How to BTFD – 5 Tips On How To Buy The Dip
BTC took a nose dive and most likely your altcoins suffered hard along with it. A rough mixture of FUD and bad news, along with a decrease of the total market cap as the Chinese New Lunar Year is coming, has caused that mess. By the way, it is not unusual for mid of January and we've seen this quite a few times, so chances are pretty good we will see an immense run on the way up – it is even thinkable that we will see a run of Bitcoin together with altcoins. Now you here them all: “Buy the f#cking dip!” they say. Ok – but how? When is a dip deep enough to be bought? Or should I better selloff everything and move on?
A general word first: You know the biggest mistake many people do when they enter the financial world? They see an asset rising and want to participate in the growth. That is okay, but most of them don't plan their entry, they just throw money at it. We remember the US people who took mortgages on their houses to buy Bitcoin while it was almost 20k. How must they feel about the current downfall? Sure, they will be scared and it is totally normal to become doubting that this praised new technology will rise again in value. They feel like they have caught the pinnacle of the bubble and now just want to get out, get at least a fraction of their life savings/house mortgages back. The selling pressure must be enormous to those people. So, the first mistake is to use the money you don't actually have. If you do this, you won't have the needed balls to hold. The second mistake is the desperate try to get rich on the fast lane – this fails all the time and there is no worse approach to lead you into wrong investment decisions. The third mistake novice investors keep on doing like an addict, is buying the top and selling the low. “It can only go up”. And then it doesn't and they just lose their sh#t and sell at the worst time. If you want to take part of that insane 2x, 3x, 4x gains in Crypto, you must be mentally able to handle volatility. If you can't, the money will do better parked in a savings account with 0.1% interest per annum. So one should better not panic when your altcoins and bitcoin are going down and if emotionally affected, it's the best advice to close the charts and uninstall the portfolio tracker until it's over.
You are reading probably often “Buy the f#cking dip” (BTFD). As a trader, you always want to buy the low and sell the high – easy principle, right? Though there are some pitfalls in this way and we want to give you some guidance on avoid catching a falling knife. So the question is actually what to buy in the dip and when? You might see some coins, that have fallen 20% in value, but is this a no-brainer to buy? Just because something has fallen hard, doesn't mean when the market recovers, it will recover along with the other coins.
Here is what you should look for when you trying to buy the dip:
Always be prepared
This is more of a general advice to be precautious when the market is going in the right direction. This is Crypto, this is volatile – you have to be prepped. But what does that mean? Being prepared for a dip is about to keep always a rough 30% of your portfolio in BTC. If you invest a 100% in altcoins, and the whole market plummets, you are stuck with 100% of your portfolio and you are not able to average your ass out of this mess. Keeping 30% in BTC enables you to buy the f#cking dip, without the need of pushing new money into Crypto, which would increase your perceived stress – and stress is deadly in trading. So set 30% aside to buy the f#cking dip, when everything dips.
Buy in staggered batches
No one knows how hard the dip will be, once it starts. it can dip 5%, it can dip 20%. So, you prepared yourself for the dip and – tadaaaa – there it is. You feel smart as you took care of this moment. Does that mean you should go now and throw that 30 % in your favourite coin after a value loss of 5%? No. Emotions aside, put your cool sunglasses on and plan your entries. Take that 30 % and spread it over the most promising projects you did your research on equally. In this dip, we have chosen Stratis ($STRAT), Ethereum Classic ($ETC), Digibyte ($DGB), Adex ($ADX), Sia ($SC) Stellar Lumens ($XML) for example. All of them have much in the pipeline and have a solid outlook for the near future. But did we purchase them all at once right after the first dip? No! We spread 7% (we still keep some small change of the 30% emergency funds in BTC) of our available funds in staggered buy orders along the resistance points over these coins, which brings us to the next point
Buy between resistance levels
If you are not aware of the concept of support and resistance, you should learn about it immediately. This is base knowledge and you will need to survive. Here is an example of the zone where we spread our buy orders on $DGB. If they don't get filled as the price starts to rebound – no big deal. We don't need to exploit every dip to the max.
Don't buy the dips on coins that are already in a downtrend
We want to buy the super fresh fish which is at discount, not a smelly dead tuna that points to your toes if you hold it. You have to make sure that the coin you are purchasing is in a uptrend if you want to BTFD it. Otherwise, the chance is very high that you catch a falling knife. After cutting your hands, it will fall down and stuck in your leg for a long time. “Bad. Very bad.” how our beloved president would put it.
Examples of what not to buy:
– Coins, that had recently big news and fell off hard after that directly into the dip.
– Coins, where the intraday chart shows an ongoing appearance of lower highs and lower lows.
– Coins, that have been moving within a downward slope (Bollinger bands) already for some time (intraday)
Check the overall development of the coin price, make sure not to catch the end of a Wyckoff cycle.
This needs some experience in chart observing. The market moves in cycles. Roughly you can say there is accumulation, breakout, distribution, and breakdown (read more about accumulation and distribution here).
These five tips should get your back covered for buying this dip and future dips. Stay focused, don't let your emotions eat you up or make bad decisions. You need a crystal clear plan to achieve success in Crypto trading – may these tips be a small part of it. If you feel lost on what to buy in this dip, we suggest taking a look at Digibyte, Adex, Stratis, Ethereum Classic, SIA and Stellar Lumens and observe how they do (this is not an investment advice). Most of them can be found on Binance and Bittrex.