TL;DR
It takes a strategy to leave a bull market with a meaningful profit. The two pillars of the strategy are to formulate financial goals – both short-term and long-term – that make sense to you. These goals have to be – again – meaningful. I propose to put these goals into two ‘buckets’. And second, you need to formulate a selling strategy for the bull market. Finally, you still need to execute this strategy, which is easier said then done.
The hardest part of investing in crypto isn’t buying – it’s selling. When your portfolio is up a zillion percent, it can feel impossible to kill the goose that laid the golden eggs.
Sticking to our plans… can be the hardest part. Our own emotions get in the way at precisely the time we should buy or sell according to our plan. Fear and greed, uncertainty, and doubt… The best investors and traders are the ones who are best able to control their emotions. Before we talk about making a selling plan, let’s look at the condition for sticking to any plan: emotional stability.
The Foundation: Emotional Strength to Stick to a Plan
“Human emotion is both the source of opportunity in trading and the greatest challenge. Master it and you will succeed. Ignore it at your peril.”
This is a quote from Trader Curtis Faith’s classic on trading: Way of the Turtle: The Secret Methods that Turned Ordinary People into Legendary Traders.
The author relates the story of his apprenticeship as a trader in Chicago of the early 1980’s. Like other rookies (the class is called the ‘turtles’) he was taught a clear system. They were all taught a trading system based on the analysis of the company’s founders. It wasn’t anything spectacular: just a certain type of breakout trading consistently and systematically applied. They traded commodity futures such as heating oil contracts.
After a few weeks of trading, rookie Faith was astonished to find out that he was by far the most profitable trader of his class. Why? Because he had cleverly invented his own secret trading sauce? No, he outcompeted others by simply sticking to the system, whereas other rookies had gone all over the place.
“The difference in return had nothing to do with knowledge and everything to do with emotional and psychological factors. It seemed crazy to me. We all had been taught exactly the same thing, but my return for January was three times that of the others in the class or more. These were very intelligent people who had been taught by the most famous trader of that time. Several of them would be among the most successful traders in the world within a few years, yet they had failed to execute the plan during the practice trading period. Over the years I kept finding evidence that emotional and psychological strength are the most important ingredients in successful trading.”
Preaching this or practicing this are two different things. You will find out, but it’s good to know in advance. Volatility will shake you to your core. You’ll be depressed near bottoms, stopping you from buying. And euphoric near tops, stopping you from selling. But when you have a system in place, you’ll at least have a fighting chance of executing on it.
Stay Humble, and also Not Too Hard on Yourself
There’s another important emotional skill you will need to master during the gut-churning rollercoaster ride that is called…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
