This is an update of a previous post which you can find here.
In my two decades as an active investor – I’ve made every mistake in the book of mistakes. I’m sure I’ve also added a few new entries. However, over time, I’ve taken a few lessons on-board.
As a Crypto Investor Try Not To…
Invest First, Research Later
The rush to get money to market may feel exciting, but like most other things in life, taking your time leads to better results. Of course, we can’t control the outcome of an investment but we can control how we go about taking that position in the first place. Skimming a whitepaper, reading a 2-page article, scanning the team page and searching for a positive review on YouTube does not amount to ‘research‘. Such surface examinations are simply an attempt to mask a wish to satisfy a bias to buy). There’s no real short-cut here.
Gaining an understanding of a crypto project takes time and focus. In addition, acquiring an overarching understanding of the crypto market is also a near prerequisite for making informed investment decisions.
Fail to Reflect on the Realities of Being a ‘Retail Investor’
As a retail investor, there are a number of reality checks you need to take onboard. First, being enthusiastic does not make you well-informed. Second, you are likely not the smartest person in the market. Third, you are going to lose some money along the way. Fourth, you are not as patient an investor as you believe. You can find a more in-depth explanation of each of these ‘realities’ here. Acknowledgement and acceptance of the difficulties you face as a retail participant in the market will serve to ground and guide your investment decisions.
Buy first – Plan the Investment Second
What is your goal with this investment? Where are you looking to enter? At what point will you take profit? Will you cash out the whole position or just a portion? If the investment goes against you, when will you sell? Will you close the entire position or scale out? Is this a short, medium or long-term investment and exactly what do you mean by short, medium and long? Planning your position will definitely reduce the level of stress it brings to you whether on its way up, down, and everything in between.
FOMO (fear of missing out) into an Investment
Buy red – Sell green. That 30% move you’ve already missed, let it go. In all likelihood the price will revert to mean over the coming days and weeks, giving you plenty of time to decide whether you really do want to invest your capital in that particular project.
Go All in On One Investment
Start small, find your way in the market. Make the mistakes we all inevitably make without squandering the majority of your capital on one throw of the crypto-dice. This market is only just forming, you have plenty of time to get involved.
Over-invest in Crypto
If you value your sleep, health, and general sanity only invest what you can truly afford to lose. This is a new asset class and who knows what lies ahead? Many, indeed the vast majority of crypto projects are likely to fail, so do yourself a favour and take this risk reality on board. Losing a 100% of your kid’s college fund is not something you want to worry about or experience.
Frequently Jump Positions
Buy Cardano, sell 5% down, buy Neo, sell 7% down, buy whatever lose some more….If you’ve researched your investment and the fundamentals appear sound, why sell on a dip even a substantial one? Chasing profits and crypto jumping is most likely to simply diminish your core capital.
Buy Because Some YouTuber (or anyone) Promises x100 on Investment
Sounds too good to be true, then it almost certainly is. Shills abound, they are promoting for their own gain and care not-at-all for you or your money. There are reliable sources of information on YouTube etc. but it takes time to sift through the many promoters and marketeers.
Buy or Sell on Reflex Based on One News Report or Story
Research the source, find other stories that support or refute its thesis. Reflect, then make your decision. FUD (fear uncertainty and doubt) and irrational exuberance and hype can be equally damaging to your investment. Crypto is dead, crypto to the moon are two sides of the money-losing coin. Be skeptical, take your time and strive to make considered, calm, decisions in an ever volatile market.
Be the Counter-Trend Guy
Try to resist being the counter-trend guy just because you think the market will turn. Obviously, picking the exact bottom or top of a market can lead to great returns, but it’s almost impossible to do. At a base level, the trend really is your friend. Provided you have a set stop loss or guidance as to when to get out of a losing trade, a sudden market turn shouldn’t hurt too much and once established you can always ride the newly established trend in the other direction.
There you have it, a starter kit to successfully navigating your way through the crypto market. Of course, there are no guarantees, but we can strive to stack probability in our favour and hopefully, this short guide may be of use in that process.