Note: I am not a financial advisor.
This article will explain the 20% Cream Rule.
Sure, it's not an exact science and there's no actual trading term called the 20% Cream Rule. But, this is a tried and true method for people who have surfed the waves of the cryptosphere for long enough to know more than just how to yell HODL! every time they see a red candle.
By the way, HODL=Hold or Hold On For Dear Life or the true story.
There will be 3 parts:
- Why are cryptos votalite
- What Can I Do?
- The 20% Cream Rule
1. Cryptos are highly volatile because:
- They are invisible.
Good luck selling something invisible. Especially for 10K.
- They are not widely used.
- They are associated with CRIMINALS.
"The Bitcoin is just money for murderers and drugies."
"Easy, Grandma, give it a chance."
- Regulations have yet to be figured out.
- Half of everyone in Crypto still secretly wonders...
What if it really is a bubble?
2. What Can I Do?
Well you have options:
- You can panic sell when the market dips or when the Chinese New Year is upon us.
- You can yell HODL, and hope that there's enough noobs or men away on business trips, to not pull out, until the FUD disappears.
- You can do a shit ton of research and guess which coins will not be affected by the dips, based on upcoming news, stability, or cool polygons.
- You can use the 20% Cream Rule.
3. The 20% Cream Rule
No need to watch, unless you really want to!
The top 20% (ish) of cow milk is cream.
So how the hell is this related to crypto?
I'm glad you asked.
If the market is not having a crazy day, I always keep roughly 20% of my money as USD (or insert fiat of choice or Tether (but do your own research on Tether, cause I'm skeptical as hell)).
20%. This is the cream I have taken off the top.
So if the market goes up a lot.
Then I take some more cream off the top (as high as 30% in USD).
If the market stays the same or goes up or down a little.
I keep my USD at roughly 20%.
If the market goes down a lot.
I wait until recovery begins, and then I spend all my USD/fiat/Tether.
And as the market recovers, I start taking that cream off the top again.
And this method actually gets my crypto community excited for the dips!
No, not those dips.
I'm talking about the ones that make everyone scared to death.
"The Bubble, ahhhh, my invisible money is disappearing, HODL, red candles, Grandma!"
Cause as Warren Buffet said, "Be fearful when others are greedy and be greedy only when others are fearful."
Festina Lente
Or participate in daily contests on my SteemIt Blog
A proud and happy XLM, STEEM, and ETH holder. What do you all own?
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XRP XLM SUB WABI CND ETH TNB LTC
I am still learning
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That's a wide portfolio for someone who is still learning.
But it's smart to diversify if you haven't yet found the projects you truly believe in.
Happy investing to ya.
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I found it is always good to have a little "cash" to be able to move in or out as needed. This 'cream rule' sorta adds clarity to what I was trying to figure out. thanks.
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Yea. And having it available, in a way that doesn't require 10 days or crazy fees.
A lot of people use Tether, but no one has audited Tether, so they can sort-of just print money without us certain that they actually have their money backed by anything. Do you use Tether or keep the cash within a step or two of an exchange?
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I have various accounts where I will use this concept across the board.
No, I am not using Tether, but I'll need to look into it.
On some exchanges, there is a US Dollar account, so I can pull out cash and leave it there as this cream.
On other exchanges, I was using Bitcoin as the stable currency, but not now. Now, I look at whatever crypto is most stable to avoid volatility, whether it is Litecoin, Ethereum or Bitcoin.
Or Maybe it's a rising star for the moment while those three are volatile. It is harder on these exchanges without a true US Dollar account.
Further, I realized this cream concept is fine and appropriate on stock market accounts where there is a cash account for the cream. Some days, a stock should be sold due to market conditions. At that time, it may be appropriate to just hold the cash on the account.
So, this cream idea applies across the board to other areas.
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I am currently trading on Binance. What are some of the exchanges you use that are trust worthy? Thank you
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Bittrex is at least as solid as Binance, just with fewer options. Kraken has improved in the last month and currently has no trading fees (and a USD account like @goldkey metioned). And then GDAX as a backdoor to Coinbase.
Also, there is a new exchange set to come out (beta version in the next few weeks) in the next few months, called FairX, that will offer fiat->altcoins, and some people think it will have a huge affect on the Crypto space.
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Great Info. I was looking for more info on various exchanges, too. The exchange that a person selects is as important as the coins that get selected. In some ways, maybe even more important.
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First, I would defer to @redbagofcourage who gave a great reply. I'm very much a newbie.
As I looked, I heard good things about Bittrex and Binance. I saw mixed reviews on Poloniex. I don't know anything about any others.
Most criticisms on any have been about getting registered and verified. There is also criticism about getting cash out. Of course, there are complaints about fees on all exchanges.
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Well written.
Can you explain a little more how you decide WHEN to take the 20% off? And do you sell 20% of your sum of that coin, or 20% of the profit value factoring in the cost you bought it at?
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Thanks for the compliment. And sure.
I like making things simple.
Say, for instance, you want to start with 100 Cream Coins.
I'd recommend buying 80 Cream Coins and putting the other $ (20%) into USD or Tether, as @goldkey suggested, on the Cream Exchange.
The 100-day MA (moving average) gives you a decent idea of how people are valuing Cream Coin.
So...
if Cream Coin is performing exceptionally well, then set some limit sells, and take some cream off the top, so that you can have 20-30% of your TOTAL investment, waiting in reserve. Because no matter the hype, Cream Coin will inevitably dip.
And catching the mid- or big-dips, and then selling off the cream as price increases, my friend, is a game-changer. And you can avoid the psychological effect of dips. By seeing them as opportunities.
The only exception being if the dips are due to something bad/real. Say, the founder of Cream Coin was caught embezzling funds. Then the dip makes sense. But in a volatile market a lot of the dips come from FUD.
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So, in your example...you'd sell ~20 cream coins, and then buy more on the dip, right?
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Right. If you had 100 to begin with. Yep. Sell off 20 at a nice market average.
B/c you never know when the next dip will happen.
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I like this concept. It seems like it should come naturally. I mean, if you are interested in the market in the first place you probably lack a lot of fear that others have to begin with which should result in some type of overall strategy unless you love getting killed 3 times a day. I think the key to Cream is to move as quickly as the market, synchronization, in flow... like a dance.
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