Altcoins Talks - Cryptocurrency Forum
Crypto Discussion Forum => Cryptocurrency Trading => Topic started by: cryptothief on March 18, 2018, 08:49:44 PM
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When I first started to invest I used to panic whenever the market dropped by a few dollars, now I've started to enjoy the drops. It provides an ideal opportunity to average down, something I really should have learned about earlier, but glad I did eventually. For those who don't know what 'averaging down' is, it is buying more coins (in this example anyway, but works in exactly the same way with regular stocks) when the price drops to bring down your average buying price, therefore lowering the price at which you can cash in a profit. Using Bitcoin as an example...
1. Bought 1 BTC at $18,000 back in January (aaaarrrgggghh, unlucky...)
2. Price of Bitcoin drops to $9,000 (aaaarrrggghhh, why me...) - your $18,000 of Bitcoin is now only worth $9,000 and you cannot make any profit until it gets back above $18,000 - or can you??
3. Buy 1 BTC at $9,000 (clever, buy the sh*t out of that dip) - your average price paid for 1 BTC is now 'only' $13,500
4. Cash in profit at any point above $13,500 (champagne corks popping)
Obviously there are additional factors to work into this, as it would normally be worth making more than one extra purchase as the price drops to get a better average and to cover any sudden bounces back up, but it definitely makes market drops easier to swallow. It also emphasises the need to not put all your eggs in one basket and make sure you have the funds to buy 'if' (translates in cryptospeak as 'when') the market falls. Deciding when you make these averaging down purchases is the key, as no-one has unlimited funds to keep buying more if the market keeps dropping, but plenty of research and use of technical analysis will go a long way to helping pick out buy points.
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I'm on the same boat as you and am now averaging down some ETH and BTC I bought (back when it was at 10k), hoping for a market rebound soon!