Why Buy And Hold Cost Average Entry Strategy Is Good For Crypto Currency Trading
And how it works
Crypto Currency Trader, 23.04.2020 | 0 | 324
There are 2 reasons why a buy and hold strategy with cost average entries is a good strategy for crypto curreny Trading.
Reason number oneImagine you think that a crypto currency will rise in price in the next years and you are so sure about it, that you decide to go all in.
If you have for example 10.000 dollar for your investment then you buy tomorrow for the complete amount your crypto currency. But after you did buy it, the price of your crypto currency goes sideways and downwards for few weeks and months. That means you are in negative with your investment for a long time. It maybe stress you so much that you one day decide to sell it all with some lose. So like you see it was not the best idea to go all in.
And now let us look how you would do when you use a cost average entry strategy. We start again with 10.000 dollar, but instead of going all in, you just buy for 25 or 50 dollar from your crypto currency. If the price goes in the next days, weeks and months up and down, then you buy always again and again for 25 or 50 dollar new parts of your crypto currencys.
That way you still have enough money all the time, you are not under so much stress and you are also sometimes happy when you see that the price of your crypto currency goes more down, because you know that you can buy more and more at lower prices.
At the end, when your crypto currency starts to make new all time highs, then you have get more of your crypto currency for the same amount of 10.000 dollar and you did not had so much stress during the drawdown.
Reason number twoAnother reason why buy and hold with coast average entries is especially good for crypto currency trading, is because you buy crypto currencys without leverage. If the price of them go down for a while you don't get problems because of "margin calls" or similar things. You even don't need to pay holding costs.
Many people lose for example money in forex trading because there mostly everybody is using to big leverage. With crypto currencys you don't have this problem. But it is recommended to select some crypto currencys which also have long term some chances to grow, which also have been there since long time. For example crypto currencys like Bitcoin, Litecoin, Stellar Lumens, Dash and Monero. There are of course a lot of other crypto currencys with potential, but i would not spend too much money into new coins which did not already have been there for a few years.