My Experience Value Trading And How You Can Be Better Than Me
BY CRYPTOKARP ON 5/21/18 AT 2:30 PM
Welcome to part two in the series where I, CryptoKarp, talk about my crypto and trading experiences. This part is aimed to be a follow-up to the last post, so if you haven’t read through it yet, I’d encourage you to do so.
I thought how to connect the beginning of this part to the last one, but as I ended with the “Rabbit Hole” section, there isn’t any segway into a new chapter, simply because for me that part is still on-going.
If you’re familiar with the term “Rabbit Hole”, you know that once you get sucked in, it is next to impossible to get out. And such has been my journey in crypto. Although not learning about the same thing every day, there is plenty of excitement around. However, to keep it on topic, I’ll share a little of my learning curve from the trading space.
Trading 101
Trading is anything but easy, and you’d do well to remember that. If you’re drawn to trading on the premise that, “You only need to work a few hours each day and are able to earn a lot of money doing it” then it just won’t do. I don’t believe it’s enough. If a trader has such an approach to trading, his career won’t be long. As I said, although it sounds easy and fun, it’s definitely not easy, and not as much fun either. That being said, you can absolutely find enjoyment in trading.
Back to my first experiences and what I would recommend newcomers to do, is to not jump in head first, especially with your hard-earned money. Learn first. I was lucky to be able to just jump in, because of the time I joined. Most things were going up, and so trading wasn’t difficult. Simply put some money into coin A, take some profits after a pump, reinvest into something that hasn’t pumped yet, rinse, repeat, get bitcoin.
Simple? Yes, but remember, that was at a time when BTC went from $3k to $19k, the overall crypto market cap from circa $111B to $800B. During that period, it was harder to find a coin that was in red than in green, but everything turned just a few months later.
This brings me to my point — you need to be constantly on guard — adapting and adjusting your trading strategies. Make adaptability your focus and it will pay off.
So where do you start then? First you need to know what you want to do, and to know that, you need to know yourself a little. Not everyone can be a day-trader, some people are better at value investing, swing trading, or trend following. How do you know which one fits you the best? You really don’t — at least not until you try them out of course. And again, don’t start with your money. Get started on demo trading accounts or paper-trading (simply using something like an excel sheet to mark trades, mark date of trades, time and entry, same for exits) instead.
I find it fitting to start from the biggest time-frames and advance to lower ones. Not only does it allow you to be familiar with the bigger picture, it encourages patience as well and patience is your friend, impulse is not.
Value Investing
To start with value investing, you’ll need to do a lot of research, which means reading. If you’re not ready to do that, it becomes like shooting darts in the dark, you may hit once or twice, but unless you know some of the fundamentals on the coins you’re trading, you’re more likely to miss the target. However, saying that, there’s this valuable saying I came across in the beginning of my journey: “Markets can stay irrational longer than you can stay solvent.” What this means, in practical application, is that even if you may be right and don’t like a coin because, well, it doesn’t have any of the properties that good coins do, it doesn’t mean that it won’t increase in price (e.g. XVG, XRP, etc.). So if you’d attempt to short coins such as these, you’d probably find yourself in a very bad position.
This brings me to my next point. Timing means a lot more than people usually acknowledge. Shorting a bad coin is a good idea only when the timing is right. How do you know if the time is right then?
To be completely honest, if I’d known that, I wouldn’t have to trade at all anymore, but nobody can get the timing right 100% of the time. That is another important fact. You’ll have losing trades. You’ll have winning trades as well, and the goal is to lose less than you win. So, timing comes from experience, as the very basics, you’ll need to understand price action and trends at the very least. That should be your starting point.
As another saying goes, “trend is your friend”. During value investing you’re utilizing trends the most. So arguably, the trend is your best friend during value investing, as that is what you’re looking for the most. You want to ride the trends, find undervalued coins and ride their upside potential, leave once it’s exhausted and then either look for another one to ride up, or short the same coin. Again, more rules apply here. When I talk about riding a coin up, it is to be assumed that you have positions in more coins, riding them all together, as you should never have all your “eggs in the same basket”. If you miss one of ten coins for example, nothing significant happened, as the profits overweigh the loss, however, if you aim for one coin and that misses, you’ll suffer major losses.
To simply sum up value investing, you find an undervalued coin, invest and hold until your target is hit. The time frame is often over a few years in crypto, and in traditional trading (stocks, ETF’s, forex, etc.) can be a decade or more.
In terms of setting a target, that is one aspect of my trading that I struggle with — at least while being in the value investing mind-set. It is very hard to estimate where a coin can get to in the next 3 years, but, your strategy when tackling this issue is all for you to decide. The most common include — sell half of our position at 2x to cover your investment and let the profits ride, or scale out of the position in increments as your targets are being hit (10%, 15%, 20%). All of these depend on you, your trading style, risk-tolerance, etc.
As markets and price actions are complex, so are trading strategies. There are times when you must adjust your position on the way up to lock in some profits, and you do the same thing during the beginning of a bull market. You can also buy at the dips and that is a very viable strategy as well. But, as mentioned before, it is all up to you and your preferences and it really depends on how you adapt those strategies. In trading, there is no one size fits all, hence different trading types, setups, and indicators exist, and even more than that, different traders utilize them differently as well.
Summary
To give you a quick run-down of this part 2 of this series, I quickly outlined what trading is all about, some of its complexities and how your approach should be when trading. As a reminder, if you’re brand new to trading, paper-trading or demo accounts are where you should start. The bigger the picture you’re trying to build at the beginning, the better. Although you should not limit yourself to only that. At this point it should be apparent to you, how steep the learning curve is in here. The beginning is the toughest, but if you manage to survive you’ll do well just based on your experience. That should be a goal — if your portfolio can’t survive until tomorrow, it doesn’t matter if you’re the best trader ever, because you won’t have anything to trade with.
NEXT, I’ll do a similar description of my experience with the another trading style, we’ll start with swing trading and briefly touch on trends. I’ll also add some more rules and advice that I’ve found useful.
Talking about value investing in today’s part of the series, I’ll leave you with a great resource about Bitcoin, because, that’s where it all started for me, and as such, it is important to understand how and why Bitcoin came to existence, what are its values — what can it offer to a value investor. You’ll find everything you need regarding Bitcoin on this website, thanks to Jameson Lopp.
My last bit of advice for this post, is to diversify your learning resources as much as you’re diversifying your portfolio — the more different sources of knowledge the better. Variety allows, at least for me personally, the ability to learn for longer. I get tired of reading books after a few hours usually, lose focus after a longer video and can’t watch anymore (for a while at least). Also, limit the amount of time you spend listening to podcasts as it’ll become just a background noise as your mind drifts away and you won’t learn much after that. Remember, do everything in moderation. You want be able to return to it tomorrow and feel fresh and energized, and ready to take on the world.
That is all from me for now, again, you can contact me if you wish on twitter @CryptoKarp, any comments, feedback or a conversation is welcome and appreciated.
— — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
More on me 👇
I am a cryptocurrency enthusiast, novice trader, and an eager learner. My journey started in crypto a little under a year ago and I’m excited to share my experiences during that time and any insight that will benefit you in the space. Feel free to reach out to me via Twitter or Discord
However I can make this process easier for you I will 😎
I’ve Got Socials Too
Discord: MaGiKarP#8865
Twitter: Crypto Karp
