Successful trading is often portrayed as a complex and mysterious endeavor, but at its core, it revolves around a fundamental principle: buying low and selling high. While this concept may seem simplistic, it remains a timeless strategy that has generated substantial profits for traders throughout history.
At its essence, the "buy low, sell high" principle is based on the idea of capitalizing on market inefficiencies and price fluctuations. By purchasing assets when their prices are low and subsequently selling them when they appreciate, traders aim to profit from the price differential. While the concept may appear straightforward, implementing it successfully requires skill, research, and an understanding of market dynamics.
It also involve a very thorough understanding of the coins you want to buy or sell. Their highs and lows, and also patience to wait, watch and study until you are sure of the chart movement and the trends.
The crypto buy low sell high strategy involves buying Bitcoin or an altcoin at a low price and selling it at a high price. For example, when we buy Bitcoin at $66,000, and sell when it’s at $68,000, we bought low and sold high.
For some, “selling high” means selling at a 10% return, while for others it means selling at a 1000% return. In either case, investors aim to sell higher than their initial investment. Just ensure that you take your profit when the market is going seriously against your strategy for a reasonable period of time. That way you take your profit or cut your loses. Eyes on the chart checking the reds and the greens and time, is very important.
The obvious caveat here is that this strategy is based on market timing. If we can time when prices will go high or low based on market fluctuations (bullish vs bearish), we can strategize when to buy and then look out for the best time to sell at reasonable profit. This is where the watching, timing and studying the charts come in along with public opinions and relative impactful news.
A short-term strategy can also yield profits, by buying when prices dip during the day and selling when prices peak. This is called “day trading”. Using indicators such as the RSI indicator, we can identify when prices hit support levels during the day and sell when they hit resistance.
FOMO. Crypto can appreciate fast and cause the fear of missing out. The fear and greed barometer switches to extreme greed, and this makes investors act irrationally. Control your emotions and be guided by knowledge and strategy.
Holding out. On the other end of FOMO is the act of holding out. Without a plan to follow (i.e. buying or selling at a specific price corresponding to historic support and resistance levels), emotions take over when volatility is high. The trader without a plan will keep waiting for prices to fall even lower before buying, only to watch as prices rebound. Then they will be forced to buy high as the FOMO monster kicks in. Again, control your emotions and follow your plans.
Not doing proper research. Traders who buy altcoins just because it’s pumping are at risk of losing everything if the coin goes to zero and never recovers. The golden rule in investing, “never buy something you do not understand” rings truer in crypto than anywhere else. If you do not know the price history of a coin, there is a high chance you will end up buying when it’s high – because this is when everyone is talking about it, and you get into that FOMO mood again.
When not too sure, take the little profit you have, that could be called scalping, then wait and watch for some time. Cryptos fluctuate a lot. Today's high can be tomorrow's low for the short term trader. You can always go back in after a while. What matters is that you always come out with a profit, big or small, and keep growing your portfolio.
Proper research (DYOR) cannot remove all risks in crypto investing but it can significantly shield you from unnecessary losses.
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