- Crypto Indicators like RSI help an investor analyze an asset beyond market speculation
- Dollar-cost averaging helps effectively during the bearish trend
The crypto market can be extremely volatile at times; its bullish and bearish trends can even let the user experience a double-digit percentage profit or loss. Therefore, this article will delve deep into what an investor can do to make the best out of a bearish market by mapping out four detailed insights.
Using Dollar-Cost Averaging To Purchase The Crypto
When the market turns extremely volatile and market sentiments get too elevated towards a certain emotion, it can be too easy to drift away and end up on the wrong side of a crypto trade. Fearing this mishap, the user shouldn’t, however, sit stunned and watch their portfolio crumble by the hour.
There is a common phrase used widely in every tinsel town in the crypto world ‘buy the dip’ which refers to buying up an amount of cryptocurrency whenever there is a prominent bearish correction in the market. The idea, however, is that in the near or far future, the prices will skyrocket back to their previous highs.
Dip buyers can yield a lucrative profit. This practice is supported well by the infamous quote of the legend Warren Buffet, which goes, “When there’s blood on the streets, you buy.”
While buying the dip in a single trade, the most advised strategy is to implement DCA (Dollar-Cost Averaging), which involves segregating the user’s reserve funds into small chunks and making several trades over time.
The school of thought behind this approach is that since it is extremely unpredictable to know exactly when an asset has bottomed out to the pit, instead of throwing all the user’s reserve money in one go, it is usually better to buy a small amount with a small chunk and patiently yet actively wait to see if the asset falls further in price. In case it does, buy a little more of it, and so on.
Relying On Indicators To Spot The Best Entry Point
One of the mandatory things before using this strategy is that an Investor must be at an intermediate or advanced level of technical analysis. Technical analysis is the practice of anticipating an asset’s price movement based on data analytics, chart trends, indicators and patterns.
Of course, no indicator is full-fledged foolproof for unforeseen circumstances, but they can more than often suggest a profound signal as to when to plow the user’s money in purchasing a dip.
The most widely used indicator is RSI (Relative Strength Index). There are two key terminologies associated with this tool; Overbought (Over-valued) and Oversold (Under-valued). When the critical line of indicator breaks out surpassing the channel, the respective asset is considered ‘overbought’ which signals that prices will go down soon and when the indicator line attains a negative slope and goes beneath the channel, it is considered ‘oversold’ meaning the prices will surge up soon.
Conclusion
It is extremely important to keep the nerves calm especially during unforeseen circumstances. Diversification of assets and expanding the user’s portfolio is an effective strategy to go for especially for long-term investors, Following the strategies and insights can actively help an investor to make a well-informed decision.
