Planning to stay sane “Thinking before doing” — Crypto Adventure #2
If you are thinking about investing or buying cryptos, this guide will probably help you. This is not a financial advice in anyway and I don’t pretend to be an expert or foreseeing the future.
Let’s first get back to the basics.
Planning is the process of thinking about the activities required to achieve a desired goal. It is the first and foremost activity to achieve desired results.
It might sound silly to put back the definition here but pay attention to this part
It is the first and foremost activity to achieve desired results.
This means that you can’t even think about going any further with without having a plan.
Here is what a planning would help you do in the long term:
- Not panic when crypto is playing with your nerves (roller coaster graphs, going up and down )
- Help you sleep every night ( believe me, I’ve been through this… )
- Have a clear visual of your financials
- Gain a LOT of time ( not being glued to your screen or checking your phone every 2 min )
Obviously, your planning should be a bit flexible and you should reassess every X time (ironically this should be part of your planning).
I’ll ask you now to take a paper or open your notebook to answer a few questions, this will help you write your plan.
What is your endgame ?
What are you expecting out of that investment ? Do you want more money quick ? Are you interested by a long term investment ? Do you just like the idea of owning some of that “new” technology ?
This is something that only relates to you and only you can decide that.
You could change your perspective over time but I am pretty sure that 95% of the time when starting you’d be in the optic to make “more money quick”, cause you have heard it from someone else and you want to try for yourself.
While this might be true sometimes, I wouldn’t advise to do such thing, if you’ve heard it from someone else the market might be ‘bullish’ at that time, and if it converts to a bear market you might loose your investment quickly.
A bull market is a market that is on the rise and where the economy is sound; while a bear market exists in an economy that is receding, where most stocks are declining in value. … A bear market can be more dangerous to invest in, as many equities lose value and prices become volatile.
You could easily as well fall into FOMO ( Fear Of Missing Out ), where you’d buy one assets cause it’s sky rocketing to the moon… but then crashes underground the day after.
This also applies to cryptos, cycles have been happening for the last years, with bull runs ( where everyone is making their investment back, x2, x3, x10… ) While this sounds promising, it’s difficult to predict or anticipate even though there is some signs. I’ll write another article if needed or nicely asked in the comment section, but for now let’s get back to our planning.
What’s your strategy ?
Are you planning to make a one time investment ? or just invest here and there ? or try to invest when things are crashing ?
We obviously all wants to buy at the lowest and sell at the highest but let me tell you something, the perfect trade doesn’t exist.
There is so many ways to approach it with many have advantages and drawbacks. Depending on the time you want to spend and your expertise.
First, let me tell you about DCA. This stands for Dollar Cost Averaging, it’s a strategy to take your emotions out of the equation, one of the biggest factor. If you’ve lived a a stock or crypto crash you know what I am talking about, you better be ready…
As the name is mentioning, this is gonna help you basically invest regularly the same amount, a bit like you did younger in your piggy bank.
This would then average the price of buying for your assets
I have made an example above of how it would look like.
If you were for example investing 100$ every month at the same time, as you can see the price of the assets doesn’t matter to you, you are “saving” the same amount every month which help you average the price.
In the above case, our average price is 8,250$, which means if we were to sell let’s say the 1st of May, anything above that price is pure profit. If under that price then we would be losing money.
This technique would help novice people by saving you, time, energy and keeping your emotions out. You could as well tweak this around do that bi-monthly, every 3 months or bend a bit the rule to decide a day where cryptos are not performing well in that month…
I also have to bring a drawback for that method, because we are “mitigating” the risk (basically averaging tit as well ), so is the return on investment (ROI) compared to someone buying one time at a low price.
This is a little sum up of my opinion, but not a financial advice or how you should do it yourself :
- Not interested by crypto just trying to make money: Don’t go any further and look for other investments.
- Interested, can commit a bit of time, small purse: DCA
- Interested, can commit a lot time, medium / big purse: Smart investment, reading signs of the market and trying to make smart purchase. This would be hard as well on your emotions and you might need some expertise.
- Super Interested, can commit full time, medium / big purse: You might be interested by Trading ? Day to Day ?
How much are you willing to lose ?
Yes you’ve heard me well, this is the best way to see your investment and be emotionally detached from it. Think of it like a service you are paying taking a Fancy flight, paying a takeaway, anything that would make you feel “comfortable” to spend / lose. This is the best advice I can give you.
Why ? This would avoid you panicking and losing money in the long term, and I’ve seen it or experienced it.
An example of what could happen, if you have 2000$ savings in your bank ( all you got ), and you are thinking to put it all in a crypto investment ( or any risky investment ). Then something comes up 2 months later where you actually need that saving. You’d need it out, you’d then be forced at that specific time, to get that money out being up or down wouldn’t matter as you would need it. Same thing would happen if the market was to crash.
Instead of putting those 2000$ think of putting 200$, like 10% here of your savings.
Once again this is up to, how much can you afford to lose, think of it like a long term investment “Would I need that money in the next 3 years” , “Would I be able to save that money again, or make it back”.
When are you going to take profit ?
Another important point, that people ALWAYS fall into. If not planned in advance, greed will come knock at your door. Once everything is green and going well, you’d always have this little voice, “just a bit more”.
You should have an idea when you will need to take it out, whether it’s when you reach a money value, or a time frame.
I personally use money targets, where I set up in advance certains criteria in advance and reassess every X time.
An example, if I bought 1 CryptoCoin for 1000$ , then I’d set targets like:
- Sell 0.5 for 1000$ ( making x2) and having 0.5 left , getting back my investment and having still some crypto coin to play with.
- Sell 0.2 for 500$, at this point my 0.5 is profit if I sold the previous target.
etc…
Setting those in advance would avoid you selling on the fly or panic selling. There is multiple ways to do that Stop Loss, Price limits, etc.. I would get into more details in another article.
Conclusion
By now you should already have a better idea of what you are trying to achieve, hopefully this helped you see through. There is many other things you can do and I might bring in other articles, like bot trading or IA trading services. Hope you liked this article, please clap if you did.
As a bonus, here are a few other tips from me, that might help you:
- never sell 100% of your bag always keep a % of a crypto just in case..
- Do not regret for taking profit and try to reassess your plan slightly ( not drastically ) if everything is changing
- Leave your emotions out of this, they are your worst enemy
Vocabulary
- ROI ( Return Of Investment )
- FOMO ( Fear Of Missing Out )
- Weak Hands ( People that panic sell )
- Diamond Hands ( People not selling, )
- Buy the Dip ( buying when things are crashing or low , thinking that it would bounce back up )
- HODL ( Hold On for Dear Life , basically holding your assets )
