It is a mistake to firmly and stubbornly believe that the markets will go up. You have to understand that your personal beliefs have no place in this industry.
5 Reasons You’re Not Making Money Trading Crypto
5. Believing too much
It is a mistake to firmly and stubbornly believe that the markets will go up. You have to understand that your personal beliefs have no place in this industry. You have a financial stake in the matter, so naturally you want to believe that. The truth is that as this market becomes more efficient, no one can predict where it is going to go (yes – we can predict specific coin movements to a certain degree, but not the entire market). Consequently, you want to look at what happens should the market drop.
Do you short to hedge your long positions? Do you have proper risk and money management in place? Yes, we would love the market to go up, but your focus shouldn’t be on that, your focus should be on minimizing risk. So, not IF but WHEN the market drops in order to lose the least possible. Remember companies hire risk managers, not profit managers. RISK of losing is what you should always be looking at.
4. Selecting coins when they see everyone talking about it
Remember, you don’t want to be the last person buying. Yes, the crypto market has strong momentum behavior and is very inefficient in incorporating news. However, if you wish to make money just like in any market, you have to buy the coin before the hype. So proper coin selection is of massive importance.
What to look for? A catalyst event, for example. Also, make sure of the fundamentals of the coin, notably that there is supportive community for the coin. Then, get in before everyone starts talking about it and get out when everyone starts talking about it (particularly, before the catalyst event even takes place). This is how we select some of our alt-coins at MTG. Remember supply and demand drives prices. So you’re not looking for something that everyone already bought. You’re looking for something that people are GOING to buy.
3. Not re-balancing portfolios
Ok so you have an optimal asset allocation of let’s say 20% USD, 30% BTC and 50% alt coins. If the market rallies your alt coins will be worth way more. Your portfolio becomes unbalanced. You have to rebalance it by selling some of your alt coins to keep the percentages equalt. When the market drops your USD will be constant and your BTC will drop less than your alt coins. Your portfolio will be unbalanced again because your USD and BTC will be a bigger percentage than your pre-defined percentages. In this situation you would have to use those USDs and BTCs to buy some alts at better prices and have a balanced portfolio.
2. Not trading in and out of USD
Yes the market dropped, and yes the market will sometimes just go up. However, most of the time, the market is not exhibiting momentum type behavior. The markets are usually mean reverting; going up a bit, then going down a bit. When the market goes up, it’s important to change you asset allocation, sell some of your coins to get into USD. When the market then drops you can use those nice dollars to buy back more coins at a cheaper price. Keep doing that and you’ll end up with so much more coins.
1. No optimal asset allocation based on risk
Not having a plan never works, it’s basically planing to fail. It is important to take the time to select assets (coins) that will behave in a way consistent with their risk appetite. For example, you can have a risky asset allocation composed with only alt coins, or a safer asset allocation with some USD, some BTC and some of the more stable coins.
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Summer semester start dates
May 24th, 2018, July 2, 2018
16 août, 2018 (Français)
MTG – Montreal Trading Group™
A bold and innovative proprietary trading firm bringing together the skills of experienced traders, developers, and mathematicians.
MTG operates three divisions: trading (stocks and cryptocurrencies), education, and technology.