What Is Buying The Dip In Crypto?
Considered the best trading strategy for bullruns, or is it?
“Buy the dip” is a commonly used phrase in the financial market especially due to the high volatility of cryptocurrencies, that you buy when the price is low, and sell when the price is high. Actually, it can be a smart move when crypto prices are increasing and if you feel like participating but you were late in placing your orders. Then you can wait for a while until a price correction, or a hiccup, happens and then you buy during the dip before the price stabilizes back again.
That’s the way it is with our digital investments. You can be a dip watcher since even the most stable cryptocurrency can suddenly crack a slumber and spring up the price or tumble over at certain periods. The graph can testify to this. It is always a jagged edge out there.
When the market is unstable, you can expect price fluctuations every now and then. The best time to buy the dip is when you see wild price swings that are wide enough. Again you can apply the buy-low-sell-high rule. Traders during this time will think alike and that could be reflected in the trading volume of the cryptocurrency. The noisy buying and selling activity can entice investors to participate and that can drive the crypto price up.
Depending on your strategy, it may help to take home some tips that you can use whether you are a short or long trader.
- Read the market trend if it is bullish or bearish, meaning if it is on an uptrend or a downtrend. You may want to “buy the dips in a bull, or sell the rips in a bear,” as the saying goes.
- It is good to be updated about current news headlines that are bound to impact market prices or some trade rumors that may have a short-term effect to cause a dip. Bad news can sustain a slide while good news can produce a leap. Sometimes it is good to have the intuition of anticipating any news waiting to happen rather than waiting at the newsstands before making a move. You may just miss the bus ride.
- Be sure to have an account in a robust exchange so you can trade quickly or set limits to your orders.
- Always set limit orders especially when there are no clear directions as to the stability of crypto prices where slippages are highly possible.
- Do not put too much emotion whenever you miss an opportunity after the price has stabilized. Remember that the crypto market is highly volatile and all you have to do is to wait until the next downtrend comes around. It is safer that way.
- Make the trend your friend by understanding it deeper using the MACD tool, or the divergence and convergence of moving averages. It will help you analyze visually if the market is going bullish or turning bearish. As buy the dips in a bull, keep a close watch on the lurking bear.
- Average into a dip by increasing your purchasing as the price gets lower. This will build you a long position or earn you a profit once the price reverses.
- Backread the charts and analyze how the price worked its way for an hour, 24 hours, 1 week, 1 month, 3 months, 6 months, and so on, and then set your limit orders close to the highs and lows. You are in for some buying and selling opportunities especially when digital assets are fairly stagnant. This is similar to Fibonacci retracement levels without the technicalities.
- It is impossible to perfectly time the bottom or the top so, again, set your stops and better be ready for it. Its part of the game since on the bright side, profits are there for the taking.
- Lastly, and again, it is important to know what type of market you are in. Downtrends can last long like weeks or months, and so with bull markets! Dips and rips, too, can last hours or days in a crypto market. One fair advice is, don’t be a bull in a bear market, and don’t be a bear in a bull market.
Remember this, buying the dip will work as long as the general trend is bullish. When Bitcoin reached $20,000. The market turned bearish that in the middle of December 2018, it found itself languishing at $3,120 and finally settling at $4,000.
The nosedive was characterized by dips which did not turn into higher highs, but turned into lower lows, resulting in financial disasters for those who bought dips during the spiral.
Those who bought dips from 2015 to 2017 were paid handsomely, but not for those who bought dips in 2018.
Many intangibles must be included in your strategy as the same may not apply in other cases.
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