Any successful investor needs to understand the basic maths behind trading. If you don’t understand the real implications of a 20% drop, it’s time to learn.
Here are some examples of math-related confusions:
If an asset drops 50% in price, it does not need to raise 50% to break even again.
In reality, it needs to raise 100%. Think about it: if you purchase a coin for $100 and it drops to $50, it needs to double (+100%) in price from $50 to hit $100 again. If it only goes back up 50%, then you will have $75 - still at a loss.
The difference between an 80% loss and a 95% loss is extremely significant. To break even after an 80% loss, the price needs to bounce back 5x. To come back from a 95% loss, you’re looking at 20x.
Every 10% drop, makes a bigger and bigger difference
Market Sentiment
If the overall sentiment varies, then so may the price.
While you may expect a bull market soon or be optimistic about a cryptocurrency, other investors may feel the opposite way.
This is why listening to the sentiment of other investors in the industry is crucial. If you don’t, you might miss the next bear/bull market, or the next cryptocurrency about to moon.
So, how do you listen to the sentiment of your peers
- Read other investors’ thoughts. Not thoughts from influencers or media - from investors, like you and I. You can do this by joining and participating actively in some of the best crypto communities (read mistake #29
- Use tools. These tools scrape information from the web and turn it into actionable metrics, and each of them uses different factors to determine sentiment. Alternative.me, for example, scrapes data from trading volumes, Google Trends, and social media amongst other indicators.
Remember that sentiment is just one indicator of the next market movements.
When crafting your cryptocurrency strategy, cross-reference different indicators from several sources. Always use logic over emotions.
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