The First Rule In Trading Crypto That I Learned The Hard Way
When I first started trading crypto, I often heard the first rule of crypto trading is forget about fiat and just look at BTC value. I didn't really understand this until it bit me. So, to hopefully save someone else from heartache I thought I'd make a quick post to visually show you the difference. Not long ago, I had used up my bandwidth here on steemit and needed to wait before I could submit a post or get more steem power, so I chose the quicker route. Off to an exchange I went. I wasn't concerned with the price because I wasn't going to purchase very many steem just enough to get me over the hump and continue to grow organically and since I was basically going to use the coin and not trade it I just bought without looking for a dip or a proper buy in zone. Just for kicks and the fact it's always good to keep track of all your trades I decided to add it to my blockfolio app just so I could periodically see how I did. So lets go take a look.
WOW I'm up over 17% on one and 7 on the other, if I were trading this and as volatile as it's been lately I'd take a 17% profit and run!
But wait? am I really up 17% technically in fiat value I am ........ if I was to sell it, then immediately cash out the bitcoin I received for fiat, and that is assuming that the value of bitcoin doesn't change in the mean time. So in other words if all the stars and the moons align then yup I won.
But I'm not patting myself on the back just yet, because I remembered the first rule of trading crypto currencies the hard way so lets see how I'm doing if I apply that rule and I look at only value in btc
Holy smokes If I sold now, that same 17% profit would actually be a 27% loss and that little 7% profit would be a 33% loss!!!!
You can see how this could bite you ESPECIALLY if this were a bigger trade because let's face it, nobody really sells alts to immediately cash out their btc on a regular basis, we sell it to increase our number of BTC so we can get into another trade and continue to grow our holdings and as you can see from the second photo, selling now would decrease my buying ability for the next trade.
I hope this helps visual learners like myself and keeps you from making some of the painful mistakes I made when I first started. If you found this helpful, or think it might help someone new, please upvote and re-steem .
-Harley
Crypto is extremely volatile and i expect it to be for quite some time more. There is a lot of money to be made or lost.
Most of the time when BTC rises the ALTS drop, so we always need to be carefull looking at the BTC value and not the EURO or DOLLAR.
Nice Article Harley :) My very first post on steemit was about this:
https://steemit.com/bitcoin/@ashr/why-i-value-my-crypto-altcoin-portfolio-in-btc-and-eth-and-you-should-too
Trading pairs is such an important concept to grasp! Upvoted and followed :)
and a great article by you as well, this is something that I think can't be said enough for new folks to hear, I'm usually a quick learner, but it took me a sec to learn this one.
@ashr how would you handle buying "expensive" bitcoin in order to purchase alts? Right now bitcoin is around $4300. Should I wait until it's cheaper to buy alts? Or do you never pay attention to bitcoin price if you intend to use the bitcoin you purchase to buy alts right away?
I never really worry about price of btc when buying because some of it I'll trade for alts and the rest will get held long term and I believe it will rise emensly. I once thought it was a bad investment at $700 didn't see the light and start buying it until it was $1300 and I haven't looked back sense
If you're intending to buy alts right away then your intent is to increase satoshi value of those alts when bitcoin corrects a bit. It would depend on the speed that you can get from USD > alts through BTC particularly with the current transaction times. I would consider ETH or even LTC (it's also HIGH right now though), because they'll aid you in making a move quickly. Your strategy would be USD>LTC or ETH> Exchange>BTC>alts, but the .25% difference in fees will likely save you a day at current BTC transaction times/regular fees. If you really wanted to buy in BTC, you could buy BTC, send it to your own wallet, then do a CPFP receiver side transaction with a double fee to get it on exchange.
Good advice! resteemed and following from now on!
I picked up on this immediatly. Most people don't get it right away. My friends don,t get it.
They won't if btc keeps climbing, but as soon as it corrects they will notice I normally pick things up quick but this took a couple of crap what happened trades to realize what I did lol thanks for the reply