Buying the Dip Can Result in Quick Gains if Timed Right

It can be tempting to sell low or “just hold”… but buying the dips (by setting limit buys near support levels) is generally profitable.

TIP: Support levels being, in simple terms, prices where a coin traded before it started going up rapidly. Otherwise, for a more detailed understanding of support levels, see technical analysis.

Whether you are adding to a long position, or range trading, or just want to play the bounce, there is a lot of money to be made in any market assuming you have dollars, BTC, or ETH (as they can all be traded for other coins).

To speak in dollar values on Coinbase and using LTC as an example (the same is generally true for Satoshis, Ethers, and dollar value of any type on any exchange compared to any solid top coin like XLM, XRP, ADA, etc): With LTC going from $400 to to $150, you might be tempted to give up. That is one option. However, a better option is to set buy orders just above historic support levels (laddering those orders above and below that support to avoid mistiming the market).

LTC was about $150 the other day, it dropped all the way to sub $110, and now it is back around $150 (this could all change, but this is the deal in the moment).

That means if you had buy orders from $150 to $50, a chunk of them would have filled and then you’d be up on each buy.

At that point you either lowered your average price (if you bought higher), added to your position at a good price compared to the current price (if you bought lower), or would have a chance to sell for a quick profit (potentially gaining $20 – $30 or so per coin you bought depending on how you laddered your buys).

Sure, it could have blown down past the $100 mark and stayed there, but you had orders set down to $50, and those would have gone a long way to offset that. Plus, the reality is at this point, after so much correcting, it is very unlikely that coins will just drop and not make their way back up (even if only for a quick bounce).

It took an insane amount of outside pressure and a quick rise from $8k to $20k BTC for this correction to occur. Even more pressure would be needed to push prices down quicker and with no recovery in between. To do that would break almost every pattern (and that is unlikely).

The point is, although one can always end up jumping the shark and failing in their risk taking, for those who want to take risks: there is money to be made in any market.

We can’t do anything about the Litecoin we bought at $400 (aside from remember for next time that going all-in at the all time high after a coin just went up 400% isn’t always the best move), all we can do is lower our average price and take advantage of the current market assuming we have dollars on hand.

BTC could potentially drop to $5k or so, or it could drop lower… but the short term pattern so far has not been one of straight shots to the bottom, it has been gradual waves down to the bottom with lots of room to buy low and sell high (or to add to positions at each low).

The next phase, be it weeks, or months, or years down the road is very likely to be an upward pattern. In the meantime, its fractal waves down to support levels. One of those supports will likely be the bottom (the bottom could be in, or there could be further to go). It isn’t crazy to think the bottom came in given where prices were at right before the epic run-up starting in November. But that parent isn’t as important to know. What is important is realizing that there is money to be made in the current market for those who want to take a risk.

Meanwhile, if crypto recovers in 2018 and we see those all time highs again, there isn’t just some profit to be made. There is a ton of it.

NOTE: If you have 100% of your investable capital in crypto, you can 1. use BTC and ETH as your currency and buy other coins on the dip (they generally fall harder than these two and then recover faster), 0r 2. sell a little bit to BTC, ETH, or dollars next rally (using laddering limit sells up to “resistance levels”). If you sell, simply take the dollars you made from selling and then use those to ladder limit buys.

Author: Thomas DeMichele

Thomas DeMichele has been working in the cryptocurrency information space since 2015 when was created. He has contributed to MakerDAO, Alpha Bot (the number one crypto bot on Discord),...

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