Things To Do To Prevent The Market From Turning Bad

June 18, 2022 - Around 6 mins mins to read

The crypto market has been going through extremely difficult periods with declines that have scared off investors. This article will suggest you some things you should do to prevent the market from turning badly not as expected.

Diversify investments in the market

“Don’t put your eggs in one basket” is a saying that should always be remembered in investing. The same goes for financial investments, participating in the electronic market with tens of thousands of different asset classes. We don’t know which coin/token will recover the fastest, go up the highest or drop the most.

One way to protect those investments is to not go all-in and divide your portfolio into sections, each for a different asset class.

Of course, it is not advisable to randomly select crypto-assets and invest in them. We need to do careful research before investing in these assets. A thorough fundamental analysis of the project will make me feel somewhat safer from market fluctuations.

Managing emotions in the market and assertive in investing

Managing emotions in a fast-moving market like crypto is not an easy thing to do. In fact, it is often described as the hardest thing to master when learning how to trade professionally.

The famous American economist Benjamin Graham once said: “Individuals who cannot control their emotions are not suitable to profit from the investment process.”

An important step is to realize that fear and greed are powerful motivators and can often lead to making quick judgments that lead to losing trades.

Having a specific plan in place before making a trade can make all the huge difference between making a profit or losing. This could simply be a case of saying, “When I see a bullish RSI divergence on the daily chart, I will allocate X amount to the trade and take profit at Y.”

Taking profits is a seemingly easy task, but extremely difficult to master. Greed can often keep us in a trade beyond our take profit in the hope that the asset will rally even higher. This increases trading risk as the price can reverse at any time, especially if no stop loss is placed.

The crypto market is extremely volatile and while we might be disappointed if we miss out on buying in this dip. And if you invest and are afraid to miss this opportunity, make sure you have a take profit mark, place a stop loss order, make sure to keep some spare capital for crashes and remember to stay calm when the bears move.

Crypto investment with DCA method

When the market moves in a negative direction, it’s easy to go wrong in crypto investing. This can lead to us only spending time focusing on looking at charts and looking at our portfolio constantly instead of using that time to learn more about the market in general as well as doing other things. traditional.

If the portfolio has been properly allocated and there is a reserve, when the market turns bad, it is the most appropriate time to implement the DCA (Dollar-cost averaging) strategy, also known as the middle strategy. price average.

The price averaging will help our “swinging” investment have the opportunity to “come to shore” sooner when the cost of capital has decreased.

Fundamental analysis combines technical indicators to find the best entry/exit points

For those who have analyzed very carefully and put their full faith in the project, learning more technical analysis to predict the price movement of the asset is very necessary. The reason is because no matter how good the project is, what matters is our position.

Let’s say we find a project with great potential but forget that its price has been continuously increasing in the previous period and BTC has a strong downtrend.

The price continues to fall and we are still confident that we have found a very good “hidden gem”, the price will recover anyway. So we have “swing to the top” and have to ask ourselves “why does such a good project go downhill?”.

While technical analysis is not always accurate, a combination of fundamental analysis and technical analysis will increase the probability of winning in this market.

An example of a popular strategy is using the Relative Strength Index (RSI) indicator – There are two factors that are important to this tool:

Overbought Zone (When RSI > 70): When the indicator line crosses above 70, the asset in question is considered “overbought” – in other words, overvalued – and usually signals that price will soon decrease again.

Oversold Zone (When RSI < 30): When the indicator line breaks below the mentioned 30 level it is considered “oversold” or undervalued and usually signals that the price will soon rise.

While these two signals can be used alone to great effect, they do not always accurately predict bottoms or tops, especially on lower time frames like options: four hours an hour or 30 minutes. A better method is to use the RSI divergence strategy.

One thing to note about the RSI is that it often follows a pattern similar to the price of the asset, which means that when the price falls, the RSI indicator line also falls. However, there are times when the two lines move in opposite directions. This is known as an RSI divergence and usually indicates the beginning of a trend reversal.

To determine the bottom, you will need to see if the RSI makes a higher high while the corresponding price makes a lower low. Ideally, the RSI would be near or in the oversold territory on a larger time frame, such as daily, to signal a strong reversal opportunity.

I hope the article will be of help to you. Please leave comments or suggestions to improve the article.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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