After this exciting week, very exciting week I can say I think, I have at least learned a few very wise lessons.
Let me start at the beginning.
To trade on an exchange you of course need a starting capital. And regardless of whether you sell your house for that, offer your mother-in-law on an auction site, empty your bank account, or try to collect your starting capital through Hive and all the communities within Hive. You must have something to put on an exchange to get started.
Then continue with the second part. We now have something on an exchange and so choose a pair to trade. For this tutorial it doesn't matter what you are going to trade, you must have a pair. Two different things. The choice is that either you trade two different cryptocurrencies against each other… Hive / BTC for example, or you trade a cryptocurrency against a stablecoin or fiat. There are no more choices.
Now the trading begins, and it is quite simply… sell high and buy back lower.
Easy right?
Yes, so far! But then suddenly, then a crash comes your way… and now it is time to see which way you are going. Because if you are in crypto for the long term, and it is not about the dollar value attached to the crypto, then you really do not care. Even if the market crashes, you can still increase your crypto. By looking at which coin crashed even harder than the one you have. IF there is at least a pair with that coin you have. If you were trading against a stable you can only hope that you were in the plus just before the crash and sell quickly.
Yes, but how did you say that? You can only lose in a crash, right?
Uhm yes, if you think in dollar terms, yes. If you can let go of the dollars and just assume you want more crypto, then you can make even more in a crash. Finally, cryptocurrency does have the potential to increase in value over time, although there is of course a risk… because if you look over the past few days, it has not exactly become worth more, but rather a lot less. And that can sometimes cause a problem.
Then you can never earn money with crypto, can you?
Yes you sure can, but you have to get REKT one or more times before you learn the most valuable lessons.
And what are those most valuable lessons?
You don't learn a thing about the real trading in a bull market!
Well I'll explain that to you with another example. Suppose you start trading on an exchange and you buy a cryptocurrency with a stable coin. That cryptocurrency will rise and you will see your value increase. Every day you enjoy when you log into your coinmarketcap app, and every day it gets better and looks nicer. In short, every day you saw the dollar increase in value and you felt like a king. You already imagined yourself somewhere in the Maldives. In a hammock under the palm trees with a cocktail in your hand, looking out over the bluer than blue sea with your toes in the yellow sand of the deserted beach.
Can you picture it? Oh yes, a wonderful picture. Well, you will automatically see that image before your eyes when you see that portfolio increase in value every day. You step in one trade, after another… and it goes great. Every day your dollar value grows a little more.
But then why do you have to get REKT to learn how it works? It works well, doesn't it?
Yes, that scenario works well… as long as the market is going UP. But because everything is going so well, you forget an important rule that ALWAYS applies. Not even just in the cryptocurrency, but always and everywhere. Everything that goes up so hard will come down again. And if you take the example here of a ball that you throw up, it will come down. Bounces in the street, goes up again, lands again, bounces up again but a little less high, and rolls a little further until it finally stops.
In the case of cryptocurrency, there is no 'hard' line that it cannot fall through when it comes down. Compare that with the ball that bounces in the street but next to the street is a gutter and from the street the ball goes into the gutter, and next to it is a meadow that goes down diagonally, the ball rolls out of the gutter into the meadow, rolls downhill at a rapid pace and eventually comes to a stop in the ditch.
So you say that when you finally build something, you can lose it again?
Yes, if you did not take your profits along the way… and put some of those profits away in a stable coin, then you can indeed lose a lot again.
So taking profits is important?
Yes, even if that slows down your growth, it is very important that you do this. Because this has a second advantage. Besides losing much less, you can also do your dollar cost averaging when the market crashes!
The what?
Well at the moment that the market crashes, and you have learned to take your profits, then you also have a saving money to buy the dip! You can sit on your hands until the market is done crashing, and the bounces are over. Compare it again with that ball, the moment that ball has finished bouncing, you pick it up from the street, or out of the ditch… just where you can get it.
In the case of crypto… when the market has calmed down, and you can again discover a pattern in which range the currency you want to trade will move. Then you can buy it at the bottom! You don't have to wait that long to take full advantage of the ride up. With this you have just cut your entry costs in half, and it will only take you half as long to get back to your old level from before the crash.