- The market has been a bit crazy in the last few months. In mid-April, most coins were recording all-time highs, just days later there was a correction of up to 30% in less than 24 hours.
- In a new video, market analyst Lark Davis has taken a look at some of the ways – new and even old – investors can avoid losing huge amounts of money during retracements.
In about 2 weeks, the crypto market came from a full-blown bullish trend to shedding over $260 billion. Bitcoin, in particular, was 10 days ago trading at all-time highs above $64,500. At the time of press, the largest digital asset has dipped under $50,000. Volatility characterizes the crypto market. For those involved in the market in 2017, this is old news. But for new investors involved with the market within the last 6 months, most are in shock.
Analyst Lark Davis has shared a few helpful tips that long-time traders have learned about the market and have helped him mitigate losses when volatility rockets.
Research shows that an overwhelming majority of traders lose 90 percent of their accounts in the first 3 months. Most traders try to maximize profits by day trading which has proven ineffective, more so, dealing with highly volatile markets such as cryptocurrencies. However, holding in the long term is a successful strategy. Those who have kept Bitcoin for more than a year have always turned a profit. Lark himself admits he only makes a few trades a month.
Lark is also advising investors to always take profits. While this contradicts the long-term holding strategy, Davis believes investors should at least take profits of the initial capital. This means that investors will not lose any of their initial investment. If the boat sinks, only profits and potential income will go down with it. The initial capital will be back in the investor’s pocket. This gives investors confidence to hold out more and have peace of mind even in a bear market.
Diversifying the portfolio is a sound strategy for any market. Some investors hold one huge bag in their portfolio which leaves them vulnerable to losing a lot of money when that coin crumbles. A lot of coins in the crypto market ride bullish waves depending on sentiments and hype. It is advisable to have a diversified portfolio to minimize losses when one or a few coins crumble. Profits from the rest of the coins can cover the losses of one or a few.
Do your own research
In line with having a number of coins in your portfolio, it is key for investors to diligently research the coins they invest in. In a market craze, there are hundreds of ‘analysts’ who shill random coins to unsuspecting investors. Successful investors need to do their own research. These will include the core value of the project, the team behind it and the roadmap set by the project.
Manage your portfolio
The next tip also falls in line with diversifying. Davis talks about managing portfolios and how much one invests in each particular coin. His personal approach is holding big bags in large-cap coins such as Bitcoin and Ethereum. He then invests a small margin in small caps which tend to be purely speculative. This small allocation means investors don’t lose a lot when these coins don’t pan out. But when they do, as they usually tend to, investors can still earn big.
Buy low sell high
The last one goes against human psychology, it is all about investors’ greed in a bull market and fear in a bear market. Investors tend to buy high, when there is hype and sell low when they see the market is red. This strategy means the investor is always losing money. But if they can buy when the market is bleeding, getting coins at a discount and sell high, they will be taking profits every time.