The real wealth is created during consolidation phases, like now.
But no one explains how to profit from it, everyone just says buy the dips, no one shares specifics. This post will be your playbook to help you make the most of the dips in the market.
We are currently in a consolidation period and our main goal is to survive, and those who do this will stand out in this bull market.
The key is to aggressively buy the dips and position yourself correctly, and here is my ultimate playbook on how to do just that.
1. Do not perform high-risk operations
During such consolidation periods, taking significant risks can lead to heavy losses in your portfolio. So, limit high-risk plays to less than 3% of your portfolio and it is better to focus on low/medium risk plays.
2. Stablecoins
Keep 30% to 60% of your portfolio in stablecoins, they help reduce volatility, plus it allows you to buy dips at the right time.
3. No funds to buy on dips, find a Web3 job
If you don’t have the funds to build a position, find a Web3 job. These periods usually last 4-6 months and give you enough time to build a minimal portfolio, especially now that there are so many job opportunities.
4. Improve your skills when the market is boring
This is what separates the winners from the losers. Those who do their research when the market is boring and actively learn new things will come out on top in this cycle.
Here are some skills:
programming
Video Editing
Copywriting
How to buy on dips
This means buying at the lowest price, but there is a problem: how to predict the lowest price?
The answer is simple: No one can predict it. But we can use strategies to get as close to the lowest price as possible.
To get as close as possible to buying the dip, you need to know the answers to these three questions:
When do you need to buy?
What do you need to buy?
How to buy?
Let’s dig a little deeper.
When do you need to buy?
The usual pattern of all bull markets is: halving -> 18 months -> all-time high (ATH). We can divide the entire cycle into:
Phase 1 – Buy-in
Phase 2 – Repair
Here is a rough diagram of the stages:
Buy and Repair
Phase 1 – The dip buying season, which usually lasts 14 months, is when our mission is to accumulate positions.
Phase 2 – The market is approaching its peak and we start locking in profits.
What do you need to buy?
To maximize profits, we need to find undervalued altcoins.
But also keep in mind the risks:
High market capitalization = low risk
Low to medium market cap = high risk
Choose according to your risk management and portfolio.
Undervalued altcoins are usually in the price discovery phase and they can be high or low market cap assets.
You can also add to your $BTC/$ETH position to reduce portfolio volatility.
How to buy?
Buying on dips is a complex process. We can’t just put all our money into a token at once, because it’s possible that we didn’t really buy at the bottom (the price could continue to fall). That’s why we will use the Cost-Averaging Strategy to buy.
Let me explain.
Simply put, the cost averaging strategy is to buy in batches so that the average purchase price is as low as possible.
Example: $1,000 portfolio
First Buy-in – $100
Second Buy-in – $200
Third Buy-in – $300
Fourth Buy-in – $400
Feel free to adjust these numbers to suit your situation.
But when exactly should you buy?
The easiest way is to buy every time $BTC drops 5-7%, keeping in mind that altcoins can drop 10-15% at this time.
Again, you are free to adjust the percentages based on your strategy.
Summarize
Check if it is time to buy the dip, check if the altcoin is still undervalued, and then use the dollar cost averaging strategy:
BTC -5% = Buy $100
BTC -5% = Buy $200
BTC -5% = Buy $300
BTC -5% = Buy $400
This method is actually buying on dips.
