Dennis Gartman started trading in the 1970s, and during the course of his career, he gained a ton of experience trading. Those who are familiar with Gartman will be aware that he published a highly esteemed daily newsletter for 30 years that institutional investors highly appreciate. How to Position a Crypto Portfolio in the Down Market looked at Gartman's top rules and modified them for investors who trade cryptocurrency.
1. Never increase a negative position
Simply averaging down makes sense occasionally. After all, as soon as prices rise again, an investor might quickly make up their losses. Ethereum would average $180 if an investor doubled down on his holdings after purchasing it at a price of $220 initially and $140 afterwards.
By using this tactic, break-even would drop from the initial 57% gain to just 29%. This is the worst approach ever, according to Gartman, and it's not just novice retail traders who fall for it.
2. Be quick to change your mind.
It makes no difference how confident one is in a thesis. Close the position if the asset's price falls further and reaches the stop loss. Don't instantly make a lower-level bid again. Right now, increasing sales is the only decision that should be made. The wisest course of action is to frequently and early cut losses.
3. Losing money is horrible, but being stressed out is far worse.
Maintaining a position that reduces portfolio value is bad, but the mental anguish it causes is even more detrimental. Try to take a few days off after suffering a loss to concentrate on other things, such as your family and personal well-being.
Every trader occasionally places terrible bets; it's just the nature of the game. Avoiding emotional commitment to a position is crucial. Trading and investing are very different from one another.
4. In a bullish market, one can only be long or neutral.
If a trade has hit its stop-loss, the investor most likely didn't read the market correctly. Too many traders fail financially while attempting to predict the bottom. Reevaluating market patterns after each loss is a wise tactic. Only a few months after the fact will one be able to determine whether the price was high or low. Avoid bucking the trend.
5. Be patient with profitable transactions, and get out of lost ones right away.
Even if an investor only correctly predicts 30% of their trades, they can still make a lot of money. The secret is to consistently add positions to winning trades while maintaining a tight stop loss of about 7% to 10%.
6. Observe strong market trends
It's difficult to identify who came up with this expression. It yet succeeds in every way. Even when investors are absolutely certain that a price shift will occur, it occasionally does not.
Try not to counter the emotion of the market. No matter how "correct" you are, do not expect others to share your perspective. The confirmation bias should be avoided, especially on social networks.
7. Be mindful of big candles
It is important to instantly change this strategy if the market is steadily increasing and suddenly there is a huge bearish candle. In a matter of hours or days, a 4% reversal may swiftly turn into a 12% or 20% loss.
On the other side, a powerful positive candle following a protracted bear market may serve as the catalyst for a trend reversal.
8. Markets fluctuate in cycles; take advantage of this.
Even a bad trade can turn out well when investors properly predict market movements. Right now is the ideal opportunity for investors to increase their bets and add to their open positions. On the other side, when the price declines, take it slower and reduce your positions.
