Why LIQUIDITY is vital to successful Steem / All Trading

etc trade 7 28

Thursday July 28, 2016  6:00 AM

I just tweeted the ETC trade for a 40% gain in 1 day you see above. Did you know I would have made 15-20% LESS if I had sold in US dollars?   The buy/sell spread at the time I executed the trade looked like this

BUY ETC    $2.01     SELL ETC  $1.80 a 20% difference!!

The spread in BTC was more like 1-2% . The difference had nothing to do with foreign exchange rates or anything fancy. There was simply a lot more trading volume going on in ETC/BTC than ETC/USD.

The message here is to always check the liquidity of your investment before you enter because you might lose money even when your investment goes up in price!

There are two ways I always check liquidity of an investment before I even get involved:

  1. Daily Trading Volume over a week or more (ideally months but that’s not happening in the infant age world of crypto)

2. Buy/Sell Price Spread over a week or more, especially when price gets volatile

I see huge moves in some lesser know cryptocurrencies that make me want to trade them, but then I check the spread and you can buy it for a fraction of a bitcoin that has like 8 zeroes in front of it and sell it for about half of that.  Then you look at the chart and it has little marks all over the place as price moves wildly with almost every trade.

I don’t want to be the mark joining the poker game when there are only sharks in the room. I’d rather be with the crowd in the casino. The games are still risky, but at least you don’t add more reasons you are likely to lose money!

It’s vital to trading success that when prices spike up and you are ready to collect some gains you need liquitity to maximize your profits.  More importantly, if you’ve ever seen a stock (or a market) crash, and you’re trying to get out, you’ll never question the value of liquidity again (or a really good trading platform, but that’s another story for another time).

CURRENT POSITIONS

25% long core position ETC

50% long BTC (proceeds of ETC trade above)

50% long core position STEEM (small position)

NOTE: NOTHING IN MY POSTS IS INTENDED TO BE TRADING ADVICE. Please do not base your trades on any information presented in the materials on this blog as it is for information and entertainment purposes only. You are 100% responsible for your own trading decisions.

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