This is a very good question and as you might expect it. There is a short and a long answer to it, like anything related to investing. The quick and easy answer is, buy when everyone is selling and sell when everyone is buying, as was said by one of the famous investors Warren Buffett. In this article, we will try to be practical and that’s why we will explore how and with what tools professional traders try to buy low and sell high.

Market analysis

There are two terms that professional traders use when they decide to make a trade one is a technical analysis and the other one is fundamental analysis. Some rely more on the first one and others more on the second one. It depends greatly on what asset they are trading, as some assets are affected by the news than the others. We are in digital/crypto space and for this particular segment, both are important.

Technical analysis

It’s based on extracting information from the charts and graphs relating to the asset which they are considering trading. Traders who use this method try to determine where the price will move based on the previous patterns. The terms that are commonly used are Fibonacci, moving average, trend line, exit, entry,… as symbolically is shown below.

Source : https://articles2.marketrealist.com/2014/12/must-know-glossary-technical-analysis-terms/#

Fundamental Analisis

It is based more on the information that is surrounding the asset, like the news, or what’s happening on the more macro level of economics or what one of the famous or influential people in the segment predicted or said. Digital/crypto segment as it’s a rather small market(260mio$) compared to the stock market (68T$) is especially affected by the news or other information that is not of a technical (graph, chart) nature.

Source : https://cointelegraph.com/

Trends

Every professional trader is familiar with the market trends and we can best explain them by using everyday life. Anything that goes up, eventually goes down, just like your mood, day and night, black and white and so on. Markets are also operating in cycles, at some point some assets gain and later others will. It’s important that we follow the trends in a long run but in short term, we have already discussed it’s important that we base our decisions on understanding the markets and base our decisions on well-educated and calm calls.

Sentiment

One of the main reasons people lose in the markets is that they make decisions to buy or sell based on sentiment or emotions. They either need to make a quick gain, or they are afraid something bad will happen. If you are emotional you will most likely lose your long term bet to make gains. This is very well shown on the forex as well as crypto markets. 96% of people trading forex lose, that’s a very serious number and that is because they are not educated, they trade sentimentally and they expect big leveraged gains.

Buy LOW, sell HIGH!

If you want to buy low and sell high you need a couple of things and this is:

  1. Have a strategy, you need to know why you are investing, for how long you are investing, what you are investing in and when you will take your gains/losses and move them to another asset.
  2. You need a clear understanding of the market you are trading, is it volatile, how big is it, who’s participating, what affects its the price, wherein the cycle is the current asset, etc.
  3. You need to learn to use all the tools at your disposal to be able to predict trends and moves as we mentioned above. Master technical and fundamental analysis
  4. And last but not least keep your head cool, if you will trade emotionally of under pressure you will most certainly lose. The majority of professional traders, educate themselves and observe more then they buy or sell.

Unfortunately, most people don’t have any of the above-mentioned capabilities when they start trading, that’s why the majority loses. There is also another option which is, have a professional council or have someone manage your assets.