2 Things to Do While the Cryptocurrency Market Falls

Besides crying, screaming, and other self-destructive behavior.

1. Switch to a Ramen noodle diet.
2. Rock yourself back and forth in the fetal position.

Just kidding

Please don’t do either of the above. Although I’m always a proponent of
frugality, and genuinely believe Cheese flavored Ramen is one of the most
underrated delicacies this world has to offer.

Cryptocurrency investing is an emotional roller coaster, even for experienced
traders. Don’t let your emotions control your actions. Stick to your strategy,
remember why you bought the coins you did, and don’t panic sell.

What to do when the market falls depends on the specific position you’re in.

If you’re already invested and are seeing your positions bleeding value, you’re
going to want to behave differently than if you’re sitting in cash waiting for
an opportunity to invest (which is the best position to be in when the market
falls).

If you’re lucky enough to have your investment capital in cash when the market
dips…

Buy the Dip

There’s a term used in cryptocurrency called, “BTFD”. Which stands for, “Buy the
F***ing Dip”.

Buying the dip, which means purchasing something when the price goes down, has
been a winning strategy for Bitcoin investors since 2009. This concept isn’t
new, there are quotes as old as Finance telling you to, “buy when there’s blood
on the streets”.

Here are some examples of “BTFD” in its natural habitat, Twitter.

Approach cryptocurrency investing like you approach grocery shopping. You’re

looking for the best deal.

When you go grocery shopping, you know what you want to buy, and you have an
idea of what its worth. So if you go to buy bananas, but they’re out of season
and marked up almost 20%, you might not buy bananas that week.

It’s the same with cryptocurrency. If you believe something has value and will
accrue more value in the future, buy it. If you think something is already
overvalued, or even if the market has made the value of something increase
beyond what you’re willing to spend on it — don’t.

Let’s say that a coin goes from $5 to $20 during an uptrend, only to come down
to $10 when the market falls.

Is this a discount from $20 or is it marked up from $5?

It’s both. The coin can go either way, but at this point, given that it’s found
its temporary bottom at $10 and hasn’t fallen further. I’d consider it more
likely to resume up towards $20 and beyond. On top of that, my downside is $5,
and my upside is $10.

This example is extremely over-simplified, but you get the gist. In reality
there are many more variables that need to be considered when weighing risk vs
reward.

Moral of the story, the more articles you see calling this, “The End of
Bitcoin”, the more bullish you should be with your investments. Don’t pay
attention to the news (CNN, CNBC, etc.). The last time CNBC did a segment on
“How to Buy Ripple”, they almost called the exact top of the uptrend. Almost
immediately after the segment aired Ripple ($XRP) plummeted over 50%.

Study

“Formal education will make you a living; self-education will make you a
fortune.”
– Jim Rohn

If you’re already invested and watching your bags lose value, take this time to
learn from your mistakes.

I started learning about Technical Analysis and developing a personal investment
strategy the first time I experienced a bear market in crypto.

Unfortunately, at the time I wasn’t sitting patiently in fiat waiting for the
perfect opportunity to “buy the dip”. I had already invested everything I could
afford to, at the top of a bull run that almost immediately stopped after I
bought in.

My investment quickly lost 50% of it’s value — I couldn’t even open up my
exchange without going into a fit of depression. I felt like an idiot.

Too stubborn to accept the loss, I started learning. Teaching myself about
indicators, studying the market and its cycles, learning the different key
players in the space — doing the due diligence I should have done before getting
involved at all.

Check out StockCharts and start studying different
chart patterns. Technical Analysis is considered a “Pseudo Science” by many
but I find that it applies more in cryptocurrency than traditional stock
markets. Perhaps due to the emotional state of the market.

Where the stock market has investors and traders with decades of experience. The
majority of investors cryptocurrency investors are beginners.

Beginners who are more prone to act emotionally during times of extreme
volatility.

Technical Analysis (TA) ties in psychology to try and understand the
possiblities that may occur at any given point in a charts history.

It’s important to understand that TA isn’t about predicting the future.

It’s about understanding all of the possible outcomes and preparing yourself to
be in the best situation if any of those outcomes are too occur.

It’s all about **risk management. **For example: don’t try and catch the bottom
of a downtrend (experienced traders call that “catching a falling knife”) to
maximize your upside potential. Instead, wait for confirmation that the
downtrend is over. This means that you will miss out on the initial gain the
price see’s, but you’re also entering at a much lower risk than if you jumped in
before an uptrend was confirmed.

Before you buy anything, you should study the chart for at least a month. Get to
know the channels it moves between, study its history and see how its reacted to
negative and positive news in the past.

When you identify a coin that you think is a good investment:

• Study the Chart
• Identify what you believe is a good entry point
• Set a limit order to buy at that price
• Walk away.

Believe it or not, the last step is often the hardest. One of the biggest issues
I see people in our Trading Group facing is
sticking to their strategy. They spend time researching entry points, but when
they set their limit orders — they sit and wait for them to hit.

This is a TERRIBLE IDEA.

Turn on the TV, play some video games, do ANYTHING besides staring at the
chart until your order goes through. Staring at charts after you’ve set your
buys is a great way to allow yourself to second guess your own decisions and
shoot yourself in the foot.

Figuring out good entry points is much harder than I make it seem here, I
suggest finding a mentor or checking out a Technical Analysis course on
Udemy.

Further Education: If you want to be able to read charts and make your own
decisions on charts, start off with some basic TA. Learn about:

• Candlestick Patterns
• Chart Patterns
• Support & Resistance
• ALL of the indicators
  on StockCharts.

My personal favorite Overlays/Indicators:

MACD

RSI

Stochastic
RSI

Bollinger
Bands

Once you have a solid understanding of the basics:

Take a DEEP dive into Fibonacci Retracement
& Elliot Wave Theory.
These are my personal favorites and I swear by them.

I originally published this article in Hacker Noon.