It is easy to be blindly confident when making money in a bull market, but it is wise to stick to the basics and take it step by step during a crash. Yuan Shao became the leader of 18 princes and was confident and arrogant, but he eventually withdrew from the stage of history because of his failure in the Battle of Guandu. Liu Bei, a mat weaver and shoe seller, understood the grace of preserving the people and attracting talents, and divided the world into three parts to restore Shu and Han. Only with food and guns in hand can one stand in the torrent. An ideal with an empty stomach is just an ideal.
How can you find your own way to survive in the changing situation of the crypto? Here are some suggestions from veteran traders:
1. buy the dips formula: mainstream coins + mainstream memes
A sharp drop or major adjustment in the market means there is a chance of "over-bottoming", but it is better to buy in batches rather than investing all at once. At the same time, it is safer to buy mainstream coins and mainstream memes.
Meme coins have their own buy the dips strategies. For meme coins with large trading volumes and sustained popularity, there is usually a relatively predictable pattern.
After such tokens reach their all-time highs (ATH), the retracement generally does not exceed 60%. Therefore, you can consider buying them at the following times:
a. When the token retraces 40% to 60% from ATH
b. Trading volume remains at a high level
c. The market is still discussing the token
Taking WIF as an example, the current maximum retracement after ATH is about 59%. This strategy takes advantage of the volatility and market sentiment of Meme coins.
However, Memecoin can fluctuate wildly, so be careful and combine other technical analysis and market research to make decisions.
2. Don’t use leverage, especially contracts
A margin call will make you lose everything. Furthermore, it would be great if you could hold on to the order, but you should know that the funding rate is actually a cost that many people ignore. Finally, contract trading will have a negative impact on your emotions and psychology, which in turn affects your trading operations.
3. Stop loss in time
If a position falls below a key support level or does not conform to your investment logic, don't be afraid, sell it decisively and protect your principal.
It is better to lose a little than to risk a huge loss. When the market situation improves, you can buy it back. The most important thing is to control the risk at the beginning of the decline, rather than waiting until the decline is deeper.
Especially for those “shit coin” with large fluctuations, if you choose the wrong timing and strategy, you may suffer heavy losses, or even lose everything.
Specifically:
Stop loss quickly: If the market is not going well, take immediate action and accept a small loss. For example, a loss of 5% is acceptable.
Set partial stop loss points: You don’t need to clear all your positions at once. You can set multiple price points and reduce your position by a certain percentage at each point. For example, if Bitcoin falls below $60,000, you can choose to sell 10% of your position.
Find buying points flexibly: If the market does reverse, you can buy again when the support level is reconfirmed. If the market continues to fall, re-enter the market at a lower price to get a better buying price. Although this will incur some transaction costs, it can effectively control risks.
In general, it is a wiser choice to lose 5% to avoid a possible 50% drop.
4. Buy the dips step by step
Buy the dips or buying cross margin may make you regret it, so you can combine technical and fundamental analysis to set several possible entry points, such as historical support levels or important moving average positions.
When the price hits these preset points, you can start buying in batches and gradually reduce the purchase amount in a "pyramid" form, while setting a stop loss point for each purchase to control the risk. Then, you have to adjust your strategy in time according to market changes.
5. Avoid over-diversification
Just find 10 (maximum 20) tokens that you think are reliable, and don’t diversify your investments. This way you can manage your investments more independently when prices fluctuate.
The more types of tokens you trade, the greater the risk of loss. Over-diversification will reduce the overall performance of your portfolio because it is difficult to effectively manage too many positions when the market falls, especially not holding too many Altcoin positions.
6. Get enough stablecoins
Invest at least 20% of your portfolio in stablecoins so that if the market drops, you can still take advantage of the opportunity without having to reluctantly sell your existing positions because the timing is not right.
Even if the market goes up, holding a certain percentage of stablecoins will allow you to have enough liquidity to operate when the market pulls back.
If you can’t remember the investment rules above, then remember the most important point, which is to protect your principal and survive first!
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