This will be a quick first post of many to come about LONG TERM crypto investing. In future posts, I will show tools and applications I use to stay ahead of the game, and yield high reward, but low risk returns over long periods of time.
Investing is the art of expending money into a asset, expecting a profit in the future. Within a growing Crypto Currency Market, investors can yield HUGE gains, even with little skill. This is due to the fact of a growing crypto market, which this is only the beginning of a world revolution. Due to this growing market, some traders don't realize they are hurting themselves by trading often. Realistically, trading should occur weekly or monthly. In this post, I will explain 3 critical evaluations I do when running my hedge fund to generate the higher profit from my investors, while knowing my investment is secure for my clients in the long run.
1) Understanding the Investment
I would expect anyone investing in ANYTHING to have done of research on their investments, although, especially in the Crypto Market, this seems to never be the case. Very quickly a stock can shoot vertical on the charts, but unless it has a solid reason behind the raise in price, this was not a opportunity to invest. For as many currencies that shoot up, there are twice as many that plummet to the dirt and never return. Don’t feel like you’re missing an opportunity, because unless your investment has research behind it, you are completely gambling, even if a growing market can put the odds in your favor. In my next post, we will examine this much more in depth and look at tools I use to gather critical information others won’t even know was available. This will be the topic for my next post, and there will be a lot of information on how to assess crypto assets.
2) Slow entrance, slow but sometimes quicker exits.
This will change in the future when decentralized exchanges finally make it to a rolling functional basis (yes, this is investable if you believe in it like do), but until then, take your time with your purchases. Even if you are using a huge exchange like Poloniex, their book orders only account for at MAX 20% of the global book orders. Other exchanges are much less, and even then, the saturation between buys on sells can be even lower. To explain what I’m saying, I’ll have to throw a little numbers around, but I’ll be as quick as I can with it.
If I planned to invest 100k in Golem, a digital asset on the Ethereum network, I need to make multiple purchases of Golem, not one big glob purchase of 100k. The reason for this is due to multiple exchanges having different book orders. If I did it in one go, as soon I purchased 100k, a automated bot would then immediately buy on a exchange with a slightly lower price and sell on the one I made the purchase with. Essentially, I made an opportunity for that bot to make money because I raised the price, where as I could have kept it a lot lower by spreading my buys out. The bots will always make money from trades by keeping the exchanges close, but don’t give them more than you need to. Spreading out the purchases will ensure you’re getting the true mean price of your purchase.
Selling is very similar, you would want to spread out your sales so that your keep your sales at the mean sale price between all exchanges, but sometimes, there are reasons to sell all at once. A perfect real world example I am currently looking for daily is news on Bitcoin Restrictions in China. As soon as China puts a restriction back on Bitcoin since its leading to funds flowing out of the country, the price will halt its rise and most likely start to decline quickly until it starts its growth again. I this situation, I just want to get the hell out, because I know a decline is in order, and it can come quick.
3) Act on Knowledge, not on Feelings and the sight of Red
Crypto Currencies swing up and down a lot, but they swing up more than down. In my first few trades, I fell victim to not following this rule. I did my research on a particular digital asset, understood the investment, invested. Next morning, down 20%, I panic and sold out. The lesson here is that I had no reason to sell out. I used my tools and information gathering skills ( will be covered in depth in next post) to look for a reason for the drop, and there was none. In this situation, I was the “weak hand”. Following the next coming 3-4 days, I saw gains of 130%, of which I was no longer apart of. Which I DID predict upon my research, but I didn’t let the magic happen. This is another reason why investments must be made long term, investors must let time pass for their predictions to occur.
This was my first post, I hope my writing skills are not to bad, as I am a trader, not a writer ha-ha. Please leave me comments, and or improvements. I am open ears. Thanks!