How far can we extend our coverage (in geometric progression) of purchase protection?
This question is important because, according to this method (desiring to reduce the risks when buying), if we are not able to cover ourselves at least up to the historic low, then we must take this limit into account in our risk management.
How to do it?
This secure coverage limit imposes a time limit on the conservation of the asset.
Indeed, always wanting to avoid a situation of loss of value, the price of the asset purchased must not fall below our limit.
How can we assess this time limit based on our coverage limit?
Let's consider a concrete example:
Purchase price Amount
(x10^n depending on capacity)
1.159 0.01
1.156 0.02
1.153 0.04
1.152 0.08
1.150 0.16
1.142 0.32
1.131 0.64
1.1307 đ short term support level
1.130 1.28
1.122 2.56
1.120 5.12
1.116 10.24
1.111 20.48
1.110 40.96
1.109 81.92
1.108 163.84
1.100 327.68
1.098 655.36
1.092 1,310.72
1.089 2,621.44
1.087 5,242.88
1.074 10,485.7
1.055 20,971.52
1,044 41,943.04 đ our limit đ
1.034 83,886.08
1.022 167,772.16
1.021 335,544.32
1.012 671,088.64
1.006 1,342,177.28
1.003 2,684,354.56
0.8278 đ medium term support level
0.697 5,368,709.12
0.531 10,737,418.24
0.260 21,474,836.48
0.008 42,949,672.96 đ ATL đ€Ł
Here's a three-step approach:
â (1) Identify market cycles
Study the history of the asset's bullish and bearish cycles.
If FET follows a cycle similar to the previous ones, we can estimate an average correction time before recovery.
â (2) Observe the strength of the supports
If our limit is strong support (lots of orders and bounce history at this level), we can hold longer.
If the support gives way, it will be necessary to consider exiting or waiting for a longer bullish cycle.
â (3) Determine our investment horizon
Short term (<6 months): If the asset does not rise above our buying levels in 6 months, then it is riskier to hold.
Medium term (6 months - 2 years): If we believe in the long term trend, we can hold despite fluctuations.
Long term (>2 years): If we are convinced of the growth potential, the time limit is more flexible.
đ Conclusion :
The time limit therefore depends on:
1. From the strength of the support to our limit.
2. Average asset correction time.
3. Our investment horizon (short, medium or long term).
Conclusion :
Our coverage limit at $1.044 is located below the current short-term support at $1.1307, providing reasonable protection. However, as cryptocurrency markets are volatile, it is essential to regularly monitor support and resistance levels, as well as market trends.
Would you like a mathematical model that accurately estimates this time limit for holding the FET asset (or another) based on our coverage limit and historical supports?
Have a great day đ€
