These 3 Things Will keep Your Crypto Portfolio In Profit
Hello, Crypto trader/investor...
You are probably wondering what proven secret is there to reveal about a market that has a reputation for doing wild swings in very random successions. If you have reasoned in this direction, you really do have a point.
In fact, anyone claiming to have the crypto market in their pocket is only basking in a fool's paradise; it's just a matter of time before they realize how much of the market they have yet to figure out. Truth is, the crypto market has a dynamic nature, and no one could predict a future occurrence with 100% certainty.
However, regardless of the random volatility and price action of assets in the crypto space, there are proven techniques with which a trader/investor can adopt to reduce his chances of getting wrekt. Hop on the train, as we explore three(3) of these techniques in the following paragraphs.
1. Proper research
In the crypto register, the term DYOR -which is an acronym for "Do Your Own Research"- explains this paragraph. Traders/Investors who give quality time to conduct proper research on crypto projects minimize their risk of jumping on the train of scam projects. Success in the crypto space depends largely on knowledge first, before any other matrix. A trader/investor who wants to remain profitable in the market must have a good understanding of some or all of the following:
- Fundamental analysis
- Technical analysis
- On-chain analysis
With a good knowledge of these key market research methods, a trader/investor can make informed market decisions by observing the news trends, price action, and on-chain transactions data.
2. Portfolio Management
In loose terms, portfolio management refers to investment techniques employed by investors to reduce their risk of running into unimaginable losses.
In the crypto market, good portfolio management is the difference between an investor who remains in profit for most of the season, and one whose profits get totally wiped out by a single dip in the market. Good portfolio management gives credible strategies to "what kind of assets are being bought," and "how they are bought."
Oftentimes, crypto investors make the mistake of having just one asset type in their portfolio. Also, there are investors who buy huge quantities of a particular asset all at once. Following any of the two methods above would be an unhealthy risk exposure to the Investor's funds. What it means is that a single dip in the price of the said asset is enough to shave off a good percentage of value off such a portfolio.
Investors should get familiar with having different crypto asset types in their portfolios, especially assets with prices that are not deeply correlated. It is a fact that what happens to bitcoin affects other cryptocurrencies in the market. However, a closer observation will reveal that in the event of a fall in the value of bitcoin, some altcoins lose relatively more value than others.
An investor whose portfolio contains the right mix of primary coins and altcoins will always have an edge when the market tumbles low. Also, spreading the purchase of an asset over a period of time through Dollar-Cost averaging protects an investor from the sad event of buying a crypto asset in a single purchase, at its highest price point.
3. Knowledge of Market Cycle
Financial markets often have observable cycles that govern price action for the respective season. In the crypto market, there are two seasons, namely; bear season (when the market is consistently going down) and bull season (when the market is consistently going up.
In each of these seasons, there are cycles that play out. These cycles map out points where the market pressure for a particular market move is high and points where the market pressure has been exhausted. Having a knowledge of the cycle in each market season can help traders/investors know when it is safe to buy or sell a crypt asset.
Popular crypto terms like "FOMO" and "FUD" are usually the crucial parts of the market cycle in the bull and bear seasons, respectively. It is dangerous to buy during a FOMO, as it is characteristic of buying an asset at its highest price point. Also, selling during a FUD is not advisable, as the market might just be at the verge of a reversal.
Making a profitable investment/trading decision at any point requires understanding the particular phase of the cycle that the market is in. With this knowledge, a trader/investor can avoid the common error of buying the top and selling the bottom - which is the easiest way to amass losses.
The financial market is a very volatile zone, and cryptocurrencies are so far some of the riskiest asset types out there. Having proper knowledge of the market by engaging in elaborate Fundamental, Technical, and On-chain analysis can set an investor/trader up for a sustainable profitable streak.
When proper knowledge is also matched with a good portfolio/risk management, the chances of amassing losses are even further reduced.