So the crypto market took a wholesale nose dive this January. That’s everything except for the odd altcoin flashing green as if oblivious to the current market turmoil, wearing a crimson hue and hemorrhaging double-digit value while plummeting to levels last seen before the great December rally of ’17. News that China might implement further crackdowns against cryptocurrency exchanges, and boom! Panic sells galore.
Disclaimer: This is not investment advice but reflects the opinion of the author. Do your own research before acting on any of the information provided in this article. Any form of investing including ICO’s and cryptocurrencies cannot guarantee any return and carries the risk of loss. As with any speculative investment, do not invest any capital which you cannot afford to lose.
The Bears couldn’t cash out fast enough as they scrambled for the exit, selling their positions at pennies to the dollar. “The Best time to buy is when there’s blood in the streets” as the old adage goes, and bulls had their pick of coins, and at up to 40% discounts no less. I mean Bitcoin even bowed below $10K. It’s hard to stay calm in a situation like that, because who wants to be left holding a steaming sack of nothing, while someone on the other side of the screen makes off with your money, right?
Buying out of fear of missing out on profits could lead you to buy a coin just before it dips and panic selling could lead to further losses. So how does one get their crypto-zen on and maintain “woosah” in this speculative chaos? The people who tend to be on the right side of crypto market dips aren’t “the chosen ones” or Jedi’s who channel the force. They simply have a plan.
As many a high school teacher has said, “you can’t go to war without a gun”. If you expect to go in and point your finger about and yell ‘Phewm! Phewm!’, you’ll, more likely, get swiss cheesed. So here are a few practical tactics to help keep you from losing your beans and panic selling during a downturn.
Get Familiar With Technical Analysis
Detractors, like technical analysis to reading entrails to tell the future, reading the charts makes for better calls. You analyze historical data and make more logical predictions on what the price might do next. If you’re trading short to mid-term there’s no point in getting emotionally attached to a coin, you buy in, extract value, and get out before it dips. All cold and calculating like.
There are several websites and Youtube channels on the net you can use to get studied up on the practice but Investopedia seems to be a lot of people’s go-to source. You can also try ProfitsRun for video tutorials on how to play the game like a shark.
You might also want to pick a coin, any coin, and try to predict what it will do (based on charts, online chatter, google searches etc.) and record why think it might. Jott down your gedanken trade, and see how it did after a time. This will help you make the neural connections a lot quicker and train your trades into second nature.
I don’t think this can be stressed enough. If you don’t want to wake up to find a coin that was last ATH’ing itself crazy has suddenly reversed and bled a third of its value and is now threatening to put you in the poor house.
One should set a clear target level for taking profit and more importantly, a stop-loss level for cutting losses before even entering a trade. If you feel pressured to make a trade, then don’t. Another trading opportunity will come along.
Everyone seems to be an expert online these days, to avoid a FOMO fuelled trade, you’ll need clear and rational reasons to take a position on a coin, so expect to be reading many whitepapers. Couple this with keeping yourself plugged into current affairs and you’re on the right track. Follow, the Blockchain and financial news outlets, as well as some of the movers and shakers in the crypto game, Jihan Wu, and Charlie Lee (founder of Litecoin) are people who’re ruminations you want to be privy to.
Buy the rumor, sell the news. Buying in the news once it’s hit mainstream media is normally too late to take advantage of price increases, the news is often already priced in by savvy investors and traders. It’s probably a good idea to follow other crypto-traders as well. You can’t call every ATH, so why not ride an incumbent trader’s slipstream?
Here’s a bonus tip: aside from watching the charts, you can use Google Trends to help predict a rise in a coin’s prices. How? The logic is simple. If people are Googling Bitcoin or it’s price, it’s usually in the news and likely breaking price records, as a result, it’s attracting new users. A good time to sell. Inversely, if search activity is low, then that that’s usually an indication of a good buy period.
Another point that cannot have enough emphasis put on it. If you’re trading a single coin and nothing else, then you’re tendering for sleepless nights.
So if you’re doing the Bitcoin thing, get some ETH, ARK, some IOTA, and any other promising Altcoin. With all the uncertainty caused by Bitcoin’s high transaction fees and the fact that it sprouts new versions every few weeks, altcoins are where it’s at right now. This where your research muscles will require extra flexing because here, everything will ATH at some point and then bleed that value.
Another thing to keep in mind is crypto markets seem to follow one another just like a single companies stock seems to follow the JSE index for instance. You may want to hedge your cryptocurrency investments by investing in unrelated markets like Gold, silver and company stocks.
You’re not Dr. Manhattan. You can’t be everywhere at once and see the past, present, and future, all in one go. You can set alerts and so you know when a coin is dipping or rallying but look, that will only get you so far. Some trading opportunities will slip through the cracks while you’re out having a life. So it’s a good idea to hold a portion of your profits and go long.
The above tips will help you clear some of the fog of war, but above all, you have to develop and apply your own trading strategy. I suppose it helps to have it based on reason. Speaking of reason, don’t argue with the charts. If what the charts are showing you is different to what you think should be happening, you’re wrong. Burn your opinion to the ground.
Final tip, don’t be a hog, hogs get slaughtered. 80% of your trades are going to be small, but those crumbs accumulate. The big trades will come along, but this isn’t a movie. So try not to expect to walk out of every trade like the baddest gun in the west.