In times of the internet and information being accessible for everyone at any time, there is lots of space for misinformation and wrong advices.
Today I’m going to write about one of the most common phrase in the crypto-sphere.
“Buy the dip!”
Don’t get me wrong, accumulating more of an asset, which is currently in a strong an consistent bull-run and is correcting a few percent down to significant support-lines or moving averages is a good thing and can make you a decent amount of money, but like I said in the beginning of this sentence…
make sure the asset is in a bull-run!
Try it yourself! Look for any video made by a Crypto-Youtuber on a day, when bitcoin fell a few percent. You might find several of this comments:
“Just by the dip”
If you bought all the dips, you are seeing in the chart above, your account balance might be -20%.
So, what should I do?
The easiest way to avoid losses is to wait for conformation of the asset either being in a bull-market or reverse the downtrend. You might be missing out on the first 5-10% gains, although you prevent your savings from probably decline by 20 % or more.
What does a confirmation look like?
- Double bottom
A double bottom pattern describes a trend reversal from prior downside price action.
It’s formed by a drop to a certain level of price, a strong rebound, another drop down to the same or similar price level and another rebound.
- Bullish engulfing pattern
The bullish engulfing pattern is a two candle reversal pattern. The second body completely engulfs the body of the first candle (without shadows). On the second day, the price opens lower than the closing price of the first candle, but enormous buying pressure pushes the price over the highs of the first candle. A long position should be opened, when the price moves above the highs of the second day.
Waiting for a conformation in the charts is a hard thing to do. It’s just human, that if we see an opportunity in the charts of making good returns, we tend to overreact and buy without thinking of the consequences.
Sometimes it’s better to miss an opportunity, than to lose money by overreacting.
Feel free to make suggestions in the comments about topics, you are interested in and which I should write about.