From time to time, I read or listen to smart money coming to the crypto market. But they will not come. They are already here. And they will profit from whatever move.
Dumb money vs. smart money
Starting with this, I must tell you, what does it mean. So let's start with dumb money.
Dumb money
Dumb money are "investors", or maybe let's call them hazarders. Or even gamblers. They buy bitcoin and other cryptocurrencies on the top. On the very top! And when it peaks, they are "catching the knives", because they simply "hope it will go up again". They have zero fundamental pieces of knowledge and close-to-zero technical analytic skills. And not clue, what is happening in the crypto sphere. And also, they mostly don't know how bitcoin and other cryptos work. They just heard that you can earn tons of money by buying crypto so they did so. They heard it from their friends or their taxi drivers.
Dumb money invests according to their emotions. Dumb money doesn't use stop-losses. Dumb money doesnt set up their goals, their selling targets. They are buying at the top and selling at the bottom. This is completely wrong in trading!
Graph source: CoinMarketCap
Never invest in something you know nothing about. Don't be dumb money. Get informed before you will do so.
PS. It is not a bad thing to be dumb money, don't get me wrong. Many of us were dumb money in the beginning, in the first bitcoin cycle or the other. The goal is to move from dumb money to smart money!
Smart money
This is the opposite. Smart money sells on the peak of the cycle and re-buy back on the very bottom. Usually, where the weak hands of dumb money are shaken and when they sell their positions.
Smart money is those, who have all the information. They are using risk management strategies for their trading.
Most of the time, the smart money is called institutional investors and hedge funds. And do you know why? Because they use trading strategies, they got a tremendous amount of information and they are in the market "in time" Dumb money is in the market "too late". Smart money uses their risk management and they are trying to avoid their emotions.
Be like smart money instead of dumb money!
Conclusion
I know it sounds a bit cheeky. You might feel, that someone calling you a dumb. And also you might feel, that smart money is impertinent. They are stealing money from the dumb, shame on them!
This is not a good approach. This is just a market. If you will not sell your assets to the dumb money, others will do.
This attitude is good for your portfolio, believe me. Put emotions aside! Never use emotions in your trading. Try to avoid them and act like a robot. Set-up your positions in advance and never regret your steps. Only try to learn from your mistakes. This will lead you to your goals!
Bull markets won't make you rich, bear markets will do!
Be ready for my next article about bitcoin cycles. To be continued...
Photos used: Pixabay (CC0 license)
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