One frustrating part of investing is doing everything right, yet still losing money. Although it’s been a while since an excellent opportunity to invest presented itself, the overall market is still at a low, and prices keep getting lower.
This is how not to lose money in a bear market.
Know Your Weaknesses & Strengths
The way we see it, there are many different types of traders. Some are lucky and able to pick winners out of losers – others, not so much. Some may try to time the market and get lucky – others, not so much. This is known as your strengths and weaknesses.
Knowing where you excel and not excel will give you an edge over your opponents in the crypto market. If you know that you have absolutely no sense of timing the market, then don’t try to do it. Balancing your strengths and weaknesses is key to improving your trading strategy.
Know The Market Cap
If you are making an investment, a good way to gauge the value of that investment is to know the overall market cap. If you’re investing in an obscure project with a $1-$3 million market cap, you could be taking on more risk than if you were investing in larger markets.
In researching the overall market before investing, it’s important to understand that the larger the market cap is, the less risky your investment will be. For example, in the case of a tech company, Bitcoin has a market cap of $30 billion meaning that investing in Bitcoin and Ether is substantially less risky than investing in, say, an obscure game company with a market cap of only $3 million.
Know Your Risk Tolerance Levels and Risk Management Strategies
Everyone has different levels of risk tolerance – the amount of money that you’re willing to lose before you panic and abandon your investment. It’s important to know your thresholds for panic and how you react to that sort of thing.
Also, it’s important to know your risk management strategies – ways you can protect your investment from unexpected market movements. Are you going to be investing in a constantly evolving industry or are you going to have a long time horizon for your investment? Will you ever sell the coins or tokens?
Know What You’re Buying Into
While we appreciate that many of us are speculative traders, it’s important to always know what we’re buying into. Do you want to be investing in a company ecosystem or technology? Is this an industry with a growth rate or one that is already mature and cannot expand any further?
Unless you know the answer to these questions, it’s possible that you’re investing in a project that’s already priced out of its market cap. If a project’s technology can’t keep up with the growth of the industry, you may be better off buying into an established company since there will be more room for profit.