This is arguably the most common question you see in the cryptocurrency space. There can be a lot of focus on finding that ‘correct’ time to buy and sell. However, it might not be as important as you think.
There Is No Simple Answer
Just to be clear: there is no universal rule book when it comes to buying and selling cryptocurrency. That’s because the cryptocurrency markets are made up of people with a variety of goals and plans.
Consider what happens when you look at other people’s portfolio. Depending on whose portfolio it is, you can be tempted to copy it.
This is problematic because that person bought those assets at different times, in different market conditions. They have their own plan, some trades might not make sense for your personal circumstances.
This is why looking more broadly there should be greater focus first on making sure you buy according to:
- Your personal plan
- Your personal circumstances
- Spending time in the market and education
Your Personal Plan
Each investor will have a different plan for their cryptocurrency investments. If you have a long-term time frame and are losing sleep over figuring out when to buy a certain cryptocurrency, you may be overthinking things. In 10 years when you go to sell your cryptocurrency, for example, the difference between you buying at $5.00, $5.50 or $6 is very likely to be negligible.
When long-term investors are fretting over the ‘perfect’ entry point, it is usually a strong indicator that they have rushed through their planning—or skipped it altogether. This is extremely common among beginner investors and serves to further underscore the importance of planning.
You could be wasting time over thinking at a perfect entry point—only to eventually miss out if that asset starts to increase in value. Conversely, if you are reacting emotionally to a recent price increase you could develop a fear-of-missing-out (FOMO) that leads to you buying in at the top of a significant upwards price movement.
Many beginners with long-term timeframes adopt a dollar-cost averaging approach (DCA) which involves the process of dividing their intended investment value into smaller allocations with the intent to invest these amounts at different prices over time with the intention of reaching an average target price.
When it comes to the ‘right’ time to sell, the difference between planners and non-planners is even more obvious. If the price of a cryptocurrency increases strongly over a sustained period, the planners will often take profits at calculated target prices along the way whereas those who haven’t planned may act more emotionally.
Education & Spending Time in the Market
Generally speaking, the more time you spend learning, the more likely you are to know what factors to consider when you’re thinking about buying or selling cryptocurrency.
Don’t underestimate how much you can learn from experience. Participating in the market can help consolidate the things you’ve read about in courses like these. If you’re uncomfortable about putting money on the line just yet, you can use test accounts with fake money on platforms like eToro or simply trade with less significant amounts relative to your level of risk tolerance.
Closely following the market and simply observing can also help you develop your understanding of the power of sentiment, common pitfalls, how to mitigate risk and how to spot opportunities.