Many people think that crypto is so dangerous because you can lose your money easily. Yes, they are right but if you don’t pay attention to the charts or you don’t DYOR (Do Your Own Research). What I want to say is that you have to pay attention to when is the perfect moment to invest. If you don’t care about the price when you invest that means you are doing DCA (dollar-cost averaging), and that is perfect. Do it for a while and in a few years, you will have a nice portfolio. But if you don’t do DCA and you want to buy now and sell tomorrow you should analyze the price very carefully and the directions where that price can go. Because you don’t do that you can be put in the situation to buy low now, the price rises for a short period (minutes, hours), and after that, it continues to go down for a long period, and you will lose all your money. Because this my friend, is a very used trap, and it is called a bull trap. But how did this happen? Well, it happens when there is a downtrend and there are false signs of a reverse of the trend. At that point, the price starts to go up and it seems that there is no possible way to go back down. After a short period, and significant percentage growth the price starts to decrease again and it goes even lower than the previous ATL (all-time low). This is happening when the market makers or just some weals want to liquidate the short positions. Yes, this kind of trap wasn’t made for you, only if you had a short position open. 

Another way to lose your money in crypto is to be caught in another trap, like a bear trap. Here things are a little different. Think like this, you already have some coins, and the trend had an ascendant trend for a while but at some point, the price starts to go down and you think that that was it and this is the time to sell, and you do it. But after a short time, the price starts to go up again but you already sold everything that you had. It is frustrating, isn’t it? This is how a bear trap feels. And it works in this way. When the market has an ascendant trend the market makers put some signals that can indicate that there will be a correction of the price, the price starts to go down for a short period and by a significant percent, this move of the market scares weak hands who starts to sell, but after that, the price starts to rise again because the market makers start to buy again and those who already sold will not buy right then because they still expect a price drop. This kind of trap is for those who have long positions and the market makers want to liquidate them, so don’t take it personally, only if you have a long position open. 

These two types of traps are so used that I think many investors and traders knew them and not only in the crypto universe. These two are used in all financial markets so it is no surprise that is present in crypto too. My advice is DYOR and also pay attention to every market movement if you want to trade. 

 

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Written by : Betuel Saracut

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