Crypto Markets – Part I
In “crypto markets” part of crypto beginners series I will share with you different techniques of buying and selling, important facts and observations.
Today topic – January Dips
As this is a hot topic right now I will share with you my observations.
January dips are a pattern in crypto markets.
There are many different assumptions for a cause of the January dip every year
from the Chinese New Year speculation to annual taking profit.The cause does not really matter, when you see the pattern.
What do I do in periods like 12-18 January when the entire market is taking a hit?
Best thing would be to sell when the dip starts, but how can you know that? Bear trap can be seen every day on the markets. If you are sure a big correction is coming, than you have to sell when buying momentum is seriously decreased and the price is on all time high and buy off the dip. This is perfect scenario.
As the above is really hard to achieve and is really hard to do, your second best chance is to simply do nothing. When markets in such state of doubt and distress any decision you do can very easily be wrong no matter how much of an expert you are. Truth is experts do exactly that in times like this – nothing.
You simply need to wait off, follow the information flow, do your own research and look for the signs of recovery. This would be the moment for you to buy if you sold higher.
The important things you need to know to avoid losing money are:
– Don’t take any words or advise as a fact. Always do your own research, even when you see an article of established crypto Medias.
China is banning Bitcoin. This news are set on a timer and come out every 4 months in crypto. The number of people who sold their crypto at loss will amaze you.
– Always invest money you really don’t need. You heard this one a lot without a clear explanation the truth is, when you invest money that you rely on and are crucial for your wellbeing – you are overly emotionally attached to them. This means that subconsciously you are taking emotional actions which are not always in your favor.
In fact they rarely are. If you invest money that you have put aside for investing you are prepared to lose or win, you have the mindset and can afford not to sell on dips.
Bob decides to invest in bitcoin, but he does not have the money to do that.
So Bob uses his credit card to purchase 4 BTC @ 2800$ each. Next week Bitcoin is already 3100$ and Bob is happy but he doesn’t cash out and wants to wait for 4k$
Next week bitcoin takes a dip down to 2500$. Now Bob panics that he might lose it all and sells all his Bitcoins for 2500$ each so he can at least cover part of the loan he took. 1 month later Bitcoin is 9000$ and if Bob was not so emotionally attached he wouldn’t panic sell and he could actually more than tripe his money.
Don`t be Bob
Crypto should not be 2 days investment. Adoption is still undergoing.
If you want to invest you have to put this money in and be ready to wait long enough for it to make sense.
– Buy low – Sell high
You will say, ha everyone knows that. Okay knowing it is a good thing.
Start doing it J I still see plenty of people who do the exact opposite every single time.
John likes crypto and long walks on the beach.
He decides to buy some crypto after reading the news that Bitcoin is on a rally and purchases 1 BTC at 18k$, after that John sells his Bitcoin for 14k$ because he is afraid he will lose his money and intends to buy the bitcoin back when it gets to bottom. Sounds good. But instead bitcoin rises back to 16k$ and John is afraid it will go higher and he will miss the train. So here John buys again.
Don’t be John.
Buying the dip technique
A basic investment strategy can be phrased as “buy the dips,” this doesn’t mean go all in while an asset’s price is going down, it average in as it goes down and/or buy after it settles.
This is generally a better tactic than waiting until prices are high and then buying at that point.
We can treat this as “buy the big dips” (as in, buy when the price has gone well below the average) or we can treat this as “buy the little dips” (as in, buy when the price comes down from wherever it last was).
In crypto we see many little dips, and then every few weeks or month tend to see some very big dips. Both of these can make sense to buy depending on your investing strategy (if you are range trading, then little dips are great to buy, if you are a long term investor, then the bigger dips can be rewarding for building a long position).
With all that said, let’s not make this more complicated than it is. The basic strategy is in the name, its a simple concept with a few variations. It isn’t always easy to pull off (as no one can see the future), but it does help increase your odds of either “getting the best price over time by dollar cost averaging” or “buying low and selling high.”