Dennis Gartman began his trading career in the 1970s and over the years he amassed a ton of experience trading Forex, treasuries, stocks, commodities, and derivatives. Those familiar with Gartman will know that he wrote a very prestigious daily newsletter for 30 years, and it is held in high regard by institutional investors.
Known for his pragmatism and skepticism, Gartman crafted some of the most contrarian trading calls ever registered, often hitting the bullseye. Gartman eventually wrote down some “rules of trading,” and these have been revised and honed over time.
Most of Gartman’s rules work for any market, but some adjustments were necessary since cryptocurrencies are known for their uncanny volatility and startling lack of liquidity compared to established markets such as gold, oil and S&P futures.
Retail traders tend to make fundamental mistakes as conventional trading practices applied to cryptocurrency investing can sometimes produce unintended outcomes.
For example, it might seem natural to take profits once a trade hits your target and the shift to buying cryptocurrencies that have been lagging the market but it is not a strategy that has proven successful for many investors.
For this reason, we have reviewed Gartman top rules and adapted them for investors who trade cryptocurrencies.
1. Never add to a losing position
Sometimes it just makes sense to average down. After all, an investor could offset their losses faster as soon as prices recover. If an investor initially bought Ethereum (ETH) at $220 and it drops to $140, doubling down his position would result in an average price of $180.
This strategy would reduce break-even to a mere 29% gain instead of the original 57%. Gartman advises investors this is the worst strategy ever, and it’s not just inexperienced retail traders that fall for this one.
Losing positions should be terminated, not increased.
2. Be willing to switch sides, promptly
It doesn’t matter how bullish one is on a…