Profit Taking during dips:
Yesterday, we saw an opportunity to buy the dip and do DCA on many of the coins. Bull market will always give such opportunities and it is important to use them wisely. However, when we buy the dip, we are not sure whether it's one off correction or trend reversal due to change in fundamental. Hence, let's understand the art of profit booking during dip to keep us ready for future dips with an example.
Let's assume that we have bought a coin at $100 USD with hope that it will go to $120 USD. During a sudden market dump, it went to $80 USD in a few minutes without any change in underlying fundamentals. In such case, we should do the DCA and add on the coin of $100 USD which will bring down our cost to around $90 USD.
Once the market recover and it reaches $100 USD which is our initial purchase price, many people get into dilemma to hold till $120 USD or not. In such cases, we should book partial profit by selling the coins which we bought at $80 USD. This will help us in not only protecting the profit but also keep us ready for a follow-up dump in the market in future.
If market suddenly dump again and you have not booked your profits, you will have less capital to do DCA.
Remember, too much of greed can lead you to more trouble. Booking $1 USD profit is better than $10 USD paper (notional) profit.
If you don't book profit, somebody else will. And, you will left with their losses!
Happy trading, peaceful trading!
