Dangers of Buying the Dips in the Market's Current State

The crypto market is so unpredictable these days that if you don't trade with good strategies, you may end up losing lots of funds as the case may be. The way the market is going confuse a lot of people. Many actually felt the bull is close when the price of bitcoin reached $74000 but in a week, it dropped to $63,000.

There are lots of sentiments in the market and people even start asking themselves if the bull run will actually come this year. Many rush to has refused to sell off their tokens because the felt with that increase, the bull will soon spark not to realise the biggest dip of all. Now there's another sentiment in the market. Will the market fall again to $57,000 or this is the last dips?

There's a trend that people should stop buying the dips for now. Check the price of Steem falling drastically......

This post will give an overview of why buying dips at this moment can be critical and why it can be important on normal situations... We'll also see how these dips can be identified.

This is a common strategy used in investments by major investors and traders. They purchase assets after its price has dropped so bad depending on the type of coin dropped though. The idea behind this investment strategy is simple. We follow the rule of buying low and then selling high.

These dips are temporary and not permanent and that asset bought will sure rebound which allows investors profit in a spectacular way when the price recovers its loses.

Buying the dips also mean taking advantage of short term price declined in crypto assets as these assets have long term potential of rebound anytime. Traders who buys the dips are likely to make profits at every slight increase from the price bought. To illustrate, Sol dropped from $173 to $123. If a trader after identifying the assets dips and buys, he'll be in profit when Sol recovers from $123 to $157.

To buy a dip, you must follow the following processes.

• You don't just buy when you see a price drop a little except you're placing a trade on futures sometimes it can be very risky too as that asset price may fall to a point you never expected liquidating you from the market. You must identify the dip and this can be fine by looking for significant declines driven by negative news or broader economic factors which makes the market crash.

I can recall a negative news in the market last week of $800 liquidation or something and a particular country big investors sold off their major assets. These news in the market is possibly one of the reasons bitcoin fell to this price. So if one can identify these dips and buys strategically, he's likely going to make profits when there's a market correction.

• The fundamentals of the asset should be considered. Strong fundamentals in terms of use cases, market adoption and trends can indicate the price dip is temporary and that the asset had long-term potential.

• Buying gradually is a process of diversification of income. Using the dollar cost average approach will help spread your income and profits. Let's assume you have $500 and there's a sharp decline in the market, instead of using the whole $500 to buy at that price decline, you can use $100 at that point and then pin point another price with $100 when it drops further as nobody knows when the market increases and drops.

Having different prices bought at different dip levels will help you gain much profits than buying at a particular price with $500.

• Setting limits is more like the latter. You set entry and exit points in the market using the dollar cost average strategy. At 2% drop, you'll buy, at 6% drop, you'll buy. At 4% increase, you'll sell and then set incase it drops. This disciplined approach will help avoid emotional decisions

• Sentiments in the market can be essential though. Positive sentiments may signal a good time to buy an asset while negative sentiments in the crypto space may signal declines. Also staying informed on trends will help you know when to buy dips.

Buying dips leads to significant yield in profits when market recovers from its loses. You have the opportunity to accumulate more assets to yourself when an asset dips as you won't be buying when the price is extremely high.

Buying a dip can also have disadvantages and some of its disadvantages especially now includes;

• Uncertainty of a recovery after dips. Not all assets recovers immediately after a dip. It usually take time before there's a recovery which sometimes lead to more losses.

• The volatility in the market can cause us to make poor decisions and prices can continue to fall after initial dips like what bitcoin is doing. Many are skeptical about its increase again. They feel it would Keep falling to $59K as it did last bull year.

Manipulations in the market, liquidity issues and difficulties in predicting market bottoms are the major reasons why it's not wise to wise the dips now. I can remember when steem price fell to $0.26. This was its initial dip and then its fell to $0.22 without recovering in price and then fell again to $0.17 without recovering much. These are some reasons why buying dips as the market is now is not advisable.

In conclusion, buying the dips is a very good investment strategy but these dips must be identified properly before any investment decision is made and also bring alert to news as it does cause sharp declines will help.

The DCA can help in this case of buying dips as the market can be very unpredictable. So as the market is right now, I'll say you should examine it properly to making decisions that may cause you sell off your assets in losses.

All screenshots from my binance account

Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have