Money management is paramount, but fearful trading doesn't do you any good either
One thing that I think can't be overstated is the fact that constantly preparing for that upcoming pullback is the wrong way to invest...
(Source: ~~~ embed:1364554800747134979) twitter metadata:bWljaGFlbF9zYXlsb3J8fGh0dHBzOi8vdHdpdHRlci5jb20vbWljaGFlbF9zYXlsb3Ivc3RhdHVzLzEzNjQ1NTQ4MDA3NDcxMzQ5NzkpfA== ~~~
I have a friend, and lets call him Bob.
Bob is constantly trying to time a large pullback in the stock market, he's looking to go short on every slight move up and rarely ever goes long the stock market.
This has caused him to miss massive gains over the last decade.
Basically ever since the crash happened in 2008/2009 he's been trying to time the next big one.
He's convinced that the was the tremor and the real collapse is yes to come.
Long story short, the stock market has gone up many multiples of those lows and he's hardly had a profitable trading year since.
Moral of the story, don't be like Bob.
How does that relate to bitcoin and crypto?
If you recall I have posted a chart of the 2017 bull market along with its corrections and subsequent rallies.
It looks like this:
When you see a chart like this it becomes very tempting to try and play these dips and rips.
For example, after bitcoin ran up to $42k, the idea was to sell that runup and then buy it back around $30k.
That would be about a 30% drop and that's pretty much exactly how it played out, but what if it's not quite that cut and dry and not quite as easy to time?
Most people will sell too early and buy too early on the way down, or buy too late and miss the buy all together.
The idea that another 30% correction is coming might tempt you to try and sell some that you can get back in later, while that strategy might sound great in theory, it's very difficult to pull off in reality.
I know of several people who have attempted to do just that and ended up with less bitcoin than they started with or out of the rally all together...
So, how should we instead play it?
I'm glad you asked!
Like in life and in Southpark, the theory of Moderation makes sense...
(Source: https://southpark-online.nl/en/clip/heat-wave)
If everyone were to hold in their farts all the time, they would spontaneously combust, but if they farted all the time then the world would be a smelly place that no one wanted to live in.
Therefore, moderation is key!
With bitcoin, if you have conviction that the price is going higher, to say something like $100k or $200k, but you want to also try and trade a bit, only use a portion of your holdings.
For example, you could hold onto 2/3rds of your investment and then try and trade in and out with the other 3rd. Or, if you are more aggressive then you could hold half and try and trade half, something like that.
This is more or less the strategy that I personally follow, it helps me achieve good returns while also satisfying my need to try and time the market. :)
Happy trading!
Stay informed my friends.
-Doc
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Riding all the way to where the long time frame top can be expected to be and selling then and buying where the long time frame bottom ought to be is the only way, in my opinion.
You just can't time this little movements precisely and accurately enough to make any gains. It is different with the 100x moves up followed by the 85% corrections. Your can on the way up can be only 30x and your timing the bottom can be inaccurate enough to only avoid losing 40% of the value of your BTC, but that way you can still massively outperform BTC itself.
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I do agree with you there. Timing the 4 year cycles might be at least partly possibly. If you just get it half right yous till make yourself a lot of money, as long as they keep repeating anyways. Which at some point, they probably will not.
This is such a true statement! I have learned it the hard way too: never sell in a bull market! I have almost always made losses on short term trades, and always gains on being long... yet the monkey brain knows it better right? ;)
I can relate as well. It's very tough to beat the market, in just about anything. So many examples of long term holding outperforming "the smartest guys in the room". Ironically women tend to hodl better than man, and by the above logic are better investors. Go figure.
That's the lesson I've learned the hard way, too!
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Oh yeah, I burned myself several times trying to do that in the past. No more! What if the correction you are anticipating to be 30%+ turns out to be a a quick 10% dip? What if you keep hoping to go down and it recovers and goes above the sell level with a clear pattern up?
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Exactly. I've already seen that happen to several users on here trying to time the bitcoin zigs and zags. Full disclosure, I have slightly less bitcoin than I started with trying to do the same... ugh.
Agreed with your trading strategies...gotta keep it solid.
But that picture is epic😅:
If everyone were to hold in their farts all the time, they would spontaneously combust, but if they farted all the time then the world would be a smelly place that no one wanted to live in.
Not somewhere I'd want to live...
🤣
That's a great quote in your title!
This is so me. I don't sell so at least I don't get that bit wrong. 😂
I started dollar cost averaging yesterday. This will be my third attempt. Let's hope I can keep going this time and not freak out when the price goes up again. 😂
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It's a good strategy. Hopefully it works out well for you!
People are just afraid of massive correction like what happen in 2018 from 19k to 3k .
This prevent them from benefit from small corrections fearing from further and further correction to 20k or 30k levels
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Bitcoin's mega blow-off tops are ample cause for selling hard whereas buying large time frame bottoms is a fantastic idea.
Google up on the Mayer Multiple.
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Exactly.
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