HODLING vs Trading – What You Should Do In a Volatile Market
January 28, 2020
Volatility is an all too common occurrence when trading digital assets. Bitcoin, for example, encounters some of the most dramatic volatility in a day. The up-and-down price rollercoaster offers either a vicious or rewarding cycle. Therefore, regardless of HODLING or trading, you should base your investment decisions on research, patience, what investment you have and a predetermined investment plan as described below:
A Helpful Four-Step Cycle to Help with Your Investment Decision:
1) Know Your Market Before Trading: Understanding Leads to Experience and Well Informed Decisions
2) Practice Patience and HODL It Could Pay You in Dividends
3) Only Invest What You Can Afford To Loose
4) Pre Determine Your Stance: Have a Plan Before Investing
Understanding HODLing: A Mishap Turned Viral Adoption
According to the urban dictionary, HODLing for those not in the know is “the act of holding a store of value like stocks or virtual currency, most often bitcoin”. The terminology was first mistyped by GameKyuubi on a Bitcoin forum back on the 18th December 2013. Titled “I AM HODLING”, GameKyuubi bestowed the reality of many who would follow in his footsteps to help circumnavigate their losses. Regardless of the spelling, though, the meaning stays the same.
Know Your Market Before Trading: Understanding Leads to Experience and Well Informed Decisions
Before putting any money into anything, you first need to understand what you are doing. Too many people trust their emotions to help them invest. They live by the fear of missing out, and regrettably, it only leads them to significant losses. On the other side of the fence, if you are an experienced investor, then you know that not putting all your eggs in one basket is best practice. Instead you should spend more time researching than investing. Study the market, understand what drives the price and then consider your options.
For instance, would you inject all your securities into a market that is known to fluctuate from $20,000 to below $7,000? No, of course, you wouldn’t – but many did. Why? Greed and a fear of missing out – emotions can crumble the best of us. So, therefore, don’t purchase up everything with all your capital reserves as the price will more than likely drop – it’s a given.
Practice Patience and HODL It Could Pay You in Dividends
We live in a world full of immediate gratification. BTC, ETH, Litecoin, XRP and EOS all have volatile markets so if you invest one day and trade the following you will more than likely succumb to a lower position. However, if you HODL and practice endurance while understanding your market, the benefits could be satisfying.
For example, Bitcoin over one day can fluctuate as high or low as ±1500 USD in a single day. The loftier the level of volatility, the higher the risk you take. However, if you look at the average Bitcoin variance over a 30, 60 or 120 day period, instead of 24 hours, the fluctuation isn’t all that bad. Did you know the Bitcoin deviation volatility index for 30 days is estimated to be only around 2.82%, whereas for 120 days it climbs to 3.31% according to bitvol.info? That’s not a bad return on your investment. HODLing can pay off! Or another way of putting it as Shakespeare says “How poor are they that have not patience!”
Only Invest What You Can Afford To Lose
As a licensed trading platform, Zipmex offers you a variety of investment opportunities. With inexpensive fees, many of the opportunities are exceptional value when compared to other market offerings. Taking this into account and adopting the previous thoughts shared, you should only invest what you can afford to lose.
Having a cash reserve is imperative when investing. If you are looking at trading often then contemplate what happens if the price drops and you find yourself plummeting down into negative territory. Do you have any way of evaluating your losses? Can you buy in a downturn to average your price while going against the market? You can adopt this strategy or ride it out; however, best practice is not to invest all your portfolio.
Averaging your buys regardless of the price is a great way to invest, especially in a volatile market. Combining this with an investment strategy is also vital to predetermine what you should do in a bull or bear cycle.
Pre Determine Your Stance: Have a Plan Before Investing
Breathe, breathe. When you have done your study, research and have an investment plan figuring out where to repose becomes your only worry. Without the three crucial steps before this one, the definition and realisation of digital assets volatility can certainly reflect an irregular heart rhythm.
To avoid a regretful heart attack, we suggest writing down your investment plan so you can follow it to the letter. When a volatile time hits, you won’t end up like the many investors who panic and begin to question their investment strategies. Having prepared a pre-investment plan instead determines how you should act regardless of the cycle. It is only then you should consider revolving the cycle before taking a new position or adding to your existing portfolio.
As the development and understanding of digital assets grow so to will the investment opportunities. At Zipmex, we understand that the volume of investment is growing, which is why we offer an economy of scale to reduce trading fees. So, if you are planning on following your pre investing strategy by buying one or more of the top five digital assets; Bitcoin, Etherum, EOS, Litecoin or Ripple, then Zipmex is certainly worth investigating.
As a business, we decided on listing the top five digital assets as they have exceptional development and offer endless potential for integration and growth. Take, for instance, what the banks are doing with digital assets at the moment – it is mind-blowing. So, to learn more about each of the digital assets, Zipmex offers standby as we deep dive into the technical analysis to help you understand the market. Until then, happy HODLing or trading!