How to Aviod getting drown by the crypto dip (Key insight on how to hedge against Dip)
The blockchain world is all about the ups and downs (I mean that literally) and yes dips are part of the process. I have always seen dips as an opportunity for more crypto adoption as this period looks appealing to the new market. So the dips are also good as it also helps put inflation in check too.
Why dip mostly affects the most greedy people or people whose belief in a project is over the roof, there is no denying that crypto dips affect everyone. The faint-hearted might even consider calling it quit and doing something else but that is a wrong move as the next move should be thinking of how to get more dipped coins/tokens.
While dips are good, nobody really finds dip welcoming and they are steps that are taken to always have a good stand-in case where dips occurred. This activity prevents one from losing all profits accumulated over time and most times puts one in a favorable position to get more tokens when a dip occurs.
These steps and actions are:
- Taking profit
- Having a stop-loss target
- Not being greedy
- Buying coins with good use case
- Buying for long term
These steps are further explained to bring more clarity to them. I could assure you that by following these steps, there is a 90% chance that dips will not make you broke or put you at risk of losing all your crypto assets or Investment.
TAKING PROFITS
The term taking profit has no technical explanation behind it as its meaning is just as literally as pronounced, TAKE PROFITS. Why investing is one thing, knowing when to take profit is another. Well, I take profit at every turn whenever I invest in a coin, and most especially the price of the coin doubles or triple.
Taking profit ensures that you have something back from the coin and this also hedges against dip, while also giving you more funds to buy the dip at even a lower value. What I do when taking profit is take profit by percentage,i.e, I could sell 20% of my coin when it moons and sell another 30% when it attains another All-time high. By taking profit this way, it ensures that I have portions of the coin in my wallet.
HAVE A STOP LOSS TARGET
Stop-loss target is just having a target for your coin to be sold at a particular amount in case of dip. I am still new to this concept and I think this option could only be maximumly achieved on a centralized exchange. For decentralized exchanges, you have to do this manually and that might require a lot of your time to accomplish.
How the stop loss target is when a coin is bought at $5 and your loss tolerance level is just $2 dollars, you can set a stop loss at $3 dollars. So whenever the coin amount dropped to $3, the coin will automatically be sold on your behalf on decentralized exchanges. For centralized exchanges, you have to manually sell the coin yourself.
This also helps hedge against total loss too and it is a good way to have some stable coins which could be used to later buy the coins you sold, especially in a case when the coin dipped more after you sold.
NOT BEING GREEDY (Set Target)
A common trait among crypto enthusiasts is that we always believe that a coin will keep mooning forever and this leads to us not taking profits especially in cases where huge profits have accumulated on the funds invested.
People who fall in this category are majorly people who have no target value for which they wanna sell their coin. Setting a target gives you a value to look forward to and once it is attained, profits could be taken. This makes one be in a safe space especially when a massive dip happens.
BUY COINS WITH GOOD USE CASES
Investors who losses out the most during a bear run are the ones that invest in coins that have no real use case and most usually end up losing all their funds from that action. Some coins will never rise even after a bear market season as they have no real use case in the first place and that will force people to want to do away without them.
To be on the safe side, it is advisable for an investor to invest his funds in coins with real use cases, so that even after the bear run ends, such coin will surely moon. One can hold a shitcoin forever and never make a dime from it and it is all due to them providing no value in the first place.
coins that give you a reward for holding or could be stacked in expectancy of a reward in form of dividends or interest to be paid (either in the form of the stacked coin or stable coin). Staking coins such as cake, bake, and a few others yields more coins.
BUYING FOR LONG TERM
Buying a coin or long-term does not necessarily mean that it should take five years. Coins could be bought with a target of six months to 2 years in mind. The good thing about this is that even in a period when a dip happens, you will not be bothered about it.
Having a long-term mindset when investing in a coin makes one look beyond the current happenings and be more focused on the future rewards of such a token. In order to make it big from being a long-term holder, investors should consider a coin for its use case and not the hype, the future development surrounding such a coin and the road map of the project (Coin) should be put into consideration.
Posted Using LeoFinance Beta