"If only I could just see a bit of the future..."
I'd sometimes have this desperate longing. Especially when there are big moves in the financial markets - stock market, commodities and the nascent cryptocurrencies market, of course. That surely would help me make big killings each and every single hour and day. Unfortunately I don't, so I have to make do with other strategies in these.
Even if you aren't active in the crypto market, you are surely aware of the turmoil over the past week. If anything, all of us have vested interest in seeing STEEM and Steem Dollar at least holding up value. The previous two days especially had been traumatic for many, particularly those who had bought Bitcoin and other cryptos at the peak. Here's how I've been handling my speculations, trading and investment and trying to minimise the associated stress and tension.
First and foremost, and despite this being repetitive: Speculate/invest only with money that we can afford to lose. "Yeah, so what else is new?", the cynical might scoff. The thing is, many ignore this: "This is a chance in a lifetime!", "Fortune favours the brave!", "Putting in too little isn't worth the effort" and so on. Sometimes they are right - coming in at the right moment, ploughing in maximum capital, and experiencing the thrill of picking up big gains.
But a lot of the time, things don't immediately move favourably for us. Which is why I've been forcing myself to be cautious and prudent, and not get caught up in the exuberance (it's the opposite right now). Instead of "maximising capital", my goal is to protect capital and to keep as much of the profits as possible. The general principle is: Even if I were to lose 100% of the capital in cryptos, I will only be disappointed and exasperated. BUT NOT face any sort of financial difficulty. Not even having to tighten my belt when it comes to the monthly budgeting. At worst, I will not be going on a vacation.
The crypto market may be new but it's also subject to all of the basic economics of other markets. Over the years, I've painfully discovered that we should never commit all of our allocated capital at any one time. There must always be reserves at the sidelines. And it is moments like now that one would see the wisdom - sharp falls in the market are an opportunity to buy coins. Have to admit there is always some worry whenever I buy during times like this. Often, they'd go lower. However, I also ensure that I don't buy in one instance but over a few different price levels. In lieu of not knowing the future, I see "Averaging" as the best strategy in investing.
Although I believe cryptos are here to stay, I'm no HODLer. More of a mixture of speculating, trading and some genuine investing. Based on my previous experience in the stock market, I make it a point to take some profits and money off the table when prices reach a certain point. But not sell all though. This ensures that I won't feel dismayed whenever the price falls (which happens quite often). I'd use the profits to buy again whenever it reaches a lower level. Like now. But if HODL works for you, then stick to this. After all there are different ways to skin a cat (with apologies to animal lovers).
Incidentally, this strategy has helped me handle the present fall much better. Thanks to previous big gains which I had taken profits on. Like with RISE and Navcoin especially. And the rather unknown Evergreencoin just a couple of days ago.
"Cash flow and capital management" - these are crucial in helping to handle FUD.
(Apologies for the clunky image. I'm not quite sure how to include this.)
*UPDATED 18 Sept: From a post at Steemit, I've found out the correct way to include images in posts. I've tried using Photobucket and Google Photos but they didn't appear. I had received a message from the former, about needing to upgrade my account. Then I discovered imgsafe.org, and needing only to copy the image link and paste it on a new line at the Steemit post.