How To 'Buy The Dip' Like A Pro
Markets are down and everyone is either panic selling or telling others to "buy the dip" but who is actually buying? How & What? With proper planning and technical analysis, you can do a lot of trading and ultimately make a steady amount of gains. You have to know 'how to read charts and find patterns'. Technical Analysis is a hard nut to crack and it is simply not everyone's cup of tea. So, how will an average joe, a rookie-pookie mango man like me make it in crypto?
Dollar Cost Averaging Into Dips
The first and foremost thing you need to understand is that for people like me who don't know a thing about trading, Dollar Cost Averaging is the best strategy to move ahead with your investment journey. It doesn't put too much of your capital at risk in one go. An evergreen investment strategy in which investors divide the total amount to be invested across periodic purchases. This avoids the volatility factor of any asset such as bitcoin which is highly volatile. I buy $1.33 (100 INR) worth of BTC every day. This might seem small but it adds up over years.
What if you give a twist to DCA and only invest when there is a significant dip in the market or in the price of your favorite crypto. It has to be at least 10% otherwise wait for it. ๐ค Patience is the key to happy investing. If you invest only in dips then 1 year later or two years later you will get the maximum returns! Maybe even better when you invest periodically. If you can't read charts then the least you can be is an active investor.
To put all of this into practice, one must have enough liquidity to buy at least the next 3-5 dips depending upon your appetite. So that you will get enough time to collect monies for further dips. You have the liquidity, you are ready to invest $500 in the next dip. Now, the question comes..
What To Buy? Confusion! No Conclusion!
For a rookie investor, this question answers all the problems. For starters, I would suggest going for coins that are already in the top 30 or maybe 20. If the project is solid then you will definitely make a handsome profit within a few months or years by DCA into its dips. Let me show you a tool called CryptoRank that helps me decide which coin to buy during any dip:
- Go to https://cryptorank.io/. On the homepage, you will see the usual crypto data you see on any other data aggregators like Coinmarketcap or Coingecko.
- Now click on "ATH" tab to see the magic. Here you can the All Time Highs of the top 100+ cryptos.
- Since we are interested in investing only in the top 30 coins, you can change the filter settings and set Rank from 1 to 30. That will help us sort the data for only these coins that matter to us.
- After setting the filter, click on % from ATH to sort the list and get the top losers. If any of these coins is your favorite and it is a solid project then choose that one to buy in the current dip. For example - Algorand, Polkadot, Solana, Cronos, Terra, and Polygon are quite low from their ATHs and all of them are good projects to bet on.
Please don't buy SHIB ๐ There are some shitcoins in the top 30 and that's a reality. You can slowly expand your watchlist and use this tool to see which coin is bleeding the most in the current dip and take your decision as per your priority. I used the above strategies early on in my journey and they work well if you have patience. When you make enough gains in a year or so, you will have more capital to play high-risk bets.
Do try these tips if you are a newbie or a pro in crypto investing and give feedback. What's your dip-buying strategy? Let me know in the comment section below.
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