Defensively aggressive laddering dips - "Knife Juggling"
Updated
[Skip to end for the actionable obvious but useful idea]
I contest that Crypto is currently not bull and bear, but pigeons and eagles.
"Just buy the dip" and "HODL" are two bromides of wisdom for the pigeons, kindly given by the eagles.
Ways to keep skittish retail from panic selling and causing even more volatility.
But clearly in a volatile market with big swings (10-20% within hours), buying dips is a good strategy. But we are sagely warned against 'catching knives' - get confirmation before buying. Great, but whenever Bitcoin shits itself the market drops with it, and Bitcoin is more erratic than modern politics, which means you can timidly wait a long time for a good entry... and still catch a knife in the hand.
HODL is also cute. "Just buy whatever the market is doing, don't try to time the market". Michael Saylor, gigachad himself, bought 500 million worth of Bitcoin for 37.6k average... within a week it was trading consistently under 32k. The circumstances there are a bit different, as held in fund etc, but one can't help but think a bit of timing the market would have been wise.
If you bought Bitcoin at 65k, and it slumped to 55k, and then it was clearly heading down, why wouldn't you sell 'at a loss' and buy back in later? More satoshis for the same amount as the original investment, even if the first cash out was less money than you originally put in. Stressful and with some risk, I grant you, but not dumb. This is what all money managers do, but we are told dilligently not to do it - one rule for the pigeons, one rule for the eagles.
But one great idea from HODL is the Dollar-Cost Averaging... If you are 'under water' on an investment, you can keep buying back in as the price craters. There is a horrible amount of sunk cost fallacy to it - throwing good money after bad - but you can reduce your break even sale price quickly that way.
How does this fit in with catching a falling knife, or rather knife-juggling, you ask?
Well, if you keep track of your DCA, and you are using an exchange with lower fees (eg Kraken) rather than something with a high spread (eg Uphold), you can buy dips and sell tops slightly safer.
IDEA
This is more for swing trading than 'investing'. Invest in bear markets, sell in bulls... let the pigeons get that backwards.
With this technique you are still able to aggressively buy dips, as long as you believe the market is in an overall uptrend.
It relies upon laddering in (multiple buying points) on the way down, and taking decent profits sensibly on the way up (don't sell all in one go, but take some off the table whenever there is a big move - do not sell below your break even price (BE)). If you are tracking your DCA, as you take profits on peaks, your BE.
As your BE price drops, you can use that for your new stop loss limit level, and use BE*1.05 for your stop loss trigger... ensuring you get 5% return whatever. You could also split it, so half your remaining bag stops at that level, whereas the other is stopped as high as possible but decently below a key support to allow retracement.
You can then set limit order buys on a small amount above good support lines, which should provide a base in times of market fear. You will often snipe a good deal and it will roar back up. If it is being pushed down by BTC price action, it often recovers quickly, regaining that support level, reducing your risk.
NB: If you buy into further dips on the way up, your BE will also rise, so be careful if your BE is close to market or has no support cover.
NB: If you buy into further dips below your BE price, because the market has dropped since your first entry, your BE will also drop, thus making it easier to get out of your position without a loss (especially if you bagged some profits when possible) when it next upticks.
It does rely on eventual market upticks, but that's crypto. Keep your head, don't panic sell, and try to clear out of your holdings now and then to reassess the market. Be clear what you are investing in, and what you are trading in - they are different strategies.
And no shit half the battle is good entries and exits. Sell into strength, buy at peak fear etc, but try to get the meat of the move.
Good luck.
HOW
[IMG] No Pro, no Show :'( - See comments[/IMG]
In [sheet software] arrange QUANTITY and PRICE in two columns, and just copy the trade numbers from Cryptowatch etc. BUY is simply quantity, but SELL is the negative of quantity. (eg 50 | 0.10 ; -50 | 0.15 )
Sum the quantities, which should give you your current holdings (check!)
Then use =SUMPRODUCT(B8:B24,C8:C24) to add all the multiplied quantities and prices.
You then divide that by the sum of your current holdings (repeat the sum equation or call that cell)
Voila. That will give you BE, and [BE]*1.05 will give you BE + 5%, giving you your SL price to ensure a profit.
Figuring this out has helped me deal with swing trading the schizophrenic BTC/Alt market the last week or two.
---
Let me know if it helps, or if you think it is ridiculous/sophomoric/dangerous. I'm also fairly new - but not doing terribly.
I contest that Crypto is currently not bull and bear, but pigeons and eagles.
"Just buy the dip" and "HODL" are two bromides of wisdom for the pigeons, kindly given by the eagles.
Ways to keep skittish retail from panic selling and causing even more volatility.
But clearly in a volatile market with big swings (10-20% within hours), buying dips is a good strategy. But we are sagely warned against 'catching knives' - get confirmation before buying. Great, but whenever Bitcoin shits itself the market drops with it, and Bitcoin is more erratic than modern politics, which means you can timidly wait a long time for a good entry... and still catch a knife in the hand.
HODL is also cute. "Just buy whatever the market is doing, don't try to time the market". Michael Saylor, gigachad himself, bought 500 million worth of Bitcoin for 37.6k average... within a week it was trading consistently under 32k. The circumstances there are a bit different, as held in fund etc, but one can't help but think a bit of timing the market would have been wise.
If you bought Bitcoin at 65k, and it slumped to 55k, and then it was clearly heading down, why wouldn't you sell 'at a loss' and buy back in later? More satoshis for the same amount as the original investment, even if the first cash out was less money than you originally put in. Stressful and with some risk, I grant you, but not dumb. This is what all money managers do, but we are told dilligently not to do it - one rule for the pigeons, one rule for the eagles.
But one great idea from HODL is the Dollar-Cost Averaging... If you are 'under water' on an investment, you can keep buying back in as the price craters. There is a horrible amount of sunk cost fallacy to it - throwing good money after bad - but you can reduce your break even sale price quickly that way.
How does this fit in with catching a falling knife, or rather knife-juggling, you ask?
Well, if you keep track of your DCA, and you are using an exchange with lower fees (eg Kraken) rather than something with a high spread (eg Uphold), you can buy dips and sell tops slightly safer.
IDEA
This is more for swing trading than 'investing'. Invest in bear markets, sell in bulls... let the pigeons get that backwards.
With this technique you are still able to aggressively buy dips, as long as you believe the market is in an overall uptrend.
It relies upon laddering in (multiple buying points) on the way down, and taking decent profits sensibly on the way up (don't sell all in one go, but take some off the table whenever there is a big move - do not sell below your break even price (BE)). If you are tracking your DCA, as you take profits on peaks, your BE.
As your BE price drops, you can use that for your new stop loss limit level, and use BE*1.05 for your stop loss trigger... ensuring you get 5% return whatever. You could also split it, so half your remaining bag stops at that level, whereas the other is stopped as high as possible but decently below a key support to allow retracement.
You can then set limit order buys on a small amount above good support lines, which should provide a base in times of market fear. You will often snipe a good deal and it will roar back up. If it is being pushed down by BTC price action, it often recovers quickly, regaining that support level, reducing your risk.
NB: If you buy into further dips on the way up, your BE will also rise, so be careful if your BE is close to market or has no support cover.
NB: If you buy into further dips below your BE price, because the market has dropped since your first entry, your BE will also drop, thus making it easier to get out of your position without a loss (especially if you bagged some profits when possible) when it next upticks.
It does rely on eventual market upticks, but that's crypto. Keep your head, don't panic sell, and try to clear out of your holdings now and then to reassess the market. Be clear what you are investing in, and what you are trading in - they are different strategies.
And no shit half the battle is good entries and exits. Sell into strength, buy at peak fear etc, but try to get the meat of the move.
Good luck.
HOW
[IMG] No Pro, no Show :'( - See comments[/IMG]
In [sheet software] arrange QUANTITY and PRICE in two columns, and just copy the trade numbers from Cryptowatch etc. BUY is simply quantity, but SELL is the negative of quantity. (eg 50 | 0.10 ; -50 | 0.15 )
Sum the quantities, which should give you your current holdings (check!)
Then use =SUMPRODUCT(B8:B24,C8:C24) to add all the multiplied quantities and prices.
You then divide that by the sum of your current holdings (repeat the sum equation or call that cell)
Voila. That will give you BE, and [BE]*1.05 will give you BE + 5%, giving you your SL price to ensure a profit.
Figuring this out has helped me deal with swing trading the schizophrenic BTC/Alt market the last week or two.
---
Let me know if it helps, or if you think it is ridiculous/sophomoric/dangerous. I'm also fairly new - but not doing terribly.
Note
As an extra point - knowing what your BE point is at all times also allows you to get out of your position quicker if you expect a market down turn, knowing you are in profit or what your total loss will be. Which is another benefit to this method, taking profits reduces your BE, allowing you to stick to your "I don't sell at a loss" principle without having to wait for your entry.
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