and downs of the QRK price. This is one of the fundamentals of trading: buy low, sell high. If there are periodic ups and downs in a coin's price, buy when it is low and sell when it is high. As you can see in the image below, the downs are marked in red and the ups in blue. Analysis of patterns is key to this strategy. A good rule of thumb is that if there are two “mountains” or “valleys” that are approximately the same height, buy at the average “valley” price and sell at the average “mountain” price. This is a more risky strategy, so use it sparingly! Make sure you don't get caught in the trap shown in the first box, where the valleys get lower and lower each time. Try to use this strategy more when the price graph is similar to what is highlighted in the second box.

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