How not to lose money when the market is at its peak.
The bearish trend that we are seeing is not over yet. Many investors panicked and only aggravated their situation. If anxiety has visited you, study these nine tips. They will help you choose a strategy of behavior in these difficult conditions.
1. Do not try to guess the time of purchase or sale.
This is a universal tip. And do not believe anyone who says that Bitcoin has reached the bottom - how can he know? John Bogle, the godfather of index funds, once said:
“Of course, it would be great to sell shares at the maximum and buy at the minimum, but for 55 years in this business I have not only not seen a person who could do it - I did not even see anyone who would see such a person.”
If professional investors, who have models and data in their hands for a hundred years, cannot guess the price movement, it will not work for you. So one of the strategies is to buy more during a recession. But in no case can one believe that this bottom, trying to “catch a falling knife,” will be cut. Remember, whatever strategy you choose, this first rule must always be followed.
2. Do not do anything - hold the assets
Hodla is a meme that has become the name of all bitcoin enthusiasts losing on the fall of the market. The term went from the BitcoinTalk forum, where a drunk user confused the letter in the word “hold” - it was about the crash of the market in 2013. Five years later, this strategy would pay off.
This is a classic approach - to wait out hard times and wait for a new dawn. But we are not a classic stock or commodity market - we have no history that would convincingly prove to us that Bitcoin will certainly recover.
Also, do not forget that stocks are shares in companies selling real products to real people, and even in difficult times, the business does not completely stop. With cryptocurrencies everything is different. Before Bitcoin recovered from the blows, and hlodler were rewarded. But we have no guarantee that he will recover to any of the previous levels, and we should not forget about this. However, there is no guarantee that cryptocurrencies will necessarily collapse.
3. Fix losses
Sometimes it makes no sense to worry that investment is melting. Any investor sometimes incurs losses - this is part of the game, and only in this way can something be learned. You can never invest in cryptocurrency more than you can afford to lose. Therefore, fixing losses should not be such a painful operation. And if this is the case, then you have invested too much. Keep in mind that the bear market is almost certainly not over yet, the situation could get worse, and the losses more.
4. Buy more
As the old saying goes, “buy when you see blood on the streets.” You need to buy when market participants are afraid, and, conversely, to sell "on the hype" is the basics of trading. And, obviously, very many are now afraid. Traditional investors, such as Warren Buffett, made a living buying assets at the time when the rest of them were selling.
This requires iron nerves and willingness to take risks, but it can pay off. Again, be careful, keeping in mind that cryptocurrencies are a completely new class of assets, and there is no guarantee that their price will be restored.
5. Rebalance the portfolio
The collapse of the market is a good time to revise the portfolio, because in these conditions problem and unstable coins are clearly visible. Truly valuable projects come to the fore when the hype is a thing of the past, and here you can soberly assess the market prospects.
6. Look for opportunities
What to look for during the revision of the portfolio? Same as always: team, product and market for which they work. Coins and projects that need to survive this collapse will be united by a set of similarities. First, they will have a purposeful, experienced and enthusiastic team, that is, you need to pay attention to those involved in the project and the community around them. Now look at the product they create. Does anyone need a coin? Does she solve a problem or create a new opportunity?
And finally, what market is the project targeted at? For example, the Ripple market is banks, the Ethereum target audience is developers, and Stellar customers are people with whom banks refuse to work. The hype is over - only projects that bring real benefits to people will survive.
7. Apply averaging dollar value.
We have already warned that trying to guess the behavior of the market is a bad job. Therefore, instead of waiting for the bottom, some investors choose an averaging strategy when a cryptocurrency is bought, say, once a week or once a month for a fixed amount.
Thus, buying a $ 100 cryptocurrency each month, you average the purchase price - when prices are low, you get more cryptocurrencies for the same money, and when high prices are lower. Yes, this is not the same thing as guessing the bottom accurately, but you get a uniform average asset purchase price. This is a long-known investment strategy, and it requires discipline. It should also be noted that this approach does not guarantee that you will not lose money (like any other).
It is always difficult to keep track of how investments lose in value, but the effectiveness of training is incomparably higher. In this situation, you understand much more about the market, see viable projects and reactions to what is happening in their teams. You will also learn more about yourself - your discipline and risk appetite. Let the market fall, but it is important for you to take some advantage out of this situation for the future.
9. No panic
Yes, this is easier said than done, but most importantly - do not panic. A bear market is a time of tough discipline and caution, and before making a decision, you need to study the subject and carefully weigh everything. Do not panic and act with a clear head.