In a bull market there's plenty of opportunities to "buy the dip" but for those that are new to crypto it might not be as easy as it seems.
Like many of you I'm sure, we have friends that are new to crypto and you want to see them do well and take advantage of opportunities to get crypto at a discount. I'm often asked the questions "when should I buy?".
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In the grand scheme of it I think noobs over think this a little too much, but at the same time I understand the hesitation to jump in and lay down their hard earned fiat after the market takes a shit. Is now the time? will it drop more? did I miss the opportunity to buy on the cheap?
It's a lack of experience and some fear that's preventing these fine people from scooping up crypto at a discount.
So what if you could create a very simple framework to take some of the guess work out of it. I think it would help, and it certainly would help me to provide an easy answer when I get these kinds of questions.
Spotting A Discount
We can all see when the market takes a nose dive but not all dips are equal obviously. The question is what kind of discount are you looking for before you will consider buying more coins?
What's right for one person won't necessarily work for everyone else. Personally I start paying attention at a 10% drop in price, that's when I want to see what stable coins I have on hand.
Once a coin has dipped to the tune of 10% I'm not jumping in right away, I definitely want to give it time to find it's bottom!
Those that have been around a while, or even just this year, know that BTC regularly takes dips in the area of 20% to 30%. It's done it 5 times already just this year!
Count it not 1 but 5 golden opportunities to take a position with a massive discount in the general area of 25%.
When things start to go south be patient and watch on the sidelines, consider getting your spare change together to buy up that yummy dip.
Cash On Hand To Buy Dips
I think the only way I can describe this is being patient, and trying to almost always have some stable coins on hand to take advantage of dips when they come.
Fiat for me would take too long to on ramp so I try to keep a bag of USDT or your stable coin of choice on hand hand and be ready to go. I use USDT because there's a ton of pairs on Binance, and that makes it super convenient depending on what you want to acquire.
There is some risk holding coins on exchange and there's some risk holding USDT, I'll acknowledge that but I feel the risk is relatively low and I'm not talking about life changing money here. I'm talking about a small percentage of total holdings in a stable coin.
Choosing An Entry
It's very difficult to know the exact top or the exact bottom, so I'll say don't kill yourself trying to nail these spots. I think that's an unreasonable expectation.
Instead figure out what kind of dip you're looking for and what you're comfortable buying. Consider making a rule, if the price drops by as much as 20% I'll take a position and buy the dip.
This might mean that once in a while you miss a dip but if history continues to repeat itself you'll eventually find the dip you're looking for.
Stick to you're guns, it's your system! If it's a 20% discount you're looking for then wait for a 20% discount to buy! It's totally possible it drops another 5% to 10% but in a bull market if you scoop up coins at a 20% discount you'll soon enough be back in the green.
If you bought every 20% dip so far this year (3 of them not including current), on average you would need to wait another 5 days to be in the green.
A simple system like this can be tuned further based on your risk tolerance, personal preferences, and financial situation. Traders and investors have systems that are tried and true. They don't work 100% of the time but the win rates are high enough that they're consistently profitable.
Ciao for now,
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