After a turbulent weekend in which shares plummeted below $3 for the first time since 2/11, Tezos has shown its resiliency by tagging $3.50 again Tuesday morning. Paying dividends certainly seems to, well, pay dividends, as Tezos just continues to soar. BTC hasn’t done much over the same timeframe and ETH has performed well, but not as well as Tezos.

Which leads me to the main point of this article: It is possible to trade Tezos for a profit. Having found the general trading range the crypto token lives in, the whole point of everything we do needs to become as the old stockbroker’s mantra: buy low, sell high.

How do we do that? It seems risky, and there are real psychological difficulties in play. If you buy at a certain price and the price increases, you make money—but if you sell at a certain price and the price increases, you lose money. At least, that’s what FOMO would have you believe. Last I checked, you sell for money and you keep the same amount of money as Tezos jumps and jumps. But the thing is, as long as the range ($2.85 to $3.6) holds up, you can sit on a limit order as long as it takes to fill with confidence that the price will return to a level which brings you back into the game and hence profitability.

Principles of XTZ Day-Trading

First and foremost, don’t make a sale if it’s likely to cause you stress. For me, the best way to manage the tendency to continually monitor the XTZ price and think about my portfolio is to take the majority of my XTZ, put it into the Coinbase XTZ wallet and allow it to accumulate rewards.

I haven’t accumulated a massive amount of rewards, but I haven’t held too many XTZ in there the whole time because I’ve been earning more XTZ by trading. Frankly, if you hold 500 or more XTZ, you can make a new XTZ about every 10-15 days, so regardless of what the market does, THERE IS A SOLID LONG-TERM OPTION with XTZ. It’s easy, it’s free to participate in, and it involves ZERO work. You literally just add XTZ to your Coinbase.com account and watch it begin to grow. I believe the number of retail investors doing this via XTZ is in fact the main reason the price is surging in the market—they know a win/win when they see it.

To Earn More XTZ

Earning more XTZ involves beating the 5% interest paid in XTZ you can get for free. So about 1 share per 12-15 days if you hold 500 XTZ, more if you hold more, less if you hold less—this will be our baseline.

The goal is to play the volatility in the market so that you increase your share count. There is ZERO reason to worry overmuch about the price during this time, though we hold the bull thesis that XTZ could hit $50 by the end of the year and thus must hedge some of our bets a bit to ensure that we don’t end up getting left behind by a surging market.

Last weekend gives me hope for general instability in the market with profit-taking and so on that may end up meaning that we don’t have to worry about in-range limit orders remaining unfilled as much as I would have naturally been inclined to do otherwise, but here’s the problem: what if the range moves?

The vast majority (I won’t get overtechnical with the math here) of trading seems to occur within a window. Right now that window is about $.30 north and $.45 south of the $3.30 mark. North of $3.50 seems to take a substantial amount of effort, just as south of about $3.10 does, so we’ll want to place our limit orders for the most part between $3.10 and $3.50. And we’ll want to ensure that these limits are frequently tagged, so that we make more shares happen.

The sharper the spikes, the more often we can earn say, .5 to 2.5 XTZ in a short-term trade of a relatively small number of XTZ. Just don't be greedy - it could take years to say, get back in at $2.50 after selling out at $3.50, and there is a long upward climb you could make with XTZ during the interceding time!

What does this mean, in practice?

The strategy I’m advocating for is to know the market by observation, to decide upon a value (we do not know anything for certain—this crypto could tank to $.50 or bounce to $12 within the next week!) that is frequently traded, and to, by selling shares high and buying them back at a slightly lower value, utilize automated limit orders to gradually increase holdings. That’s it.

My upper bound $3.45 limit order was triggered last night, so this morning the first thing I did was to place a new lower-bound $3.20 limit order. I’m only doing this with about 20 XTZ, but a 1.5 share profit (depending on how long it takes the price to drop to $3.20) seems reasonable enough for such a small risk. Frequency is the name of the game—we want to set up our situation so that we HOLD the majority of our XTZ in a secure account, accruing interest.

The general idea: Buy when the price is low, set a sell-trigger where you think the next price drop will start, and set a buy-trigger after the sell-trigger executes. There are a few ways to set the buy-limit: a consistent number where you're buying a few more shares (simple), an aggressive number that represents our observation of high volatility in the market, or a percentage of the sell price. Just don't sell your entire portfolio every time you see the price spike and expect to ever sleep.

The way I do it is to delegate a small portion of shares to use in creating new shares on the market by strategic deployment of limit orders. 20 XTZ seems to be the magic number for now, but the number will increase as the price goes up because small fluctuations in the market price won't buy as many new shares. You can do all of the math at Coinbase Pro with the buy/sell calculator—just make sure you’ve found a high that seems like it will lead to a $.10-$.25 drop eventually, set your limit order to buy back in at the specified price, and go about your business. It’s automatic.

Market Volatility In A Bull Market

The market cannot be relied upon to be very consistent, yet. As the market cap explodes and XTZ goes “to the moon,” as they say, we’ll find that volatility will generally tend to decline. This will make it more difficult and risky to exercise these sorts of limit option trades to increase holdings, and will make it more important to hold shares over time instead to “bake” more tokens so that we end up profiting from the meteoric ascent of the XTZ token to the greatest extent possible.

We want to HOLD most of the shares for the exact reason that we do not have any idea when the next major spike will come—I’ve picked out a few that I’m watching for, such as $4.20, $5.00, $7.50, and so on—but we definitely don’t want to watch that spike happen from the sidelines, thinking “damn, I wish I hadn’t just sold all of my shares at a small marginal profit.” So instead, only sell shares you’re willing to lose. No pain, no gain, as they say.

None of this was advice. I am not a certified whatever you’d have to be to advise anyone. I’m a layperson explaining my situation. If you know a better way to grow XTZ holdings, please, send me a link, write a comment, drop me a line… I want to know!

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