The goal of anyone investing or trading is to be able to buy low and sell high.
Many have the hopes of buying at the exact bottom and selling at the exact top. However, if you have been involved in the cryptocurrency for any substantial amount of time, you know that is easier said than done.
Everyone can be a genius looking back at history after the fact but most do not have the skillset or even the time to learn and watch the markets to identify those highs and lows of market price cycles in crypto. The best thing you can do is to study, learn, and then practice your trading skills and strategies. Newscrypto has some great tools to help you with this.
Below we will look at a strategy you can use in the meantime to build up your cryptocurrency portfolio until you are confident enough to day trade. Even as an experienced trader, I do not trade with 100% of my portfolio. The strategy we will look at below is something that I have consistently done over the past 5 years.
Emotions when the market dips can be scary for new people. Also, many experience anxiety as the price is rising wondering if they missed out on the gains and is it too late to buy in. This fear is sometimes confirmed when people give in to FOMO buying and buy at the peak of a market cycle and then watch the price tumble shortly after buying. Or, people are in decent profit after buying a crypto and expect it to keep going up, but instead the price dips and wipes out most if not all of the potential profit that you may have had if you had sold at the top. This is nothing new and has happened to many of us.
While you use all the great tools of Newscrypto to get better at your trading and learn how to trade these ups and downs of the market, you can build up your crypto portfolio using dollar cost average strategy, or DCA. This does not work on all cryptocurrencies, as over the years we have seen some cryptocurrencies rise and then crash and never rise again. However for a select few that either have already stood the test of time or through your research, you feel have long term potential for growth, this strategy can help you out.
Usually when the market takes big dips in price, you will hear people yelling to buy the dip. While this is not a bad thing to do, as I’ve accumulated plenty in the dips along the way, using the DCA method has helped with my longer term accumulation strategy. You can say, buying the dip is good, but using the DCA method is a better method than just buying dips. Let’s look at how this works.
Dollar Cost Averaging (DCA) is the strategy to make regular recurring buys no matter what the current price is. Does not matter if the price is down or up, consistently buying and accumulating on a regular basis has shown to be effective over the longer term. In the shorter term, you may see values dip below what your cost basis is for your investments, but over time, it can be a winning strategy. I did a scenario for some students earlier this year.
If you had invested $50 a week into Bitcoin starting at the very peak of the last bull market in December 2017 and bought consistently every week until December 2020, you would have invested $7950. Now, even though you started buying at the top of the market, you bought through all the highs and lows of that 3 year period. That investment at this time would be worth well over $50,000 in value.
The other benefit of this is that you are not throwing in large amounts at one time so you are less likely to get emotional about the volatility in the price of what you are investing in. So, once you have researched which cryptocurrencies you feel are good for the longer term, you can begin accumulating them over time and building your portfolio. Personally, as I became more confident with my trading, I would then use some of what I accumulated to trade with. Now, let’s look at how you can do this and how you can even automate this process.
Many exchanges now allow you to link a credit card or bank account and give you the ability to set recurring buys. You can set the amount of each buy and the frequency of each buy, like every day, every week, or every month. Many will allow you to even set the date or day of the week you would like the order to execute. This is a great hands off approach to automate your cryptocurrency buys regardless of what is happening in the market. Some still like to do this manually so you can also create a routine that buys regularly. I also will manually go in and buy a little more during the dips.
You may ask, “what do you do if it dips more after you buy?”
My answer is usually I will buy a little more. I am not investing to sell tomorrow, or even next week or next month. I am looking at the next 3-5 years for the cryptocurrency that I consider long term holds. Another great option that helps you to hold and accumulate over time is to look at ones that allow you to stake and earn more.
NWC tokens, for example, allow you to stake and earn up to 25% annually for your return. In addition to this, if the price is higher at the end of your staking term, you have earned more than 25% in terms of dollar value. Staking NWC last year was one of the best decisions that I made plus staking gives you free access to the Newscrypto premium content.
There is also the option to go to the Staking Rewards section in Newscrypto which shows you all the different cryptocurrencies that you can stake, their current average return, and links you to how to do it if you need to learn how. If a certain percent of your portfolio is for the long term, then take advantage of staking rewards to help grow what you have. As discussed in our past blog on identifying your strategy, determine how you want to build your crypto portfolio and if you decide that a portion of your portfolio you plan to hold for the long term, consider the Dollar Cost Average method we discussed here to help you accumulate crypto and potentially take out some of the stress and emotion of investing.
Content written by Blockchain Wayne and NewsCrypto Team
