Tips and Tricks for Finding, Riding, and Bailing From Waves in Cryptocurrency (Tactics for Benefiting From Price Increases, and Avoiding Hard Dips, in Cryptocurrency Trading)

It isn’t uncommon for a given crypto to see a price increase of 30% to 200% in a week. We go over some tactics for buying/selling in these times.

Here is a list of considerations:

Watch out for pump and dump groups and bots. If you don’t know what a pump and dump is, then figure that out before you bet big on crypto. If you don’t understand bot trading, take a moment to research it before you make a big bet. Market manipulation is a little more common than ideal in crypto. This is a problem that is being curved over time as major players like Bittrex step up to the plate and crack down on pump and dump grounds. However, for the time being, you’ll find yourself up against pump and dump grounds with a coordinated strategy looking for fresh meat and bots who can place orders faster than you can think. Each of these things has their pros and cons, especially bots and groups who are out to pump (but not dump). That said, you shouldn’t go into this too green as you might end up as prey. You want to blend in, then get in and out nimbly. You don’t want to start flashing around big bets and make yourself a target (some bots and pump and dump groups are looking for that sort of thing).

It is never too late (until it is). There is no price increase that magically implies that it is too late to jump on the wave. Jumping into a coin on the rise that already saw a 100% increase can be intimidating to say the least, however, that coin could be going to 200% or beyond in the short term (and way higher in the long term). Thus, you shouldn’t discount a coin based on what has happened so far.

Always research a coin on the move before buying. If the coin has good volume and a high market cap (you should check coinmarketcap.com), and if the news surrounding the coin is generally good (so social media, bitcointalk, etc) then these are good signs. If you look at the chart, and the chart looks good, this is a good sign. All the good signs in the world, (every well researched fundamental, press release, buy wall, sell wall, and Bollinger Band) can be meaningless in crypto, as the market constantly defies expectations (and is sometimes manipulated by pump and dump groups) but generally a coin on the move with a lack of justification is a bad bet and a coin with good fundamentals and justifications is a good bet.

Know thy market cap. The top cryptos by market capitalization generally don’t see as big increases, but on the same token they generally don’t see as big of decreases either. Bitcoin can run up or down 25% in a volatile week, but you generally won’t catch the same sort of wild swings you do with coins further down on the list.

Know what patterns to expect. If you see a coin’s price go high and the immediately fall down and then steady off, one of a few things is happening. 1. It is a pump and dump and it has entered dump phase, 2. it is a pump and more coins are being consolidated before another run, 3. there was a lot of sellers and the coin naturally needs time to consolidate. If the price keeps declining, you may have to bite the bullet and take a loss if you were in for short term gains. That brings us to the next point.

Step stops. If you are going to walk away from the exchange, you should really set a stop loss. Pick an amount you are willing to lose, and set a stop loss. You can tier your stops, so you don’t sell your whole at the bottom after buying at the top, but you should set stops. Losing money on a trade isn’t fun, but losing a large chunk of money because you didn’t set a stop is even less fun.

Average in and out of your position (AKA be conservative and avoid mistiming the market). Don’t just spend your whole investable amount on a single buy during a run up. Likewise, don’t just sell your whole position. Average into your position on both a buy and a sell and avoid mistiming the market. If you think a coin will drop hard, by all means sell your stack. However, more often than not selling in increments will only mean a little less profits (and could mean not having to sell your whole stack and catching the next wave). Meanwhile, in terms of buying, if the coin takes off before you can buy in to the full extent you wanted to, either buy higher (again, taking a little less profit) or be happy with what you got. When buying, if it goes lower, buy more and create an average position lower than your initial buy. An average position will allow you to sell below your initial buy (but above other buys) on a small recovery and still recoup some profits. Its better to aim for a low price and miss it, then it is to go all in high and then watch the price come down. Even if it goes back up, its somewhat annoying to miss the bottom. Better to aim too low with part of your buy-in and watch the price rise again with a little extra cash (or other crypto) on hand.

Someone has to buy high every time, sometimes that will be you, but try not to be a bag holder. In almost every case, or perhaps in every case in the short term, some unlucky sap (and keep in mind I’ve been the sap more than once) will have bought a coin at or near the highest bid of the day. That person will have to wait it out or will have to take a loss. To the above point, that person can then buy lower and sell in the middle (on a recovery or even dead cat bounce) to recoup their losses. So unless the coin is getting dumped (a situation where losses should generally be taken at run-and-not-walk speed) there is really no devastating entry point if you have the right strategy in place.

Growth often comes in waves. Often a coin going through a growth spurt will grow in waves. Look at the candles. Generally you’ll see a big green candle, then a red or two, then some green, then a big green, then some red, etc. Just because the first spurt stopped doesn’t mean its over. There will always be another wave of people checking the exchanges after work or taking to social media. That could spur on another wave.

You are very likely to take some gnarly losses chasing big gains. The bottom line here is that chasing 100% increases is a bit more like gambling than averaging into a long position in Apple in your 401k. You’ll need to suck it up and take a few losses in the process of finding that 100% gain. Expect average gains of 25% chasing 100%s, and you’ll feel better about yourself when you have to eat a few thousand satoshis here and there in a bad trade. An honest crypto trader will tell you about their gains and losses, most people aren’t going to get that full 100%.

Ideally, don’t be shady. You can join a range of groups. Some groups study charts, some build bots, some discuss news, etc. These are good groups. Meanwhile, some groups plan pump and dumps. You should generally stay away from pump and dump groups, grey-and-black hat bots, and other grey area or even malicious strategies. How illegal are they if at all? That is a complex conversation. However, it seems a shame to get caught up in something shady when there is so many opportunities to both be profitable and positive. There are a ton of very cool and supportive communities out there, you can enjoy the big waves without being part of a group who creates them only to prey on other traders. Someone will always be planning to dump a coin or spread FUD. Know what to watch for, but do everyone else on the planet a favor and try not to be part of the problem. There are lots of other ways to make money on crypto.

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