To stay on the righteous path, experienced investors follow time-tested principles.
Whether you’re a hobbyist or a high net worth individual, it’s best to stay on track with your investment strategy. We’ve identified seven best practices recommended for all investors, whether they have a small Stellar wallet or an extensive crypto portfolio.
Stay abreast of market developments
After a slew of ICOs left investors with mixed results, FOMO (fear of missing out) has been replaced by DYOR (do your own research).
The “evidence based & community-driven” Coin Market Calendar lets investors scan upcoming events and announcements with the help of a “Real/Fake” meter that assesses opportunities.
“The Coin Market Calendar is like the crystal ball of crypto,” according to investor Katarina Nolte. Along with Reddit, Telegram, and a few other trusted sites like CoinTelegraph, readers can stay on top of regulatory news and industry updates without getting lost in endless speculation.
Be reactive, not reactionary
The digital asset landscape is constantly shifting, which means successful crypto investors must be willing (and able) to react to events.
Staying up-to-date on market developments and keep track of your current positions. Data points like hiring announcements, regulatory news and delayed product releases can all be signs to buy more — or get out quickly.
Avoid entering any positions you may not be able to exit, stick to exchanges with healthy liquidity, and don’t get emotionally attached to any one position.
Don’t be greedy
In any other financial market, a 40% rise in one month would be unheard of, but this is crypto: what if the coin you sold on Friday afternoon shoots up another 300% before Sunday brunch?
Then again; no one ever lost money taking a profit.
Decide ahead of time what you’re looking for, and make a deal with yourself: “If the coin goes up X%, I’m going to take out Y% as profit.” Taking out a portion is a good buffer in case a token’s price doesn’t go as high as you think it might.
Those who wait too long for a coin price to rise risk losing any profit they’ve already earned, or even worse — turning that profit into a loss. “Get into the habit of taking profits and scouting for re-entry,” advises Hackernoon.
Diversify your holdings
A diversified portfolio helps an investor capture the overall growth in cryptocurrencies, and it’s a time-tested way to mitigate potential losses.
As explained by economic researcher Vasily Sumanov, “portfolio diversification gives you the opportunity to receive profit from the whole market growing and not depend just on having faith in one coin.”
With a mix of high-risk, average, and low-risk assets in a crypto portfolio, investors can potentially see increased returns while lowering the amount of standard deviation. Whether you choose to diversify by risk or by industry, start slowly and don’t hold onto too many unique asset classes, or returns can diminish.
Don’t invest more than you’re willing to lose
Successful investors are rational people. Just as you wouldn’t go into a casino and bet everything on a single wager, it’s a bad idea to put more money in the market than you are prepared to lose at any given moment.
Follow basic crypto security precautions, only invest what you can afford to lose, and set up stop losses to control positions as much as possible to prevent an unfortunate situation from turning into devastation.
Review trades at the end of each day
Professional athletes review their performance after Game Day to learn from their moves, and so should you.
Gather data to see which parts of your strategy are making money, and don’t be afraid to toss rules that aren’t working.
If you’re following your playbook and keeping up with developments, don’t feel the need to always make a change. “Sometimes no action is the best action,” writes Rocky, founder of CryptoHustle.
Manage your time; strive for balance
It’s common for new traders to obsess over announcements, dwell on social media, and spending hours on research so they can make the perfect trade. But the reactive world of cryptocurrency can absorb an inordinate amount of time, along with mental and emotional energy.
When asked if he could teach college-aged students about crypto, investor Jack Carver said, “ultimately, it boils down to opening one’s eyes to the challenges and risks of trading, and the toll it can have on a person’s mental and physical health.”
Remember: don’t sacrifice your job, relationships, or life goals for crypto.