Timeless trading wisdom for crypto investors – pt. 1

Few financial markets can rival the crypto market’s potential for astronomical gains as well as dramatic volatility. Cryptocurrency is its own animal and should be treated accordingly. However, trading is still trading.

At its core, the principles and strategy behind effective trading and investing remain the same in any financial market. Over the years, traders have found themselves in the same positions over and over again. Yes, markets are unpredictable – but certain cycles & situations have a tendency to repeat over time.

For decades, certain nuggets of trading wisdom have proven timeless, and successful traders tend to keep a few of these heady trading sayings and mantras nearby while they navigate the markets. Not only do they serve as overarching guidelines for new investors to live and trade by, but they provide a framework to stick to when the market is volatile, and emotions are running high.

Here we have some of the most famous and enduring trading sayings of all time. They’ve worked for traditional investors and can be very useful for both new and experienced crypto traders too.  If stuck to, and only broken when the situation demands it, these easy-to-remember nuggets of trading wisdom will help you navigate the market and make better trades now and for years to come. Enjoy!

It's about time in the markets, not timing the markets

Consistently timing the market so you can buy/sell at the ideal moment and take advantage of every market movement is every trader’s dream. But it’s a high-risk-high-reward approach and is much easier said than done.

While it is useful to have some basic strategies about how to time the market (buy low sell high is a common one), this trading adage suggests that these efforts of timing the market are not as important as the time you spend in the market. Buying and holding long term is a strategy that is recommended for the majority of crypto investors.

Long-term investments are a big part of every serious trader’s portfolioand crypto is no different. Investing based on long-term fundamentals rather than short-term noise and volatility is likely to bring you the best returns in the long-term.

While it is a perfectly legitimate strategy to trade frequently to maximise short term gains and capitalise on daily/weekly market movements, many crypto investors are choosing to hold the majority of their portfolios, believing that their assets will be worth a lot more years down the track.

Recently it has been revealed that the majority of Bitcoin’s biggest investors are in it for the long-haul and do not intend to sell anytime soon. They believe in the utility and intrinsic value of Bitcoin and are waiting for the OG crypto to reach its full market potential, which according to them, has not yet happened.

In the words of trading guru, Rayner Teo, ‘Be patient. Once a trade is put on, allow it time to develop and give it time to create the profits you expect.’

Know what you own and know why you own it

This quote from Peter Lynch sums up crypto trading in a nutshell. The success of a cryptocurrency is intrinsically tied to its unique ability to solve a problem in the market or significantly improve on an existing technology.  By getting to know the utility of a coin, as well as the company and community behind it, you will have a better understanding of why that particular coin is a good investment in relation to your trading goals and strategy.

Understanding the technology behind a cryptocurrency is the best way to know when it is undervalued, overpriced, and ultimately when to buy or sell. In the world of crypto and investing in general, knowledge is power. Check out our other articles on how to evaluate a good cryptocurrency investment and how to do your own research in crypto. 

Don't marry a position

When it comes to investing, it can be easy to get too attached to your investments. Crypto is no different. If you put in the time and effort to research a coin thoroughly before picking it as one of your winners, you may find it difficult to let it go when it starts to tank.

Maybe you had a hunch about a certain coin and the more you researched its unique potential and the superstar team behind it, the more you became convinced of its inevitable success. In our experience, there is a lot of mental gymnastics naive traders engage in to justify a position.

But winners cash out. Losers take too long to emotionally divorce themselves from their positions. And as the saying goes, no one ever went broke taking a profit’.

The crypto market is volatile and takes no prisoners. It rewards those who can keep a clear and objective mind while trading. However, while it is important to acknowledge when the market has turned against you, many crypto coins have been known to bounce back after a seemingly apocalyptic crash. If you were not able to sell before the dip and you have faith in the intrinsic value and long-term potential of the coin, your best bet might just be to hold and wait it out.

Know the difference between a good and bad investment

Generally speaking, a cryptocurrency worth investing in will have a diverse community behind it, a well-known team of developers and a well-written whitepaper. In a competitive marketplace, for a crypto to succeed, it must serve its function better than any other coin out there. A crypto’s unique ability to solve a problem in the world is what defines whether or not it will succeed in the long-term.

When assessing a potential crypto investment, the key elements to consider are:

  • The Utility & Use-case
  • The Community
  • The Team (developers, advisors, partners)
  • Market Cap
  • The Website & White Paper
  • The Competition
  • The Road Map & Vision
  • Trading Volume & Liquidity
  • Circulating Supply vs Total Supply

For a step-by-step guide on how to evaluate a good cryptocurrency investment, click here. So, ensure that you take a comprehensive look at the project, checking that it is supported by trustworthy and reputable people. This will save you a lot of heartache in the long-run and will have you making the most profitable trades possible from the get-go. You can learn more about performing a fundamental analysis in crypto at Crypto Simple. 

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People lie, markets don’t

The crypto space is filled with a lot of people saying a lot of things. Some of it’s legit, but most of it is hot-air. There are now thousands of altcoins on the market and every day sees new and exciting crypto projects enter the market. But this comes at a price. With every novel coin comes a team of people who will be trying to sell you on why their coin is the new Bitcoin or Ethereum (or a combination of both).

With the initial coin offering (ICO) rollout model in crypto, there is always a lot of bragging and grandiose statements made about new coins. But there is no substitute for doing your own research about the coin’s utility, team, community and whitepaper before coming to your own conclusions. Many have learned the hard way that words can’t always be trusted, especially when they aren’t from a reputable source (usually someone with a decent following and a solid track record).

Given that you can never fully trust a person’s opinion, learn to read the market and understand its trends based on past movements and your own knowledge about a certain coin. No matter who the person is and how strongly they feel about a prediction, recognise that they have a bias based on their own emotional attachment to their own worldview and investments.

Additionally, in the crypto space, a public endorsement by a certain person or group of people can have a huge impact on the coin’s market value and it is not uncommon to see hype-filled pump-and-dump schemes inflating the value of a coin before it inevitably drops back down to earth leaving investors stunned and empty-handed. Trust your research and the market before betting your hard-earned cash on someone else’s word.

It’s not whether you’re right or wrong that’s important, it’s how much money you make when you’re right and how much you lose when you’re wrong

Whether you’re a beginner or a veteran, this quote from George Soros is an important one to remember. Taking losses is an inevitable part of trading. Even some of the best traders are wrong much of the time – what makes them successful is their ability to accept losses and get out of a bad situation before it becomes worse. Then, they capitalize and bet big when the market is favourable, and they feel strongly about a position. It is common for successful traders to lose small amounts of money and then occasionally win large amounts – what matters is their overall profit margin.

Too often we see new crypto investors fail to accept that they are prone to making mistakes like everyone else. Doing your research helps but you can never be certain about anything when it comes to investing. Regardless of whether you made a hasty decision or if one of your most valuable assets is tanking, a good trader will acknowledge the situation without too much emotion. Accept it and act accordingly.

Not letting yourself be paralysed by losses and realizing that they are actually part of a wider trading strategy is something all new traders should strive to do. Always endeavour to be as unemotional and objective as possible when deciding when to buy, sell or hold. In the words of Yvan Byeajee, Confidence is not “I will profit on this trade.” Confidence is, “I will be fine if I don’t profit from this trade”. Swallow your pride, don’t personalise your losses, and take calculated risks when the time is right.

Check out our guide on how to avoid the most common beginner mistakes! 

An investment in knowledge pays the best interest

This one is from Benjamin Franklin and is pretty self-explanatory. Knowledge is the best shot you have of being a successful crypto trader. Without solid research and knowledge of a coin and the company behind it, there’s a good chance you’re going to end up worse off than when you started.

The art of profitable crypto trading relies heavily on evaluating the many factors that contribute to a coin’s value and future potential. Warren Buffet advised to ‘never invest in something you don’t understand’, and we’d have to agree. Put in the time before you make the trade. Trading should be the easy part; the hard work is in the preparation.

It is much better to buy a wonderful business at a good price than a good business at a wonderful price

Another quote from investing legend Warren Buffet. This piece of wisdom is especially relevant to crypto and has helped Buffet make some of the best investments of his career. In the crypto market, it is crucial to know exactly what you are investing in. This includes having a solid understanding of the coin’s proposed utility and function, the company and team behind it, and the community who are likely to adopt its use case.

Most cryptos start with little to no value but promise the possibility of astronomical gains that are rarely found in other trading environments. However, following Buffet’s advice, just because a coin can be bought dirt cheap does not mean you should buy it.

Although Buffet and many other investors have bought into some of their best investments while prices were incredibly low, it is important to remember that in the world of crypto, a wonderful coin at a good price is far better than a good coin at a wonderful price. There are thousands of coins on the market and just a small portion of them will actually be around in 5-10 years time.

The intrinsic value and utility of the coin is the most important thing. As we have seen over the years, the vast majority of cryptocurrencies don’t even make it off the ground and fail long before reaching anywhere close to what their founders envisioned. This is why research (and having positions in more stable, established coins) is so important. If a crypto has real potential and the right people around it, it is likely to be a better investment than other coins, even if the cost to invest is a little higher.

My attitude is that I always want to be better prepared than someone I’m competing against. The way I prepare myself is by doing my work each night

This quote from Marty Schwartz reminds us that trading, at the end of the day, is a zero-sum game that takes no prisoners. Generally speaking, every gain in the market is balanced by a loss of the same size and vice versa. To put it another way, for every person winning, there is someone losing. All you need to do is make sure you win more than you lose.

Here Schwartz reminds us that there is no easy way to riches – at least not in the long-term. By acknowledging that everyone else is out to win (and probably also thinks they are making great trades), you will realise that the best way to get an edge on the competition is to be better prepared and informed than the rest. While the importance of following these timeless trading guidelines cannot be understated, the no. 1 thing you can do to increase your chances of long-term profits is to do your own research (DYOR), talk to other traders, and learn the data and info better than your competitors.

Final words

We hope you’ve enjoyed this handful of wise trading tidbits. They have stood the test of time and guided many traders to financial glory. While keeping these sayings and rules in mind can be useful, especially for new investors, know that there are no guarantees when it comes to investing – just doing your research and giving yourself the best chance for long-term success. Stay tuned for part 2 in this series!

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