Please click the link below to listen to the 41st episode of my weekly crypto podcast ‘Two Minute Crypto.’ These are intended to be short, single-topic ramblings on some aspect of the cryptosphere. Comments and critiques welcome.
External Podcast Links
Two Minute Crypto – Riding the Bull Part 3 of 5
Welcome to Two Minute Crypto this week continues the discussion of how to maximize your returns during the next bullrun. The last episode focused on planning and its primacy in determining successful trading or investment outcomes. Today the related concepts of discipline and rule sets are examined.
As either a trader of investor discipline should underlie each and every position you open/hold or close. Of course, it’s entirely impossible to be disciplined if you don’t have a set of rules with which to adhere to. Planning your market actions is of great importance but so too is an over-arching framework of rules guiding everything you do in relation to using your capital.
Just winging it – is for punters and crypto punters almost always lose in the long run. Never allow yourself to be distracted by the loud call of Social media triumph of those who claim to have hit the crypto jackpot -they mask a vast silent majority who have lost and lost big-time.
Beyond formulating a plan of action – rules are the guiding framework for how you put your money to work. There are as many rule sets as there are market participants. No one list of commandments is applicable. However, a list tailored to your goals is critical -a reference point for risk, capital outlay, time preference, tools employed and so on are profoundly important to navigating the noise of the crypto market. Without guiding rules or principles and the exercise of discipline to stick to them you will most likely trade and invest on emotion – the worst possible place from which to attempt to grow your capital.
Rules can be as broad or granular as suits you. As a trader for example – I make it a rule never to trade at time frames under 4hrs. Nor do I take a position unless I can summon two technical chart indicators to support that trade. I don’t double down even on a momentary wick that stops me out. My minimum risk-reward ratio is 2 to 1. I never place more than 1% of my trade account in a single position and I don’t use leverage. If it’s the FOREX market I close outstanding positions or move them to break-even prior to a central bank rate announcement. There are more – and I strive to stick by them. They help frame the market and facilitate sustainable returns over the long run even when I hit a streak of losing trades.
Simply wanting a 10x return is no reason at all to invest in crypto – researching the market, finding a project that fits a dispassionate investment thesis and then taking a measured position with realistic profit targets is far more likely to succeed. Whatever rule-set you adopt, will also need to be re-assessed and re-evaluated on occasion – as the market conditions change so too do the rules of engagement.
Even with careful planning and a sound set of guiding principles -remaining disciplined while engaged with crypto is a constant challenge primarily born out of the volatility and outlier returns of crypto. Stocks for example, rarely pump 20% a day, in crypto 20% is well within the norm and as you cast your bleary eyes down the charts mind-boggling returns are to be seen 80% – 800% and more- all smoke and mirrors of course -thin volumes, devoid of liquidity, coins soon to fade into oblivion the only profits accruing to a handful of insiders. Everyday crypto calls to the punter in you – it’s in your best interests to have the wherewithal to recognize the pull of the crypto punt and overcome it.
In preparation for the next crypto bull run, it’s time to be honest with yourself – chasing x1000 returns cannot be the basis of your engagement with the market. Trades and investments executed to a plan and moderated by a rational and iterative ruleset are your route to significant capital gains. If this all seems like too much trouble – perhaps you should look elsewhere for capital growth?
Thanks for listening.