First off, I'm not here to tell you about how I've made millions (and millions) of dollars in trading Bitcoin, Ethereum, Ripple, Litecoin, [ insert altcoin here ].
for those of you who don't understand the "and millions" reference, click here.
If you're expecting to hear about a rags to riches success story, feel free to switch screens to one of the other thousands of posts that you find on here daily (especially when the crypto markets are ALL UP).
- I'm not going to sell you anything.
- I'm not going to tell you what to invest your money on.
- I am going to offer advice based on my personal experience.
Nothing in life is guaranteed. These are simply some tips that I believe should set you off in the right direction.
Step 1:
Decide on an amount of money that you are willing to invest (risk) in crypto currencies.
- This is your first and most important step. Without a baseline of how much money you are willing to lose (or grow), you will be in a constant battle with yourself about whether you put in too much money and are afraid to lose it, or you didn't put in enough money and you wind up feeling severe FOMO (fear of missing out).
- Consider this: If the world's governments shut down all of the crypto exchanges tomorrow, your investments are now worthless. Can you survive that type of fallout? If you answered "Yes", then you've done this part correctly.
Step 2:
Research
- This is the second-most-important step you will need to perform. Money doesn't grow on trees, so you want to make sure that whatever you're investing in is going to match the type of risk appetite you have (see Step 3 below for more about Risk Appetite).
- Spend a sufficient amount of time google searching various crypto currencies and news articles related to them over the past 6+ months. If you're looking at a really new currency, make sure you understand their mission statement and purpose before you invest.
- If you don't want to wind up spending your investment on a "learning experience" of what not to do, I highly suggest that you invest your time wisely on this step.
Step 3:
Decide how big of a Risk Appetite you are willing to play with.
- Do you get anxiety watching the stock market even though you don't have any money invested in it? If you've answered "Yes, you should probably select a "low-risk" crypto currency. I know what you're probably thinking.. A "low risk crypto currency" sounds like an oxymoron. And you're right. I'm just saying that within crypto, some coins are higher risks and more volatile than others. Step 2 will help you figure out which is which.
- Do you find joy and excitement in jumping out of moving vehicles at high rates of speed? After you do it once, do you want to repeat the same feeling? If you've answered "Yes", then you are probably going to be able to handle investments in the higher risk, more volatile currencies. Now, this doesn't mean that you HAVE TO invest in higher risk currencies. I'm merely pointing out that you are less likely to have a panic attack when the more highly volatile currencies fall or rise rapidly and be able to respond dispassionately during those times.
Step 4:
Set a Goal.
- This could have been augmented as part of Steps 2 and/or 3, but I feel that Step 4 is a separate thought process.
- You can set goals in many ways, but I'm going to suggest the following two options:
- Select a Timeframe for your investment. Do you want to leave the money in the crypto currency for 1 year? 1 month? 1 week? 1 hour?
- Select a Profit / Loss Goal for your investment. Do you want to leave the money in the crypto currency until you have 50% Profit? 100% Profit? 1,000% Profit? 25% Loss? 50% Loss? 100% Loss?
--- If you use the Profit/Loss method, I suggest that you select both a Profit and a Loss Goal
- Make sure that this is something you can live with. No matter what happens to your investment, reminding yourself to stick to your goal is a great way to calm yourself down from making a rash decision (buy-side or sell-side).
- When you reach your goal, re-assess the situation. Do you want to adjust your goal? Do you want to take your profits and run? Do you want to cut your losses and run?
Step 5:
Repeat Steps 1 through 4 on a periodic basis.
- The Crypto world changes quickly, and the amount that you're willing to invest in crypto may change over time.
- Keep yourself honest with your goals.
- If nothing new has happened to change your risk appetite or the amount of money that you're willing to lose, and there are no opinion-altering news items coming up in your research, stick with your goals. You made your goals for a reason, and in a well-thought-out manner. Trust in your initial gut decision.
- Set up a google news alert on your investment. If something noteworthy comes up, you want to be well-informed as quickly as possible. If there's a lot of news about nothing, then you can just stick to your plan.
Closing Words of Advice
- DON'T compare your personal investments with those of others!
-- Everyone has different risk appetites, different goals, performs different research and has a different amount of disposable income. Don't let someone else's advertised successes make you feel like you are doing something wrong.
-- Remember, everyone is quick to discuss their successes, but slow to share their failures. While they may be claiming victory and brilliance about this one bet that they made correctly, they're probably hiding several failures. - The key in all situations is to keep your head on straight. I believe that if you follow these 5 steps, you should be able to minimize the amount of FUD (fear, uncertainty, doubt) in your trading life.
Nobody wants to constantly be second-guessing themselves. My hope is that by following these 5 Steps, you should be able to increase the amount of confidence that you have in your investments. You should sleep better at night knowing that you did everything in your power that you could reasonably do based on your own personal abilities.
Good Luck out there!