Top 5 Rules For Profitable Cryptocurrency Trading And Investing

in #cryptocurrency5 years ago (edited)

Today we're going to be taking a look at the framework of how we can make money trading and investing into cryptocurrency and before this article begins it's not going to be drawing our price predictions or telling you exactly when to buy yourself as like everybody else I don't know instead I'll be giving you something arguably more valuable a basic insight into the framework and cognitive conditions needed for profitable trading or investing

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The very first thing to acknowledge is a trader or long term investor is that you are playing a game where money can easily be lost and there are no certainties therefore any money you put up should be money that you can afford to lose obviously that's not the idea but nevertheless the only way of protecting yourself against losses is exceeding that of what you can afford is to limit your exposure in the market below that level which means setting a reasonable budget and not putting any more money than it's planned no matter how sure you are that you can make money

the second priority should be defining the boundaries of your competence reasonably this means without the influence of bias and on a purely factual basis deciding which cryptocurrencies you're capable of investing into having done proper research and also whether you are capable of timing the market or more simply holding the key here is to not over or underestimate your abilities and then make the solid judgement and stick to it without exception

the third step of this framework is to learn effectively from mistakes whenever you trip up or do something that you look back on and discussed and they will happen to all of us more than once take the time to look over your decision and pinpoint exactly where you went wrong and then create a rule a reminder which will force you to avoid or at least consider more carefully similar situations in the future making mistakes is not a problem it's the foundation of learning but not making full use of the information and insights available from the mistakes is a terrible mistake in itself Ray Dalio the founder of Bridgewater the world's largest hedge fund recently wrote a free book named principles which goes into detail creating a systematic process for retaining and organizing information gained from making mistakes the book I highly recommend anybody interested in finance taking a look at the next step in this framework is eliminating what I call lenses a lens similar to those he put into glasses is a distort revision in finance lenses are detrimental to performance and can come in the form of bias arrogance or emotional tendencies each lens we accumulate further distorts our vision of the truth and thus negatively impacts our ability to make rational and correct decisions it's the duty of any serious investor to eliminate all lenses starting with the largest and even though many of us including me may not be able to see all of our imperfections in investing we must do our best to find and eliminate them as if left alone these emotional tendencies and biases will only become more deeply ingrained and widespread in our thinking ultimately degrading our decision-making skills

the final piece of this framework is staking thoroughly to all of the rules reminders and principles if investing we accumulate but at the same time be willing to change our beliefs and processes on the provisions of better ones becoming apparent or available to us in other words sticking to what we know and being willing to change them when we find better ones even if we spent time and resources developing old ones an effect known as sunk cost bias the more we put into something the greater emotional attachment becomes a truly dangerous effect anyway thank you all for reading

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