Even fiat markets face with collapse regularly, while bearish trend pulls out traders, those who stay have to experience harsh times.
Therefore, after harsh correction, the question arises (a well-known quote from Shakespeare's “Hamlet”): to be or not to be?
On the one hand, there is a high risk: one false move and you'll lose all your funds. On the other hand, a temptation not to stop and a hope that you can make a fortune or, at least, you have an opportunity to recover your funds, the sum that you had before a correction. Our emotions, especially hope and greed, blind us and ruin trading in the cryptocurrency market.
That’s why we’ve decided to discuss diametrically opposed strategies and you'll decide which suits you best.
“What if not?” aka “Run, you fools”
Every market crash booms social media channels. Some people believe that it’s time to “quit the show”, while others hope that the market will recover as soon as possible, you just have to wait — an everlasting discussion.
You should do nothing while market is recovering
We can identify a position of skeptics with these questions: “Do I have to do nothing and lose my deposit? Are you serious?”
The main reason for it is that the cryptocurrency market can experience any correction. Why you have to spend money if you have a chance to avoid it?
Some investors prefer to keep their money secure when a stormy weather dumps on the cryptocurrency market.
Check out some precautions for cautious traders:
- What if not? — this question will help you to overcome your hopes and expectations for recovery.
Several steps to take:
- Sell the weakest cryptocurrency assets and don’t be afraid to cut your losses. How long do corrections last? No one can predict. Losses are significantly greater during the market crash, so, you need to get ready for it.
- There is no place for regret, you should overcome the fear of loss. Don’t forget that market crash not only threatens your funds, but it gives you a great chance to buy low and return an asset that you initially stored in your portfolio. You should leave your asset and “let it fall”, in order to purchase it at the bottom.
What's wrong with the cryptocurrency market? It has plunged
The Dow theory states that history repeats itself. The Bitcoin chart over the past years shows us Bitcoin's recent drawdowns. Media sources predicted the death of BTC, but every time it rises like a Phoenix.
A cryptocurrency market panic has nothing new. That’s why some traders stay calm if they meet catchy headlines on the websites:
“Dear friends, a highly volatile currency was stuck at $6400-6600. Lots of traders were ready to buy the dips, led to soaring prices.”
Are major traders manipulating the price, selling BTC for almost $20.000 and trying to cash out their funds? Do they try to provoke newbies to sell assets cheaper that they’ve bought? Nope.
Some people make money while others lose. By the way, do you know how to be in the 1st group?
What to do when everything is falling apart: useful tips from successful traders
We’ve collected for you several rules. Don’t forget that it’s dangerous to trade the falling market. If you have no experience in trading, it’s impossible to make money, but you have a chance to keep your deposit safe. But also you should remember that education comes only from practical experience.
We decided to collect the rules of successful traders and collect them in a rating. We’ve ranked the tips from low to high, according to their importance and evidence. It’ll be upset If you ignore these rules and act against them, you’ll see what’s going on with mature and experienced traders. There is something “charming” in how emotions take over people. That’s why this rating is so important.
The 10th place: prepare for the worst. A full-time Romanian trader, Vlad Gubernat, an author of JLTrader blog, recommends not to hope for the best: “If you think that the drawdown will be no more than 10% and will last no more than several months, you are definitely misleading yourself. You should not trade. “
According to his point of view, you should be ready for losses. It is a natural component of trading. He mentioned the history of Warren Buffett's Berkshire Hathaway. Since 1980, this company experienced periods of tremendous adversity with large drawdowns from 37 and up to 50%.
The ninth place: think rationally. It’s really important to take into consideration all possible scenarios, and the possible size of your losses, also, do not take loans. Moreover, don’t follow the crowd. There is no place for panic. If you lose your money, don’t try to recover your losses immediately. You should calm down and prepare for it.
The 8th place: feel your fear — advice from Brett Steenbarger. He is a trading coach, an author of the TraderFeed blog and a trading psychologist. According to him, you should admit that you are confused. You should stop trading, think about this situation, control your emotions and organize new ideas.
The seventh place: you should identify psychological barriers and automatic orders.
Support and resistance levels, also psychologically important levels are used by traders. They place their orders at an expected price.
The sixth place: track a trading volume.
A low volume has a weak trend, the higher is the volume - the stronger is the trend. Moreover, without any volume, there is a great chance to fall, not to grow.
The fifth place: there is no place for greed. Don’t keep a trade open for a long time. You should keep in mind that the cryptocurrency market is going down. Some traders misunderstand the rule “make money while others lose”. They keep the deal open, and they are unable to fix their profit. Don’t be greedy: things can change quickly in the falling market.
The fourth place: if you doubt, you should choose fiat currency. Some traders believe that there are 2 strategies that work: to open a short position or to choose fiat. Yep, they warn others that there is no need to participate in the bear rally and buy the dips. Successful traders know how to protect their money from a market crash.
The third place: be ready to lose all your money. This is great advice, invest in trading what you can afford to lose.
The second place: open a trade with a sum up to 10% of your capital.
And the 1st place: track the cryptocurrency portfolio 24/7. Never ever leave an open trade, set a Stop Loss in order not to lose more money than you’ve planned to spend.
Our team wishes you to find the most suitable strategy and not to quit the trade.
May the funds be with you!
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