Devin’s Daily Crypto Tips
I’ve had a few questions about event based trading, especially after mentioning the new BNB ICO structure that Binance recently announced. In this Newsletter I will cover how to trade events (based on historic success) but with a particular focus on Binance Coin.
I’ve copied Secret 14 From my book “21 Crypto Secrets” that helps put event based trading into perspective…
In a market where intrinsic value is very hard to measure (at the moment), investment decisions are almost entirely dependent on speculation. Speculation thrives off of events, which can be broken down as follows:
• Exchange listings (we’ve covered)
• Hard forks (we’ve covered)
• Rebranding
• Partnerships
• Events (conferences etc.)
• Development updates
Once I understood how to trade around all these “events”, I significantly increased my ROI and reduced the massive drawdowns that I kept on having.
The fundamental rule is: Buy the rumour, sell the news.
This is quite a generic statement that is thrown around a lot in the crypto markets, but very few people actually know why this strategy is effective. I want to begin by stating that this strategy is not exclusive to the crypto market – the stock market behaves in a very similar fashion.
It really boils down to the media being a lagging indicator, and the public always getting in at the last minute – it’s human nature. Say, for example, there’s one of the events above about to happen in 30 days’ time. The price of that asset will likely increase leading up to the event, and then it will crash on the day of the event. This happens 90% of the time.
Here’s why…
Company X announces the event. Almost instantly, the active investors have acted on this announcement and have placed trades in this token. The price has likely increased a fair amount.
Then, the wider market starts to pick up on this event, and the blogs and small news sites pick up on it too. This normally lasts a couple weeks be-fore the bigger media sites decide to comment on this event.
By this point, the price has increased a significant amount compared to a few weeks back and the event is right around the corner. Newer investors in the market are now both aware and excited about this event, while the investors who have been in this trade since the beginning are planning their exit. The event is further hyped by the token’s community and team, drawing in more short-term speculators, who are all eager to buy the token on the day of the event.
Most investors who got in early on are now entirely out of this token, ready to buy the dip when it hap-pens. The newer investor has just bought in, waiting for the event and thinking about which Lambo he’s going to buy after the event pushes the price to the moon.
And the price plummets. The smart investor’s order fills at the low levels. But the newer investor is left confused, wondering why the price fell even though the event was good.
Here’s why…
The market has already priced in the event.
This is so important I need to repeat it. If something is expected to happen, don’t assume that the market will react when that event will happen. The market has likely already priced in that event and therefore, the expected outcome will not increase the price any further. People who are “in the know” about this sell to capitalise on profits and then the public panic sells, and loses a significant amount of their investment. The market has already priced in the expected.
If you listen to the audio version, I explain this concept using Binance as the example.
Hope this helps a lot.
Devin
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