Chapter 26: Trading When the Crypto Market is Uncertain
Trading is often difficult for both experienced and newcomer investors. This is especially true when the market seems to go in an unexpected direction. This leaves us with the question: what options do we have as traders to offset the market fluctuations?
Time spent in the market and solid trading strategies are necessary to understand when to enter and exit a position. But even more important is the mental discipline required to follow our instincts and the processes we have prepared. In addition, when there is a lot of uncertainty in the market that is moving fast in both directions, and prices seem to stagnate between certain limits, trading can be difficult even for the most experienced investors.
Above all, we have to prepare for uncertain periods mentally. We have to accept that such episodes will always appear in cryptocurrency markets when it may seem risky to buy pricer assets than their actual value. At the same time, there are opportunities to make money from crypto regardless if the market is moving or not — even in uncertain periods.
How can a trader be successful in an uncertain market?
To clarify what success means when it comes to trading and investing: having more than 60% of profitable transactions, regardless of the won amount. Not 90% or 100% — but more than half. Traders always try to beat the market to guess the following prices of their favorite digital assets to profit from as many positions as possible. Most recommended is to work with probabilities because when the market is uncertain — there is a 50% probability for an asset to move in either direction. Therefore, we must remain calm regardless of price behavior after adopting the position.
It is recommended to avoid making decisions based on emotions or the market’s sentiments. When we’re too afraid of how things will work out, we make irrational decisions. When we feel overwhelmed by the unknown — we close the browsers and focus on something else, leaving positions to work for us. Another similar advice would be to keep things as simple as possible and safe. Take more minor positions than usual and apply conservative strategies. Try to avoid leveraged trading — this way, it’s impossible to get margin called and liquidated because losses can be unlimited when trading with margin.
What trading strategies can we use in this case, and how can we profit from such situations?
As mentioned above, it’s important to remain conservative in uncertain periods because risks and losses can be more negligible. The simplest thing that even inexperienced traders can do when digital assets have suffered significant corrections is to purchase cryptocurrencies at undervalued prices and wait for their value to grow. In other words: buy the dip and wait. The tendency of valuable digital assets (not meme coins) will always be trending upwards, even if the price stays sideways. If the price goes lower after we buy, there’s still a peace of mind in our heads that the asset has the potential over the long term — and it will bring value. By the way, there is no realized loss if the trader does not sell.
By following the market’s trend and after proper analysis is made, if the trader considers that a particular direction will follow for some time, he can try to capitalize on it, thus exposing himself to limited risk. This is because the price trend reverses where the asset’s price finds support and resistance levels on a chart — and the trader can adopt positions before this happens. For example, if the price of Solana fluctuates between $90 and $100 — a trader can go long at $91 after some growth signals, leaving a stop loss at $89. These price swings will happen more often and quicker when the market is uncertain. Thus we should use alert functions.
Another strategy we can apply is to invest over the mid and long-term in staking coins — similar to the buy and hold system — but with a better return. This way, we diversify the trading portfolio — an excellent strategy to manage overall risk.
First, we must verify the platform’s staking options, locking periods, and return. For example, if we consider that a particular coin will reach $100 in the following month, and its current price is $75, we can choose a locking period of 30 days.
If the calculus is correct, we will win approximately 17% of the initial investment and the platform’s percentage for staking — that varies depending on the coin, but let’s suppose it’s 10%. Here, the risk is relatively minimal because if we consider a price correction — there is an excellent probability to end on 0% or an insignificant loss
However, keep in mind that this calculus is purely informative, and a trader needs to carefully analyze any cryptocurrency before buying it.
Crypto has a certain level of unpredictability that can be challenging to accept as an investor. But being prepared with some strategies before an undesired effect comes can save your investments. It’s also important that you work with a reliable exchange partner.
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