. Definition of the bottom 🤑🤑💰💰💶💶💶
It is the point at which selling pressures temporarily stop, and buyers begin to appear strongly, leading to a reversal of the trend upwards.
It can be a short-term bottom (within an hour or a day) or a long-term bottom (within months or years).
2. Why is the bottom important to us? 🤑
Buying assets at the bottom is considered cost-effective; the closer you are to the lowest possible price, the higher the chances of achieving a greater return when the price rebounds.
But the real challenge is distinguishing between a 'real bottom' and a 'temporary fluctuation': the price may continue to fall even after what seems like a 'bottom'.
3. The difficulty of timing the bottom accurately 😥🤑🤑💰
The bottom is determined retrospectively: you often know it was a bottom after the decline has ended and the rise has actually begun.
Even experts use indicators and false opportunities: like RSI, MACD, Fibonacci levels, and support/resistance, but they are not guaranteed 100%.
4. Alternative strategies for buying the bottom
Dollar-Cost Averaging: dividing the allocated investment amount into installments and buying them at specified intervals, regardless of the price.
The moving average as a decision maker: for example, buying a part of the trade when the price crosses the exponential moving average (EMA) for a short period from below to above.
Fundamental analysis: assessing the true value of a company or asset and then buying when the price is below fair value.
5. Rules and guidelines to limit risks
Always set a stop-loss to protect your capital in case the decline continues.
Don’t put all your eggs in one basket: diversify your portfolio across different assets or sectors.
Beware of 'bear traps', where the price rises as shown before continuing to pull back.
In conclusion, be careful 💰💰💰💰🤑😥
- Buying the bottom is theoretically possible, but in reality, you cannot time the bottom accurately.
- Instead, rely on cumulative strategies like DCA, and use strict risk management with stop-loss and portfolio diversification.
- If you are determined to try to 'catch the bottom', use suitable technical indicators, but do not rely on any of them alone, and combine them with fundamental analysis and market knowledge.