How to Survive Market corrections
Hey Steemians! I'm going to start my trading tips series today. These are going to be concise tips on trading mentality and trading methods. Today I'm going to cover what i think are the most important things to take into account during a market correction.
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Quickly, lets explain what a market correction is. A market correction is a rapid change in the nominal price of several assets and/or currencies collectively. A correction is a reverse movement, and occurs in the case of cryptocurrencies after extremely bullish markets. Much like the the markets we have seen in recent weeks.
There are two types of markets to consider here, bullish and bearish markets.
Bullish - A bullish market is when money is being flooded into crytpo, either purposely or genuinely through the ecosystem, in turn raising the market cap of assets or currencies pushing the price up.
Bearish - A bearish market is when money is being extracted from the system in quantity causing the price to consistently fall until the free market determines a new equilibrium price.
My 5 Simple Rules
I've been trading for 2 years now, and I've fallen victim to bear on several occasions. The problem is that when new traders who see a price drop drastically, that have no backround knowledge on what is causing this to happen or what is even happening, it prompts them to sell. In the case of cryptocurrencies, unless you are a day trader in this day in age, this is not a good idea. Cryptocurrency has a long way to go, and an incredible possibility for growth. The worst decisions i have made was selling good projects way to early. These actions have costed me thousands of dollars, so here are five simple rules that i follow during a market correction:
Sticking with good projects is the key to trading cryptocurrencies and is closely related to how you survive and capitalize on a market correction. I know many people make money off of scam coins, and PnD schemes, but sticking with projects like STRAT, WAVES and ETH, who's platforms and developers are solid and always working hard, has always gave me success.
Remember its not the end of the world. There's so much potential for growth that its absurd to worry. Cryptocurrencies are only starting to get recognized by the mainstream, and though there are many hurdles to get over before cryptocurrency is fully adopted, its potential for growth is limitless.
Turn your phone, tablet or computer off if you have to. Once you sit through a market correction and watch it fall then gradually go up and back down again a few times, you will realize there is somewhat of a pattern and it will get much easier for you in the future.
Staying updated on the news will allow you to determine whether or not it may be a good time to sell, buy or hold your crypto. This will allow you to make more educated decisions about what move your going to make or not make.
The best way to prevent making the wrong decisions is to be educated about what your doing. Make sure you understand what your investing in, and understand the risks associated with your actions
Happy trading everyone!
Remember to always only invest what you can afford or stomach to lose. This is not financial advice. Trade at your own risks.