How to trade Crypto without giving a f**k

NEO has been on one hell of a bull run this year, and as of writing this, it's market cap is over $2.5bn and is now the 5th largest coin behind Bitcoin, Ethereum, Ripple and Bitcoin Cash. Its current price is just over $50 and is showing no signs of slowing down.

I first bought NEO when it was called Antshares and was valued at under $0.50 and twice took out new positions as its value increased. In the last week I have sold two positions, one for +141% profit and the other for +663% profit.

As the price has continued to rise I have been acutely aware of what could of been. I don't usually share actual numbers, but at it's peak price my sold positions had missed out on £35,000 of additional profit.

If only I hadn't sold.  Coulda, woulda, shoulda. 

Now feels like the right time to write about how to handle the emotional side of crypto trading. The goal is for there to be no emotion at all. 

Apart from the odd text to my friend Tom saying stuff like "NEO, what the fuck!" I have been pretty cool about it, laughing it off. While looking at what could have been yesterday my personal portfolio has now fully recovered from its personal high in June and I expect to go even higher over the next few weeks.

But what could have been right? Like the guy who bought a pizza for 9,000 Bitcoins or any of the stories to read about people who sold all their Bitcoin at $10, $30, $100, $500.

Remember, nobody knows what the fuck will happen. Bitcoin might crash tomorrow and take the whole market down with it. Equally, Bitcoin may race up to $10k. Whatever scenario plays out we will be able to tell ourselves a story of hindsight. 

If only I had invested my original investment purely in Ethereum rather than Bitcoin then I would be a millionaire. Sure, but that would have been a stupid investment. If only I had bought more Ripple, Digibyte or not sold my NEO. 

Coulda, woulda, shoulda. 

All you can do is make the right decision you can with the information in front of you. If it proves right then great. If it proves wrong you need to be able to tell yourself you don't give a fuck.

Sure, I've missed out on £35k with Antshares and who knows how much more in the future. But what if I had started Crypto trading in June rather than January? What if I had held Ripple rather than selling out just short of the top? What if I hadn't of sold 2/3 of my Ethereum at $320.

Only the future tells us whether a decision was good or not and it is important that you remember all decisions. If a decision proves right, I want to not give a fuck, if a decision proves wrong, I want to not give a fuck.

I want to trade with neutral emotion. How though? 

It all comes down to whether you are an investor or a gambler and you might be a gambler without knowing it.

The problem with being a gambler over an investor is you are more likely to be influenced by the two basic trading emotions of greed and fear. The bigger role emotion plays in your trading, the more likely you are to make stupid decisions. 

Gambling means panic, fear, sleepless nights, stress and the possibility of getting rekt. Then you are in the zone of feeling sick, depressed and possibly suicidal. Yes, this is a possibility.

And for what? Money? A Lambo? Is it worth it? 

You are a gambler if: 

  1. You are investing more than you can afford to lose. This is the number one rule of Crypto investing. If you are buying Crypto with rent money, if you are dumping all your savings into Bitcoin, if you are remortgaging your house to buy Ethereum. You are a gambler. 
  2. You chase a trade through FOMO. Of course I wish I hadn't sold my NEO but I don't really give a fuck. My portfolio is still at a new all time high because of my strategy. NEO could go much higher but I'm not buying back in right now because I'm not chasing it. It has every chance of dropping again, today, tomorrow or in a month. It will present another opportunity to invest but right now there are smarter opportunities. If you chase something making big moves then you are a gambler.  Look at those who chased Ethereum at $400 because Reddit was saying it will take Bitcoin and be over $1,000 this year. Sure it might get to $500 and they will say holding was right. Equally it may not and think of the opportunities they have missed by having their money tied up holding the bag. There are always other trades. If you chase a trade you are a gambler.
  3. You chase losses. If you make a trade and it goes wrong, such that fear and panic set in, firstly you are already trading more than you can afford to lose, see point 1, but you may also start chasing the loss. It is very easy to get into a zone of rapid over trading where you suddenly start buying and selling anything because the charts look great and you want to recover losses. This may be buying in and out of the same coin or multiple coins. It's very easy to get into the habit of just buying and selling without thinking through your trades, doubling up and hoping to recovered. If you do this, you are a gambler.
  4. If you are worried about your trades, always checking prices, losing sleep and neglecting your family then you have potentially done points 1, 2 and 3 and you are a gambler. 
  5. If you make trades because someone tells you to or without researching the coin and looking at its price momentum. All recommendations are of self interest and no investment should be made without performing your own research. Only this week one of the most respected Crypto investors was recommending selling NEO at $35. All your decisions should be based on your own research. Do not listen to others, do not copy others, DO NOT COPY ME. You must perform your own research for every trade, understand the goal of the coin, the team, the roadmap and the price trajectory. If you trade based on others opinions and without research you are a gambler. 
  6. If you are lying. To your partner, your friends even yourself. If you are telling lies then you are definitely gambling. The truth is something which liberates us all. If you are having to lie about any of your trading then you are gambling.
  7. If you margin trade. I have been shot down for this on Reddit but I don't care. Margin trading is point 1, investing money you can't afford to lose. You margin trade if you want returns higher than you can afford to invest to make with your own money. Okay, margin trading is maybe fine for wealthy professional traders, this is likely none of us. Margin trading adds volatility to your trades, adds risk and adds emotion. You are always running the risk of being margin called and getting rekt. Repeat after me, I promise I will not margin trade because I am not a gambler.
  8. If you are shorting a bull market. Sure, plenty of people make money shorting and shorting is a good instrument for complete market knowledge, just don't do it in a rampant bull market. The upside is much lower than the downside and very risky. Shorting comes from greed and is a very difficult trade in a market up over 600% in a year and is gambling. 

Potentially gambling: there is one scenario which is arguable as to whether you are gambling or not. Going all in on one coin. I have always preferred a diverse portfolio to hedge my investment as things go up and down. All in on Bitcoin is probably fine. If you go all in on one coin because you think it is the next big thing then I believe that you are gambling. Sure it may pay off. Those who went all in on Ripple back in May/June and are still holding the bag are gamblers in my book.

As Warren Buffet said: 

“Diversification is a protection against ignorance. It makes very little sense to those who know what they are doing.”

I have left day trading out for now. I don't ever day trade for both lifestyle and strategic reasons, I wrote about that yesterday. You are not a gambler if you day trade but you run the risk of exposing yourself to gambling by doing it. It is too stressful for me so I don't and likely never will.

Gambling can be addictive and destructive and you must be self-aware of whether you are or not. It is ultimately self-defeating. If you want to make good returns, keep calm and be able to function normally then you need to be an investor. 

Therefore, you are an investor if: 

  1. You are investing money you can afford to lose. Here you are taking part of your savings or salary with the goal of growing its value without any noticeable affect on your life should the investment fail. 
  2. You are making trades for the medium to long term. All trades should be designed to grow your investment. The market can move in mysterious ways in the short term. You can trade just before a whale makes a massive sell or something happens in the market to change the price, even a bunch of Tweets by Mark Cuban can do this. If you are investing in something you have researched and believe in, then your investment should be able to ride out the good times and bad times of what is an incredibly volatile market.
  3. If you are trading with a strategy which includes risk management. If you are following point 1 but decide you want a high risk / high return strategy then fine, this isn't gambling, this is investing to a risk management profile. A strategy should be base on specific goals and will give you discipline while risk management will guide your trades as the market moves. As my portfolio has grown and I am now trading as a job, my strategy is one of stable growth supported by researched punts. I am also operating with less risk than back in January as the stakes are higher, hence my NEO trades this week where I locked down fives months of income. 
  4. If you limit your losses. There are multiple approaches to this. Many use stop losses for if a trade turns against them. I don't, I am investing for the medium to long term with a diverse portfolio which means I want my trades to reflect everything. If I had employed stop losses I would have definitely been stopped out of BAT. As my portfolio was performing well I was happy to take the long term view with this investment, leveraging my growing coins to ride the BAT drop. I limit my losses by taking 5% off the table for every %25 gain and as such, I now hold 3* my original investment in Fiat. If the crypto market turns then 25% of my portfolio is protected, limiting my losses.
  5. If you are plugged into the market. Any investor should have a steady supply of opinion and news, opinion is for ideas, news is for knowledge. Opinion helps you discover opportunities and refine your strategy, news helps you profile the state of the market. Both general market and coin specific news should help guide your trading. You should always be learning and increasing your knowledge. I've never claimed to be an expert and I know myself I am always learning. I soak up as much knowledge as possible without it taking over my life.
  6. If timing is part of your strategy. Good investing requires patience. I missed the boat on OMG, QTUM, Civic and PAY. I especially want to invest in OMG but I don't chase and as such, I am patiently waiting for the time to enter. It might be today, tomorrow or never. Similar with exit points, timing is key, don't rush an exit because something is falling if the long term trajectory is good. The June and July correction was a perfect example of patience. My portfolio dropped 50% and as only just recovered. It recovered because of patience.
  7. You have an exit strategy. Now, this can evolve and change, mine certainly has. My original exit strategy was a retirement pension where I would exit to fund my old age. I now have a monthly income exit strategy which impacts on my trades. Equally, I have an exit strategy per coin. As I wrote before, holding is not a strategy on its own, you must have an exit.

Your goal is complete control over your emotions to trade as neutral as possible. This following quote from Investor Guide sums it up perfectly:

Every true investor knows that the market is driven by sentiment. Market surges and declines are mainly caused by two emotional factors; fear and greed. Average investors invest based on these emotions but successful investors have a stronger control over these emotions.

Successful investors also have a neutral reaction to either winning or losing. They don’t abandon their investing strategy simply because of a few failures and they don’t become over confident when they are on the winning side. No matter the market conditions, they still respect the 50-50 chance of winning or losing.

Be honest with yourself, are you an investor or a gambler? Any questions then please shout.