Don’t put all your eggs in one basket!

in #bitcoin3 years ago (edited)

You may have heard this line countless times from different channels, newspapers, media, etc. But how to apply this strategy correctly into trading and investment is another thing. Imagine if you have 10000 dollars and BTC price just shot up from 10k to 13k in just a week, what would you do? You want to buy immediately to earn easy money? You want to jump on the train to “buy low and sell high”? You think it will keep going up? If you had bought BTC at 14k to jump on the 19k train, then waiting for a few days thinking it would go up to 30k then you are REKT. 5 days after reaching 19k, BTC lost ~50% of its value which means if you did not sell at 19k then you already lost ~29% of your portfolio. Therefore, NEVER buy in emotion.

https://cdn-images-1.medium.com/max/1600/0*0D5Q64bB2DW8Coiq

So, what is the correct way to apply this strategy? Dividing your portfolio in different percentage then assign each of them to do a certain task. At this point, if you are wondering on how to jump on the 19k train, put less than 80% of your portfolio to jump in and set your sell targets along the way up. However, if you are experienced in trading, you can put more money to ride the train but remember “What Goes Up Must Eventually Come Down”. Hence, you should never “Buy low, sell high” but “Buy near low, sell near high”. This will help you to minimise your risk. Here is an example for the above method:

— You have 10000 dollars.

You put 20% which is 2000 dollars to buy BTC at 10k. You set 3 different sell targets.

The first target is 15k, you put 5% of that 20% which is 500 dollars to sell when it reached the first target:
 — Change in price: (15k — 10k)/10k100=50%!
 — Profit: 500
50%= 250 USD! => Total profit: 500 + 250 =750 USD!

Congrats! You have already made 250 dollars in just 6 days!

The next target is 17k, you shorted 10% which is 1000 dollars to sell when it reached the second target:
 — Change in price: (17k-10k)/10k100=70%!
 — Profit: 1000
70% = 700 USD! => Total profit: 1000+875 = 1875 USD!

Awesome! You have already sold the the majority of your short term trade and have gained 875 USD in 10 days!

The third target is 19k, you sold the last 5% which is 500 USD when it reached the third target:
 — Change in price: (19k-10k)/10k100=90%!
 — Profit: 500
90% = 450 USD! => Total profit: 500+450 = 950 USD!

Salute to people who had diversified the portfolio professionally! You have just increased your total capital by 450+875+250 = 1575 USD in just 15 days!

https://cdn-images-1.medium.com/max/1600/0*KSkCyN17ghqEzgit

The above example had showed you the true strength of diversification. However, you can adjust the percentage to your preferences. You can decrease the first sell order and increase the following sell orders to maximise the profit but keep in mind that the risk can be increased accordingly.

Let’s move on to the tricky part. How to buy on the way down?

As you can see on the below chart, BTC has lost ~10% in the first drop and gradually has lost ~50% of its value in just 5 days. So should you buy or not? The answer is NOT. The drop was too large indicating an unusual movement in price which could cause you a huge loss. Moreover, look at the volume of the 22nd December candle after the first drop, the volume was huge! Consequently, it’s very risky for newbie to make a swing trade at that moment. So what would be a rational thing to do during this period? Our best advice is to stick close to our BTC updates until you can have a better image on where BTC is heading.

So how do BTC updates relate to diversification? Crypto is a very volatile market, you won’t know what would happen after waking up the next morning. It’s better to wait and stay calm, don’t panic sell and wait the retracement or you will create a domino effect. If you don’t know where to start buying on the downtrend, we recommend you to do the opposite of the above method when BTC is on the way down. Start buying a very tiny little bitty small amount of BTC when you see its first drop (or nothing at all) then increase the position after the second drop (or the following drop). However, it’s almost impossible to predict where BTC is heading. Therefore, it is advisable for newbies to follow experienced investors/traders to avoid loss. Here in CryptoMedics, we have a team of experienced traders which assist us to minimise loss and maximise profit.

However, there is a way to make profit when BTC on the downtrend. Do you want to know how? Join our ELITE channel to find out the method!

Let’s move on to FA diversification. First, let’s understand the basic of fundamental analysis. What is fundamental analysis? “Fundamental analysis is a method of evaluating a security in an attempt to assess its intrinsic value, by examining related economic, financial, and other qualitative and quantitative factors.” (Source). Simply explained, fundamental analysis is the study of the health, the performance and the potentiality of a company. In crypto, FA refers to the study of the background of the company, including the team, the industry, the tokenomics, the use cases and the road map of a coin or token. If you are good at analysing FA, then you can achieve the below result easily.

https://cdn-images-1.medium.com/max/1600/0*TolMY9T3P_1NV6Of

https://cdn-images-1.medium.com/max/1600/0*D2FSzGR1xpLgJFvx

Comparing to TA, FA will be a little bit harder to diversify. Here are a few steps for your to start diversifying. Firstly, set your targets. How many percentage do you want to hold for 1 year, 2 years or 3 years? Divide it into different parts. What is your expected profit on holding long term? 100%? 200%? Or 1000%? How many percentage are you willing to sell once it has reached your first target and what project will you invest after selling that coin? Secondly, find out what industry will be able to mass-adopt blockchain rapidly and how many projects are there in the business. Plus, search projects that have great token use case, their long term goals and team experiences. Thirdly, analyse what makes the project so special compare to the competitors? What are the pros and the cons in their tokenomy, their team and their long term goals? Should you invest all of your portfolio into a few projects or is it better off to diversify as much as you can? We recommend you to do your own research properly as the lifespan of a crypto project is very short. If you wanted to make 29x like we did, be diligent and try not to slack off.

Last but not least, how to diversify between TA and FA? We recommend newbie to put more money in FA rather than TA. TA is very risky. You can get burned in just a single day. Thus, we recommend you to learn how to read charts and practice your TA on website like bitmex testnet before putting your money into TA. For FA, you need to spend hours or days to analyse the potential of a project before buying. If you are willing to hodl for long term, then don’t get emotional once your portfolio goes down. Or you can read our articles on Medium/Steemit to shorten the amount of time spending on researching. Our team have various people with various business backgrounds which could help you to identify the potential of a project easily. We also have a team of experienced traders from different time zones which help us tracking the movement of BTC.

For the best crypto education join: https://t.me/cryptomedics

Disclaimer: information provided by @cryptomedics does not constitute as investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the website’s content as such. Do conduct your own due diligence and always do your own research before investing. If you like our content, show us some love, upvote, resteeem it and join our Telegram Discussion or the Main CryptoMedics Channel.

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Well written. Reading your telegram postings every day :)