We are at another one of those times when fear, uncertainty and doubt (FUD) dominate the packet-waves. I have actually been waiting for a time such as this. When you see FUD posts, it means that the windows of opportunity are opening ever so slightly.
It is buy time from now until there is blood in the streets. As you know, I play the game of percentages so as to never lose. Once I commit to buying on the way down, there is no selling. There is only cost averaging.
Catching the Knife
Everyone dreams of swooping in and buying the low and riding it to the top, otherwise known as catching a falling knife. When blood is in the streets, you may to catch the knife one out of every ten tries, but it is unrealistic to count on it and idiotic to place your bet with every last dime that you have to invest.
Back in November of 2020, I was watching the price of this new Hive token. It was new to me at least. I had been watching the price and looking for the bounce. On Nov. 3, 2020 .1029 it occurred. I started buying and my plan was to buy again at seven cents, and again at five and scoop much more at three cents. As it turns out, I had bought just after the lowest price and there was not much of any cost averaging. You really cannot count on this kind of luck, but your chances increase if you buy when there is blood in the streets.
Much of that investment was and still is in Hive Power, so I was not able to sell at the high last month. If I were to power down right now, I would still be making well over ten times what I invested. Compare that to those who bought the momentum a month ago. They are likely getting out right now with a tiny profit or worrying that they will go into loss territory. I rarely buy momentum and if I do, I usually sell when I am at three times my investment with no concern about missing the top.
Cost Averaging
What if I had not caught the knife. Let's take the same twenty thousand and start at a different point in time - April of 2020. In this example, I had missed the run up and I am buying an expected bounce.
I take five hundred of my twenty thousand dollars and buy Hive, then double the amount every time I see a new possible bottom. So, I buy after the spike in April - $500 dollars worth at $0.45 - I am hoping for a bounce.
The bounce does not come, so I buy twice as much at the next low point- $1,000 worth of Hive at 0.307
We are at the second red "X" on the graph. I am still hoping for a bounce but if it does not come, I am ready to double down.
Hive is still dropping as it levels off and we keep doubling down with each red "X" - these are actual prices from the historical chart. I caught the knife when I spent my twenty thousand on Hive and my cost average was $0.11 per hive.
| Price | Invest $ | Buy Hive | Total Hive | Cost Average |
|---|---|---|---|---|
| 0.450 | 500 | 1111.1 | 1111.1 | 0.450 |
| 0.307 | 1000 | 3257.3 | 4368.4 | 0.343 |
| 0.234 | 2000 | 8547.0 | 12915.4 | 0.270 |
| 0.207 | 3000 | 14492.7 | 27408.2 | 0.237 |
| 0.152 | 6000 | 39473.7 | 66881.9 | 0.187 |
| 0.106 | 7500 | 70754.7 | 137637.0 | 0.145 |
But, if I would have bought earlier and doubled down as the price fell, I would still be Ten X today! The pattern at which I bought in the above scenario is the same as if I had bought all 137,637 Hive at fourteen cents each. What varies is the total amount of Hive that I actually have, ten percent less, and a few cents more per Hive.
It is the same $20,000 - The same chart - The same time frame - The same investor
Many people look at how much they can afford to invest and then enter into a trade with all of it. I am of the opinion that jumping in with both feet, with no room to correct the price, is the main reason for nail biting and FUD.
As for me, I am never all-in, so I am never willing to sell at a loss. Give it a try!
Links to my Wealth Tips series
1 How to Have Money
2 Debt and Percentages
3 Waste not, Want Not
4 A Practical Example
5 Cost Averaging for Investing
6 Overnight Successes