Its important during corrections to remain calm and not over react and let emotions direct you. Regardless of the fear you hear and read about in the news, the overall market remains bullish . This is evident in how many alts recently made new all time highs, how the calls for $5000-$8000 Bitcoin 0.82% are starting to subside, and your hearing long calls now. In addition Ethereum -5.20% picked up out of no where and is crushing it. Even Jamie Dimon yesterday did a 180 apologizing for calling Bitcoin' a scam! Bottom line the dips are quickly being bought up as evident from the long lower wicks. This is clearly a sign that there is a lot of money sitting and waiting to buy on pullbacks. Corrections are part of any healthy market. This is where a new investor can get caught in what is called "Portfolio Erosion". Large investors do not buy all in. They buy in increments and buy dips. This is what is likely happening as larger investors look to accumulate a longer term position.
Portfolio Erosion happens when you get caught up in the "moment" and start buying and selling on swings and emotional impulses. "Ohhh Lord its going down SELL!, wait, there it is going back up, BUY!" and at the end of the day, the market is back to where it was and you have less money and less shares then you did before it started. PORTFOLIO EROSION! Your loss their gain!
Portfolio Erosion is why I use the 70/30 portfolio. It has saved me personally from "market erosion" over many years. It literally keeps me out of these moments as I pretty much have nothing I can panic sell here. I have been down to my core holdings since Dec 20th and only doing small limited trading. By nature of this strategy, I have limited my risk, as only a few coins Bitcoin' XRP' XLM' and Litecoin' are getting close to where I want to add for the longer term.
Looking at the chart from yesterday we almost hit the $13,500. Of course not only is this a retracement level, its a key support level as well going back to December (not shown but you can pull it up), so it is no wonder it was bought up quickly. There is also a valid 5 wave count on the daily as shown. Now this can be misleading, so be careful counting waves here, but it helps bring some perspective to the chart. I am looking to enter closer to $13,000 area for a longer term trade. Now this will only be a 1/3 position, as we can always dip more and I want some money on the sides to take advantage of a panic selloff. In addition I want to see how the market reacts at $13,000.
Longterm: We are still in a bull market
Midterm: Bear market
Shorterm: Bear market
Long Term Investors
If I had no Bitcoin 0.82% and was looking to add for the longterm there would be no reason for me not to add a small position here. We can still head lower and its never wise to come into a market long term in one move.
Bottom Line: Corrections are difficult to trade and very risky. Patience and money management should be the primary focus. Trades should be short term with tight stops out of consolidation. This is not the time, after doing everything right, to expose yourself to "PORTFOLIO EROSION"!