BITCOIN (BCT) & ALTCOIN Update: A Strategy for Protective STOPS

How often has a protective stop sell been triggered on your cryptos only to see prices then go higher than the stop price? The emotional pain and frustration from these instances can be better managed. Protective STOPs should be exactly that and not result in emotional distress. This is called a seller's remorse and the reverse is the buyer's remorse and often are the root of buying high and selling low disasters.

In my blog (https://steemit.com/@haejin), I've frequently written about the benefits of a laddering technique and how I apply it for both buy and sell actions. This technique is optimal in removing as much of the fear & greed emotions possible and keeps one safely away from experiencing the mortifying buyer & seller's remorse.

For protective stops, I apply a three rung ladder. It's quite simple. The first rung usually has 25% of coins assigned, the second has 50% of coins and the third rung has the remaining 25%. Using support resistance levels, three different price points allow ample leeway for prices to hit your first stop but again rise above it so you still benefit. In this case, your remaining 75% of holdings will benefit. This is important because prices rarely fall in a straight line. And if it does, you'll almost never get your original stop limit filled as price will be rapidly below the unfilled stops.

Take for example the below chart of OMG. If my buy was at around $3.95, there is clearly alot of profit to protect. The first dotted blue line could be the first stop rung level. This will allow me to take some profits by selling 25% of my coins, should this stop be triggered. However, in the event prices decide to rise and exceed my first stop rung, I still have 75% of coins to benefit from that rise. Should prices continue to proceed down and breach the second dotted blue line, then still I've taken a good amount of profits by selling 50% of coins. However, prices often turn BEFORE the second rung and still it would mean I have 75% of coins remaining to benefit. Even if prices move like a pin ball, a well casted three rung stop ladder will serve you well.

So, because there is no crystal ball, spreading the protective stop levels can be of sizable benefit. Again, on a collapsing straight down day, no protective stop will really help. In fact, it could hurt, especially the Stop Market orders. That's when you at times learn that your coins were sold at $0.30 cents at the bottom of the temporary downdraft and meanwhile prices have recovered to $300! How painful this would be! This is one reason for not using stop market orders, but rather stop limit types. The stop ladder will also keep abay the panic pulls during severe market corrections.

There are obviously many variations to this stop laddering technique and so one can design it to fit a specific need or personality. For short trades, I often only use two rungs, especially if market is very volatile or direction is uncertain. For investments, my stop rungs are wide and far apart because of much longer time horizons.

Bottom Line: This laddering technique, if applied well, can grow your wealth immensely! It is the only and the most effective method I know of to de-risk buys, sells and stops against the greatest enemy: EMOTION!

I hope this helps!

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Legal Mumbo Jumbo: This is only my opinion, make of it what you wish. What does this mean? It means it's not advice nor recommendation to either buy or sell anything! It's only meant for use as informative or entertainment purposes.