In one of our recent articles, The Two Week Portfolio – How to Invest Like a Crypto Millionaire, we talked about how to utilize research, buy in early, and get out early.
But — what do you do when you don’t feel comfortable buying in? Which, by the way, is ALL THE TIME in the beginning. It takes time to get comfortable with your investments, so below is a tool that will help give you some downside protection.
Even if you find the best project in the history of crypto assets and got in early, the following day a whale could come along and trigger a few sell-orders. Then bots take over and suddenly you’re down 25%. Sounds like a nightmare, right? Well, it turns out there are ways to protect yourself from this downside scenario.
Once you enter a position, you have two options: hodl until you’re profitable or set a sell-order at a level of support that you’re comfortable with. Unless you’re a seasoned trader, you might not know what I’m talking about.
Let’s take a look at the chart below:
If you read the article listed above, we talked about investing two weeks before the catalyst date. Two weeks before the catalyst date on this chart is right around February 5th. At the time, Lisk (above) was priced around $12. You may be wondering, “what is a support level im comfortable with?”. Finding a support level that you’re comfortable with means looking at that green line in the chart above and identifying the price level it has sustained for a long period of time. A long period of time is relative depending on your specific entry/exit period. In this specific period (3 month chart above), you’ll notice that the price stayed around $22-$23.
On February 5th, from a “comfortable support level” standpoint, I would feel very comfortable buying in at the $12 level. But, let’s say you see that the previous support level was $8 in late November and you’re afraid the price is going to drop back to that point. We can use something called a Stop-Loss Order.
Essentially, a Stop-Loss Order gives you the ability to sell your position at whatever price you want without having to manually sell in the moment that particular price occurs. Let’s take a look at the Bittrex interface below to get a better idea of what this looks like:
Typically, if you wanted to sell your position, you would enter the quantity in the “Units” field. Next pick the price you want to sell at in the “Ask” field (most would choose “Last” or “Bid”). The total BTC value would then be displayed in the “Total” field. Finally, you would click “Sell Lisk”.
To utilize the Stop-Loss Order, you would place your particular support level price in the “Ask” field, but also click the “Limit” button and then choose “Conditional”.
When you click “Conditional”, there will be another “Conditional” button below where you would then choose “Greater than or equal to” or whatever your preference is. Then enter the preferred price you would like to sell at in that field (same price as the “Ask” amount you entered earlier in the process).
So, here’s the deal – if you’re investing in a low volume asset (less than ~$1 Million in volume), you will want to break up your sell-order into smaller positions. I recommend breaking up your position into smaller sell-orders so that you aren’t depending on a large buyer to scoop up what you’re offering. This changes, of course, once you start trading large volume assets (bitcoin, litecoin, etc).
After all of this, what does this have to do with Gabriella Papadakis and her wardrobe malfunction? Sometimes, no matter what you do, your position can drop and you have to decide: do I panic sell, or do I have a plan and execute it.
If you’re Gabriella, you cover yourself, finish your routine and then win the Silver medal for France at the 2018 Olympics.