How to make money with Crypto by Rumjus - Part 2 When to Buy Crypto / When to sell

By rumjus | Rumjus Crypto Discussions | 26 May 2024

Ask the question, "When do I buy Crypto" in any discussion group, like a Telegram group, and, not counting the many scam responses you get, you will inevitably will get the sage, "buy low, sell high" and the sarcastic "buy high, sell low" advice. Every expert in the field has his or her own theory (see Part 1 for my opinion on experts) and a lot of influencers have their own agenda, specially when they shill obscure coins. 

I have been buying shares and now crypto for a long time and what I share here is based on my experience. I write the ensuing with a hope of documenting it for myself and also in the help that some readers may find it useful and avoid the pitfalls I went through. One of the first things I noticed when I was buying in the early stages, was that as soon as I bought the price would tank, literally every time. I found myself trying to predict the troughs (the bottom of the valleys) and buy it at that point and then sell it at the highs (the peaks) of the price movement. Many of my typical transactions looked like this.

rumjus entry points


It is quite easy to describe what is happening here. I have been watching the market for a couple of cycles, realised that it was bottoming out at a certain point, and then jumped in when it did that for the third time. Also, when selling I've waited for it to reach the previous high, been overjoyed when it went above and then sold it.  So what was the problem here? I made a profit, right? After many trades like this and looking at the cycle, the problem was this. Both after purchase AND after selling, I found myself immediately being unhappy.  After I bought the prices tanked, and after I sold the prices rose. I found that I would have been better off buying and selling at the turning points. But this was exactly what I was trying to do, when I did my trades.

Lesson: trying to predict the turning points is futile. I only get a small percentage of such predictions right.

On further thought and practice I found that rather than trying to predict the turning points, trading the trend (as I like to call it) made more sense. Let's look at what that looks like.



Quick view at this approach, and you'll see I was buying at exactly the same entry and exit levels (prices) so what is better with this approach. First let me explain what's happening here. Instead of trying to predict the trough, I have the idea of what my entry point should be, and I enter only when the trend is upward. Similarly I have an idea of where I should exit, and I enter only on the downward trend. So how is this better? Following is my opinion on why this is better:

  • I am trading the trend, i.e. when it is going up, I expect it to go up further, when going down, expect it to go down further. I trade after the peaks and troughs on the charts, which I found easy to see.
  • Immediately after buying, and selling I felt much happier because had I not done the trade, I'd have lost.
  • The possibility of buying earlier or selling earlier to increase profit
  • Your holding time of an asset can be less especially you sell on first sight of the peak

Of course, if that was all there was to it, it would be too simple. But there are obvious pitfalls here as well.

  • At any given time, the price of the asset may take either direction.
  • Although I went with the trend, it didn't always translate into movement in the same direction.
  • It is still possible to end up losing when there is an outside event (like SBF crashing the FTX exchange) which is impossible to anticipate.

So my lessons here are

  • Don't try to pre-empt price turning points on the chart
  • Trade the trend
  • Have a business strategy (clear entry and exit points) in mind

Bonus: Put in the trade for exit earlier. Though, unlike in forex, crypto exchanges don't usually offer trailing stop losses or trailing stop profits, you can put in your take profit amount at the time of buying and take the emotion out of it. If we let our emotions run our buying and selling decisions, we will almost certainly lose.

I was trying to include a section on technical analysis here, but let's do that in the next article 

How to make money with Crypto by Rumjus - Part 3 Technical Analysis


Disclaimer: This article is for informational purposes only. It is based on my personal (and anecdotal) experience. None of the content is financial advice. Users are strongly advised to conduct their research, exercise judgment, and be aware of the inherent risks with crypto currency investments. I am not liable for any financial losses. Cryptocurrency  markets are highly volatile and the possibility of investments tanking is higher than traditional investment instruments.

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