Cryptocurrencies is the wild west of investing. The cryptocurrency market is generally young with a very big potential for growth. As the concept has reached the mainstream media, one can get a feeling that it is already too late to get in. But the truth is, it is not too late. Not by a long shot! actually, that is a fallacy of the mind. We look back in time and think “sure that happened” but when we look forward, the uncertainty make us insecure and hesitant.
That said there is a lot of potential in alternative cryptocurrencies popular known as altcoins. They can make you rich and at the same time they can make you go bankrupt. Therefore, the first rule is to ONLY INVEST WHAT YOU CAN AFFORD TO LOOSE. If you invest more you MAY become too emotionally attached to your investment and therefore, run the risk of not being able to THINK constructively and strategically. Investing more than you can afford to loose may make you prone to rushing in with buy orders at all-time-highs and then panic sell everything during corrections. Both will result in losing your money.
To make money from investing, you need a clear strategy as well as the discipline to stick to these strategies. Different strategies may work for different person under different market condition, but SWITCHING between strategies will not! Again, this will cause you to make bad decisions and to lose your hard earned money. Here are some of the tips that will help you become a better cryptocurrency investor cum trader.
1. PICKING YOUR COINS
Unless you have some special information on a project, go for coins with a market cap greater than $50mn. These tend to be more solid projects with lesser risk. Trying to get rich by investing in an unknown project is a gamble and highly unlikely, considering the huge amount of cryptocoins available on coinmarketcap
Look for projects with a daily trading volume greater than $1mn. Again, this may become inconsequential if you have some special information about the project, but generally, you want coins with at least some real interest from buyers.
Once you have located a potential candidate, go to the project’s website and read about the project making sure to read information on their whitepaper which usually outlines what the project is set out to do. In doing this you need to satisfy some important questions such as: Is it well described in a professional manner with good illustrations and possibly videos? Does it have a transparent technical vision? Does it make sense to use blockchain technology for the project? Is there a clear timeline for the project’s development?
Look at the team behind the crypto project. This is ABSOLUTELY key. Are they trustworthy? Are they competent? Do they have team members or advisors who have been successful in their previous work or blockchain related endeavours? Is the team active and engaged in promoting their crypto project on social media and at live events? You will need to check out the profiles of major team members on LinkedIn to understand their past experience and their number of followers. The more follower these team members have the better.
Go to forums like REDDIT and Telegram and get a feel of what people are saying about the project. Is there an active community supporting it? This is a clear added advantage. Look for people who are excited about the technology. However, DO NOT make your decisions based on anyone saying that the price is going to jump 100x times in a few days or weeks. No one knows! Most of these people are actually paid to shill the project.
Remember – there are so many cryptocoins to choose from, there is no need to compromise. Don’t be afraid to discount a coin if there is something you don’t like about it. Don’t think about what you might be missing. It is about what you choose and not what you did not choose!
Once you have found a suitable candidate, you obviously need to find a market where the coin is being traded. I like Bittrex, Binance, and Kucoin as they have an excellent selection of coins and manageable platforms. Despite the quality of your research, know it beforehand that there is a bit of the luck factor involved in anything that has to do with investing. It is bad investment practices to always try to invest in too many coins all at the same time as you will definitely find it difficult to keep track of all of them. I like to focus on 5 to 10 coins at a time. However, this is a matter of preference and how much risk you are ready to take at a time.
I don’t believe that you should kid yourself and try to hit the perfect market swings for investment. You should buy if you think the value is right. It is right if you believe it will go up. As simple as that. However, you want to be careful investing at all-time highs as this usually present an increased risk. Contrary to that, it may be a good idea to buy during general dips in the market as your coin of choice will likely be down due to the general market sentiment and not due to intrinsic factors associated with the project.
After investing in your preferred cryptocoin, you need to develop a strategy on how to manage your new investment and develop the proper discipline to stick to this strategy. Now in this context, nothing is really right or wrong. You just need to stick to it!
The simplest approach is to simply hold the coins and forget about them for a while. This is a long-term strategy and often the best way to go, especially if you don’t have the time to follow the charts on a regular basis.
An alternative strategy is to set goals as you start. For example, you can choose to liquidate 100% of your holding once your investment doubles in value. You can as well liquidate 50% of your position at this point, taking out your capital completely and allowing your profit to make more money assuming the market continues to go bullish. With this approach, you may also want to reinvest some of your capital whenever the market dips. You can also sell everything at a certain predetermined value. Charts can help you in determining when to sell. If you chose this strategy, you must tell yourself that you will be happy taking home a profit. This implies that YOU SHOULD STOP following the charts after the sale so as not think that you could have made more money assuming you didn’t sell. It is almost impossible to hit all-time highs and lows and doing so is almost always connected to luck.
4. ADJUSTING YOUR STRATEGY
This should be done rarely and ONLY IF ANYTHING CHANGES. You want to follow the news about your coins and the market in general from reliable sources. This includes the website of your coin and their official Twitter feeds. Changes may cause you to buy (for example if the team behind your coin is strengthened by a prominent name or makes a deal with a well-known company) or to sell (for example someone leaving the team or failure to deliver on a certain promise). It may also be something that has to do with general market sentiments and not specifically related to the coin you invested in. For example, it can be good to take out some profit if you believe that a general market correction is imminent. However, this is tricky and decisions should be rational and NOT emotional. In investing, FOMO (fear of missing out) is the worst thing that any investor will allow to get hold of him. It can make you lose fortunes when it sets in.
Another reason to change strategy is if something changes with YOU. This could be anything that changes your risk propensity. For the positive, you may come into more money somehow and want to invest more. But more importantly, your willingness to take a risk may decrease, which should cause you to reduce your investment.
Above all: NEVER rush to buy a coin just because you see it going up or hear an unsubstantiated rumor. Conversely, NEVER you panic sell because something is not going your way in the short term. You should always have a strategy and if you get caught with emotions it is time to step away from the computer, take a breath, and do nothing. Emotional split decisions are how money is lost. I cannot stress this enough.
Disclaimer: The contents of this article are the author’s opinion only. All examples, ideas, methods, stories, and images are for illustrative purposes only. Before trying any method or any idea, please make sure you check all the terms of service and make sure you are in compliance. Whilst the information provided comes from my personal case study of following the same information, I assume no responsibility for anything from anyone who decides to follow this.
This article does not guarantee earnings potential in any way shape or form. The sole purpose of this article is for educational and informational purpose only and not a financial advice.
Israel Martins is a cryptocurrency researcher and trader since 2016, passionate about blockchain and other emerging technologies.