Real wealth is created during consolidation phases, like now
But no one explains how to profit from it, everyone just says buy the dip, no one shares the specific method. This post will serve as your playbook to help you make the most of market dips.
Image source: TradingView
We are currently in a period of consolidation and our main goal is to survive, and those who do that will come out on top in this bull market.
The key is to aggressively buy the dips and position yourself correctly, and here is my ultimate playbook on how to do just that.
1. Do not perform high-risk operations
Taking on significant risk during a consolidation like this could result in significant losses for your portfolio. So, limit high-risk operations to no more than 3% of your portfolio, and it’s better to focus on low- and medium-risk operations.
Image source: Shenchao TechFlow
2. Stable currency
Put 30% to 60% of your portfolio in stablecoins, they help reduce volatility, plus it allows you to buy on dips at the right time.
3. If you don’t have the funds to buy on dips, find a job in Web3
If you don't have the funds to build a position, get a job in Web3. These periods typically last 4-6 months, giving you enough time to build a minimal portfolio, especially now that there are so many job opportunities.
Image source: Shenchao TechFlow
4. Improve your skills when the market is boring
This is the difference between winners and losers. Those who do research when the market is boring and actively learn new things will excel in this cycle.
Here are some skills:
Programming
video editing
copywriting
Image source: Shenchao TechFlow
How to buy the dip
This means buying at the lowest price, but there's a question: how to predict the lowest price?
The answer is simple: no one can predict it. But we can get as close as possible to the lowest price through strategy.
To get as close as possible to buying the dip, you need to know the answers to these three questions:
When do you need to buy?
What do I need to buy?
How to buy?
Let’s dig a little deeper.
When do you need to buy?
The usual pattern for all bull markets is: Halving -> 18 months -> All Time High (ATH). We can divide the entire cycle into:
Stage 1 - Buying
Phase 2 - Repair
Here is a rough diagram with these stages:
Image source: TradingView
buy and fix
Phase 1 - The down buying season, which usually lasts 14 months, is where our task is to accumulate positions.
Phase 2 - The market is approaching its peak and we start locking in profits.
What do I need to buy?
To gain maximum profits, we need to find undervalued altcoins.
But also remember the risks:
High market capitalization = low risk
Low to mid market cap = high risk
Based on your risk management and portfolio selection.
Image source: Shenchao TechFlow
Undervalued altcoins are usually in the price discovery stage and they can be high or low market cap assets.
You can also increase your exposure to Bitcoin and Ethereum to reduce portfolio volatility.
How to buy?
Buying on dips is a complex process. We cannot buy a certain token with all our money at once, because then we may not actually buy it at the lowest point (the price may continue to fall). This is exactly why we will buy using a Cost-Averaging Strategy.
Let me explain.
Image source: Shenchao TechFlow
Simply put, the cost averaging strategy is to buy in batches so that the average buying price is as low as possible.
Example: $1,000 portfolio
First purchase: $100
Second purchase: $200
Third purchase: $300
Fourth purchase: $400
You are free to adjust these numbers according to your own situation.
Image source: TradingView
But when exactly should you buy?
The easiest way is to buy every time Bitcoin drops 5-7%, keeping in mind that altcoins can drop 10-15% at this time.
Again, you are free to adjust the percentage according to your own strategy.
Image source: TradingView
Summarize
Check if it’s time to buy the dip and also check if the altcoin is still undervalued, then use a dollar-cost averaging strategy:
Bitcoin -5% = Buy $100
Bitcoin -5% = Buy $200
Bitcoin -5% = Buy $300
Bitcoin -5% = Buy $400
This method is actually buying on dips.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reproduced with permission from: "Deep Wave TechFlow"
Original author: 𝗰𝘆𝗰𝗹𝗼𝗽
