Badger DAO | Plan For All Scenarios: Trading Strategy

4 de out.

Since market conditions are always changing, we need to be prepared for all scenarios. Being prepared is the best way to reduce stress, cut losses and maximize profits on the winners.

Let's look at some examples:

Say you a buy a pair anticipating growth, what happens if instead of growing the pair move down? What would you do? How would you approach the market?

Would you sell? If yes, by how much?
Would you hold? If yes, for how long?

You bought a pair and the pair instead of going up moves down. Without a plan, we are left with the problem of having to choose what to do in the moment, and this can be problematic since being in red can cloud our judgement and lead to poor decisions. Planning ahead of time will make things easy and increase your success ratio.

If the pair we bought goes down, we can always choose to hold it. We can decide beforehand if we can to hold for a week, a month or three months. We can say, "if it drops rather than going up, I am willing to wait for three months for it to recover. If in three months there is no action, I will take the loss and move on."

Some people can decide that if their chosen pair drops 5% below the entry price they are ready to close, this would be considered a tight stop-loss. Just close the trade and find a new one, that's also ok. As long as one has a well developed plan, it can all workout in the end.

Another example would be the accumulation strategy. We saw a bull-market and then a corrective phase, the corrective phase lasted 7-9 months and prices are trading at their lowest level in years. At this point, we decide to buy but only in portions. Rather than buying 100% in one go, we buy 20-30%. If the pair moves lower, we buy more; if the pay moves higher, we buy more. We continue this buying strategy until the pair starts to move strongly or until we run out of buying power. Once we are fully in, we just let the position run long-term.

If you buy a pair and it starts growing right away, will you sell?
When and by how much?

You can decide beforehand to sell 20% at a certain level. 20% more at another level and so on. You can also decide to hold long-term, say 8-12 months to see how it all develops. The important part is to have a plan and follow this plan until the end.

The trading strategy is just like the chart map. The chart map helps us draw all the different scenarios and the strategy tells us what to do on each of these scenarios.

It can all be a mental exercise but you will do good as long as you invest quality time in your trade. Not obsessing in front of the computer nor procrastinating, but doing real calculations and preparation, or reading content that help you grow in some way.

Namaste.