Litecoin Trading Strategy (Backtest And Example)

Last Updated on October 10, 2022 by Oddmund Groette

The amount of tradable assets in the crypto market is enough to overwhelm experienced investors. While many focus on Bitcoin, the most valued cryptocurrency, it might be too expensive for beginner investors. Thankfully, Litecoin, which is considered by many as the silver of cryptocurrency, is a great alternative. So, what is your Litecoin trading strategy?

Litecoin is a decentralized cryptocurrency that is used for peer-to-peer transactions. Launched in October 2011 and inspired by Bitcoin, Litecoin was among the earliest altcoins, offering lower transaction fees, faster transaction confirmations, and faster mining difficulty retargeting. Litecoin is currently among the top 20 coins by market cap as of 2022.

In this post, we take a look at Litecoin. We end the article with a backtest of a Litecoin trading strategy.

What is Litecoin?

Litecoin is a decentralized cryptocurrency that is used for peer-to-peer transactions. Launched in October 2011 and inspired by Bitcoin, Litecoin was among the earliest altcoins and was created out of the Bitcoin codebase. Compared to Bitcoin, it offers lower transaction fees, faster transaction confirmations, and faster mining difficulty retargeting. Litecoin is currently among the top 20 coins by market cap as of 2022.

Litecoin is produced through mining like other cryptocurrencies, and it has a limited supply in circulation — no more than 84 million of them, just like Bitcoin’s 21 million. Litecoin has an advantage over Bitcoin in the area of block time. Typically, Bitcoin has a block time of 10 minutes whereas Litecoin has a reduced block time of 2.5 minutes with a lower transaction fee.

How has the Litecoin market fared so far?

As with most coins, Litecoin has its share of advances and declines. The first major win for Litecoin came in late 2013 when the price surged over 1,700 percent, a move that saw Litecoin explode from $2 to $40 within just a few days. Regrettably, this rally never lived to see the next year as it was cut short in December of the same year.

The drop continued till 2014 and gained more momentum, thanks to the Mt. Gox crypto scandal that dragged the price of Bitcoin down by a huge 36% with all other coins in tandem. Eventually, Litecoin recorded an all-time low of $1.11 on Jan 15th, 2015.

The price of Litecoin has been growing and ebbing up till this moment. It was able to reach an all-time high of $225.79 following the surge of Bitcoin in May 2021 but has been on a decline since November 2021, like other cryptocurrencies.

Where do you trade Litecoin? Litecoin trading platforms

To buy and sell Litecoin you must have an account with an exchange. An exchange serves as an intermediary that helps you execute your buy and sell orders. Some of the most common cryptocurrency trading exchanges and platforms are:

  • Binance
  • Coinbase
  • Kraken
  • Crypto.com
  • Gemini
  • Bitfinex
  • Huobi
  • KuCoin

With so many exchanges, choosing the right one for you might be difficult. Here are some factors to consider when trying to make a choice:

  • The interface should be easy to use and understand.
  • The platform must provide graphical representation and charts to give you a clear picture of price action.
  • It must also be regulated; that way you know you have some level of protection from fraud.

Litecoin investment – is it a good idea?

Litecoin is considered the silver of cryptocurrency. This makes it an alternative option for investors who do not have sufficient capital to own Bitcoin. Historically, the price of Litecoin is strongly correlated with Bitcoin and since the price is cheaper than that of Bitcoin, it is expected that during a strong rally Litecoin will outperform Bitcoin in the short term.

However, cryptocurrencies are considered high risk for long-term investment and are not suitable for every investor. Given the higher volatility in the crypto market compared to traditional financial markets like stocks, the risks may be too high for inexperienced investors. To illustrate the higher risks in cryptocurrency, the bear market that started in late 2021 has seen many crypto assets shed up to 80% or more of their values. In contrast, with the 2022 bear market in stocks, the S&P 500 Index hasn’t shed up to 30% of its value.

Is Litecoin good for day trading?

The cryptocurrency market offers greater volatility than the traditional financial markets, which is great for day trading. With Litecoin, you enjoy a lot of intraday volatilities which means more room for profits.

The good thing about day trading is that risks are managed tightly and profitability can be scalable. Litecoin offers good daily price swings that you can exploit. While Litecoin may be great for day trading and even swing trading, be very careful when considering it for long-term investment.

Litecoin trading strategy backtest

Coming soon.

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