Buying crypto during a market dip can be a smart move, but it’s essential to maximize your profits.
I typically use a cost averaging swing trade strategy, which is particularly effective for short-term trading.
Instead of entering the market all at once, we gradually buy in at different price points, anticipating a market rebound.
Interestingly, long-term investors have also adopted this method, known as Cost Averaging (CA) or Dollar Cost Averaging (DCA).
Here’s when this strategy works best in spot or buy orders:
1-The market is experiencing a significant decline, dropping by at least 3% daily.
2-There’s sufficient trading volume.
3-The project is mature, well-established, and stable.
4-The price is above the Net Present (NP) value and not at an All-Time High (ATH).
5-You’re confident the market will rebound.
When to avoid this strategy:
1-The market is suddenly surging, rising 10% or more in a day.
2-Trading volume is low, causing the crypto to behave like a stablecoin.
3-The project is new or unstable.
4-The price is below NP or at ATH.
You have limited funds to invest in each coin, like $100 or $200.
5-You’re certain the coin’s price will keep rising without a dip.For example, if BTC is expected to drop to 50k this month before rebounding to 71k, you could wait for it to hit 50k, but you might miss the opportunity.
Instead, consider buying 25% at 65k, 25% at 60k, 25% at 55k, and if it dips further, 25% at 50k. This approach reduces risk andmaximizes profit from the swing.
However, if the market is on a continuous upward trend and you start averaging in, you’re essentially waiting for higher prices to enter, which could limit your gains.
Some index funds recommend this in the name of DCA, but it’s not always the best strategy.If you have any questions, feel free to ask, and I’ll try to address them in my next post.