If you have been following me I have mentioned over and over the importance of having good quality coins, as market corrections tend to weed the weak from the strong. We have all been expecting a correction in Bitcoin, and like tides, lower tides lower all ships. It appears we are entering a new moon.
So how do we profit from this? I'm do not recommend shorting Bitcoin, as this is a new technology corrections can be fast and short sellers can get crushed. I also do not recommend selling your core holdings for the same reason. Many have found that out already. Remember there is the means to an end, and when you do not recognize what the end is, your means can cost you dearly. I know with great certain, that Bitcoin is going further upwards after this correction. So I am not selling. Think of those that sold at $1800 that bought in at $2400. They missed the forest for the trees. Who wouldn't want to own bitcoin at this time and be in at $2400?
Money Management - This is where our money management comes into play. I have many times mentioned you always need to have some cash on the side around 10-20% of your total trading account. This is crucial and many will be wishing they followed this simple rule. I have several accounts, stock account, commodity account, and crypto account. Each one of them has cash in them separate from one another. I never mix accounts up. Why? Well as a trader you are never out of the market. Your always long something, dollars, euros, kiwi's, or yuan is just another way of being long an asset in your account. Balance is the key. During bull markets you want to shave a little off here and there to go long fiat, and vice versa during Bear Markets. But we managed our money correctly so what next.
On the chart above I marked the EW cycle we are in, along with the likely Fibonacci retracement levels. Very rarely do equities go straight down and knowing this I can use a strategy to cost average down the underlying asset. Now this will need to be adjusted for each coin, but the principle is the same and this is just an example. I am looking to buy on any bounce off these levels with my cash, and make a small profit. 1-3% (2-6% on some). These little bumps add up. I also will be tight with stops around the .5-1% range. So my risk to reward is never less than 1-1. You must be tight and stick to the plan of action. It hits your stop you get out, you do not hold past your target price (this is key). I'm looking to make money on 1 out of 3 trades, as some bounces will net more than others, but my loss is always limited to 1%.
If you are 100% invested because you just don't have the funds to trade. I recommend insuring your in solid coins, and closing your computer. Do not attempt to swim in deeper water, know where you are in the food chain. This is where fish get eaten but wise fish get bigger.
If you have the money and are 100% invested, do NOT sell strong coins here. Get rid of the losers, and get that to cash. You know the one down 75% because you invested on news (MCO come to mind). Many make the mistake of selling their winners at this point, and holding onto losers. This will result in losing more. You wouldn't cut your best player because the team is performing badly would you? No. The best lessons in life are the most expensive as education is not cheap. You must manage wisely and this for many will be their first lesson in account management.
In closing, now is not the time to panic, or make rash trades. I have posted twice leading up to this "What's in Your Wallet". This is critical as weak coins will fall faster and harder than strong, as we have seen recently. These markets separate future winners from losers. You can profit from them if your smart about money management, and reduce your cost per coin significantly by trading to the downside, using HMA's RSI's, Fib, EW, and other tools in your trading box. The correction may or may not happen, either way we are ready!
So how do we profit from this? I'm do not recommend shorting Bitcoin, as this is a new technology corrections can be fast and short sellers can get crushed. I also do not recommend selling your core holdings for the same reason. Many have found that out already. Remember there is the means to an end, and when you do not recognize what the end is, your means can cost you dearly. I know with great certain, that Bitcoin is going further upwards after this correction. So I am not selling. Think of those that sold at $1800 that bought in at $2400. They missed the forest for the trees. Who wouldn't want to own bitcoin at this time and be in at $2400?
Money Management - This is where our money management comes into play. I have many times mentioned you always need to have some cash on the side around 10-20% of your total trading account. This is crucial and many will be wishing they followed this simple rule. I have several accounts, stock account, commodity account, and crypto account. Each one of them has cash in them separate from one another. I never mix accounts up. Why? Well as a trader you are never out of the market. Your always long something, dollars, euros, kiwi's, or yuan is just another way of being long an asset in your account. Balance is the key. During bull markets you want to shave a little off here and there to go long fiat, and vice versa during Bear Markets. But we managed our money correctly so what next.
On the chart above I marked the EW cycle we are in, along with the likely Fibonacci retracement levels. Very rarely do equities go straight down and knowing this I can use a strategy to cost average down the underlying asset. Now this will need to be adjusted for each coin, but the principle is the same and this is just an example. I am looking to buy on any bounce off these levels with my cash, and make a small profit. 1-3% (2-6% on some). These little bumps add up. I also will be tight with stops around the .5-1% range. So my risk to reward is never less than 1-1. You must be tight and stick to the plan of action. It hits your stop you get out, you do not hold past your target price (this is key). I'm looking to make money on 1 out of 3 trades, as some bounces will net more than others, but my loss is always limited to 1%.
If you are 100% invested because you just don't have the funds to trade. I recommend insuring your in solid coins, and closing your computer. Do not attempt to swim in deeper water, know where you are in the food chain. This is where fish get eaten but wise fish get bigger.
If you have the money and are 100% invested, do NOT sell strong coins here. Get rid of the losers, and get that to cash. You know the one down 75% because you invested on news (MCO come to mind). Many make the mistake of selling their winners at this point, and holding onto losers. This will result in losing more. You wouldn't cut your best player because the team is performing badly would you? No. The best lessons in life are the most expensive as education is not cheap. You must manage wisely and this for many will be their first lesson in account management.
In closing, now is not the time to panic, or make rash trades. I have posted twice leading up to this "What's in Your Wallet". This is critical as weak coins will fall faster and harder than strong, as we have seen recently. These markets separate future winners from losers. You can profit from them if your smart about money management, and reduce your cost per coin significantly by trading to the downside, using HMA's RSI's, Fib, EW, and other tools in your trading box. The correction may or may not happen, either way we are ready!
Comment:
Wow down $150 since I started writing. definitely looking like the correction everyone was expecting!
Comment:
OOPS made a mistake, thank you binacoin for catching it. Update correction fibb sequence.
Comment:
It's off a little at the top but they are only areas not exact numbers.
Comment:
The original graph was a little confusing but it is still correct. I had multiple sequences on there, this clarifies the current correction.
Thanks
Thanks
Comment:
I want to add that $3000 may or may not happen, a lot of people are calling for $3000 and quite when everyone is waiting for a level it does not happen. So though it is still in play, we have already corrected enough that they cycle could be considered complete and we could head north from here. just keep that in mind and watch out for bull traps along the way.
Comment:
the I and II should not be there. the III and IV counts are correct. I apologize for the error. Just realized it from someone pointing it out. This is the proper count.