If you are short on time and have only so little brain space for new info, then remember this:
This is advice by Todd Blackburn, a well known crypto trader.
“I am going to give you the best trading advice you will every get.
- When a market takes a big nose dive – buy.
- Once it goes up, put a stop order at your buy price. If it rolls over all you lose is the fee.
- Every time it goes up $100 move your stop up $100. Ride the whole trend. Every time you move your stop up it protects your profits. Ride the trend all the way up until it loses momentum or rolls over on you.
- Don’t try to guess the top. Keep moving your stop profit order up and when it loses momentum tighten up what you think is the last stop.
- Don’t forget to check the order books when you place your stop to stop out and dump into a order big enough to cover your order. If you stop out into no mans land with no support then it will sell off and hurt you.”
So you want to go into the business of trading cryptocurrencies?
You want to trade cryptocurrency because you’ve seen those eye-popping 3000% returns.
You don’t want some measly little 10% ROI after a year in the plain old stock market, because that’s for grandpas and old people. You want quit-your-job with a middle finger, and start trading cryptocurrencies right now. Am I right or am I right?
Or perhaps you wanna be a baller, shot-caller and you want a yacht, gold-plated house, and rap video girls jiggling in string bikinis around one of your six infinity pools.
All of this and MUCH MORE can be yours!
I’ll tell you now the ultimate, super-secret ingredient to lightning fast crypto riches!
Are you ready to turn your dreams into reality?
Wait, what do you mean?
There is no ultimate, super-secret ingredient to becoming rich and anyone who tells you different is lying to you because he/she is probably selling something.
Oh yeah and I don’t really fly my helicopter to work since I don’t have one…yet.
Of course, cryptos do have some of the best ROIs in history, and you do have an excellent chance of earning some good money. Now I’ll show you how to invest in cryptocurrencies the right way.
I don’t hide the fact that I’m a long-term bull on cryptocurrencies and I believe they’re a game changing technology that will ripple across the whole world, remaking every aspect of society. Like my friend Chris Dixon, I truly believe Bitcoin could easily be worth $100,000 a coin one day. However, I’m not quite there with perennial Dennis Hopper impersonator John McAfee’s prediction of Bitcoin going to $500K a coin. I think that this is not doable, at least not in the next three years. It may take a little longer to get there.
In this article we’re going to talk about cash money, y’all and how to earn it. Unlike many people in this space, trading is not my primary interest. However, like everyone I do enjoy earning money and spending it on nice things.
How do you earn money with cryptos?
Questions, Questions, Questions
„Do you have enough extra money to invest?, “is the very first question you need to ask yourself, because, if you have extra money lying around, you’d be surprised what you can do with it.
What does it mean to have extra money?
Surprisingly, the SEC has some nice guidance here. They’re occasionally good for something, although they let Bernie Madoff get away with a massive pyramid scheme for a decade, despite someone telling them about it every year. I’m not a big fan of the “pattern day trader” rule that requires you to have $25,000 minimum in order to day trade the traditional markets, nor of the nanny-state accredited investor rules of the SEC that allows only people who are rich to invest as they see fit. However, there is some merit to the rules. Those numbers are arbitrary bullshit. However, I do agree with the sentiment that led to the creation of those laws.
These laws are here to protect you from losing money you don’t have to lose.
And you will just have to go ahead and take personal responsibility and protect yourself because the nanny-state is not here to protect you in the crypto markets.
Stories like I Invested All My Spending Money in Ethereum (And so Did All My Friends) are amusing on some level (college kids can afford to take some risks because, if they lose everything, they have a lot of life left to recover later). However, they’re also utterly terrifying on another level. What would happen if that girl lost all her food money for the year? Not great.
Just the other day I saw a guy posting about how he mortgaged his car and he was looking to get in on a “shit coin pump” aka where traders get together and purchase like crazy to pump a penny-stock equivalent to the moon before dumping it on idiots. Of course, he lost it all trading cryptos and his wife kicked him out. This is not good and you don’t want to be that guy.
You should only invest money that you can afford to lose.
Start small if you don’t have a lot of money. Don’t go maxing out your credit cards or, even worse, “loaning” money from that guy your brother knows who sits on the corner outside the grocery store on 156th and Broadway because you’ll only get burned.
„Are you a buy-and-holder or a trader?, “is the second question you have to ask yourself.
These are two extremely different things.
By a wide margin, to just buy and hold is the right strategy for most people. You should get some well know cryptocurrencies like Bitcoin, Litecoin, Dash, or Ethereum, put them in cold storage and forget about them. Don’t read the news and don’t worry about the wild swings or the predictions of doom from the popular press. Just buy, hold, and forget about the cryptocurrencies. Dig them out in a year or two, sell some of them, purchase a little more with the proceeds and repeat until retirement.
However, if you want to trade cryptocurrencies, that is a different beast all together because it means that you’re looking to get in and out of the market. The rules of the game are basic but important to remember:
Buy low, sell high.
This is easier said than done.
There are two parts to this game:
- Earning money
- Keeping it
Most people crash and burn on the second part, because everyone makes money in a bull market and then most give it right back afterwards.
So does this mean you shouldn’t trade cryptocurrencies? No fucking way. I adore trading!
It’s the ultimate rush on good days. You’re a Viking raider. You are swooping in on unsuspecting people and mowing them down with glee.
However, it’s brutal on the days you lose. You’ll lose money, friends, hair, sleep, you’ll be angry, depressed, and scattered brained.
So why play the game at all?
Because trading is the ultimate game, the ultimate rush.
You’re playing against other people, on an occluded battlefield, with incomplete information. You are also playing against the maniacal and sadistic “mind” of the market, and against yourself. Your belief system, emotions and mental strength are all working against you. That business school crap they taught you about rational actors with perfectly distributed information making rational decisions in the marketplace is just that, utter and complete crap, and anyone who spends five fucking minutes trading knows it’s bullshit.
The markets nor people are not rational. People are fear based, emotional creatures and only an ivory tower academic economist would ever think something so completely ridiculous.
First of all, we are all playing with partial information and a fog of war, because the information is not even close to evenly distributed. Even worse, we all have varying degrees of ability to process that information, which means that all of us are kind of stupid. It doesn’t matter how much information you have because, if you’re not that bright, you won’t be able to do shit with it. You should go directly to Dunning-Kruger and do not pass go.
However, unfortunately most of us are not that bright.
Sadly, all of us have broken mental heuristics and stupid magical belief systems. The worst thing is that they work against us every single second of our lives.
If you see a group of people sitting and you ask them: „How many of you are “above average” drivers?,” almost everyone will raise their hands. This is impossible because they can’t all be above average. However, they all believe they are.
You’re not immune to this kind of mental insanity even if you’re a good trader, because if you think you are a good trader, that’s another magical belief.
I made not one but two stupid BTC trades as I wrote this article, and I busted out trying to catch today’s crazy $600 a coin rally late.
I knew this was a horrible idea, but I did it anyway.
I was not focused because writing this article and I was late to the party, a double whammy of stupid. Rule number one – Stay the hell out of the market if you miss a trade and get them next time.
But did I listen? Of course not, because, just like everyone else, I am an emotional fear based creature and I am not perfect. Fear of missing out (FOMO) got me, and with FOMO, the force is very strong. Not you nor anyone else is immune to it. You’ll regularly and repeatedly shoot yourself in the foot, no matter how good you get.
I can’t tell you how often I saw good, professional traders saying “this makes no sense, the market is wrong,” when I used to trade the regular markets.
No. You are wrong and the market is always right.
You’re either losing your money or complaining about how the market should be more rational, or you are in line with it and making money.
The problem is that instead of seeing what’s actually right in front of our noses, most of us are seeing a movie in our heads about life. To the degree that reality doesn’t match up with what we want to think about it. We go with what we want to think about it. Giving up their belief systems is the same thing as death for most people, and they would rather die than change their mind.
That doesn’t work for the market because the markets are economic Darwinism and they have no mercy. The markets are a lesson in humility, which means that you will learn to see things as they actually are versus how you imagine them to be. If you don’t learn that, you will get taken out to the woodshed and beaten with a rubber hose. In other words you will lose all your money just like that idiot who mortgaged his car.
I will give you now an example of how your belief systems work against you in the game of coins.
The Wolf of Poloniex is one of the traders I follow closely. In full disclosure, I currently only follow the big market moves he posts about on Twitter and I am not a member of his “Wolf Pack”, which is his paid private trading signals group. That’s because I prefer to trust my own eyes, do my own research, and live with my own calls, right or wrong.
The Wolf is a fast, aggressive trader and his calls regularly make me tons of money. „Are they right?“is a question you have to ask of all traders. Nobody is right all the time and even the best of the best are wrong more than they’re right. The greatest traders make their money on 20% of their trades and the rest of our trades make only modest gains or loses.
So, objectively, how can we know whether a trader is right or wrong?
It’s very simple.
Either my bank account is going up or it’s going down.
That’s it, it’s a perfect system – binary. There is no in between, you win or lose.
He is right if I’m following his calls closely and my bank account is going up. He is wrong if I keep losing money on his calls.
But most people don’t see it that way and they think the guy’s calls are absolute crap. The reason for that is that the Wolf loves to stick it to people who say he’s wrong and has an in-your-face persona that rubs many people the wrong way. People are quick to pounce on him any time he posts a call and they want him to fail. They call him a douchebag, an idiot and a shill hucking trading calls.
The reason is because they’re unable to disconnect his persona from his calls. They conflate two unrelated things, and whether he’s likable or not is completely irrelevant. Personally I like the guy. However, that’s also irrelevant. The problem is that people won’t see it that way.
People become very attached to their opinions but the thing is that your opinions mean nothing to the market.
Your opinion was wrong if you thought a bull market was starting and it turns into a bear. Period! Move on and let it go!
But people love their opinions and cling to them desperately.
Our brains are littered with mental pitfalls and we are just wired that way.
Being “right” when you’re actually wrong is great way to lose your money.
Do you know that at times as much as 38 percent of the people in the United States can’t tell you which party is more conservative in the US. 38 percent! In fact, most people don’t vote based on actual politics at all and they choose who they like the most. The worst thing is that, even if that person has diametrically opposed ideas to their own, they still project their viewpoints onto that person.
Can you believe it? How stupid is that?
But that’s us, we’re prone to all kinds of crazy-ass mental nonsense.
Welcome to the human race.
So how the hell can we expect to get good at trading with that kind of broken grey matter?
Is there any ray of hope?
Getting Good at Trading
Getting good at trading takes time, so you better start reading.
We all have a lot to learn. So the sooner we start doing it, the better we get. Your aim should be to learn something every day for the rest of your life.
Top 10 Trading Setups: How to Find them, When to Trade Them, How to Make Money with Them (http://amzn.to/2ughxup) is my current favorite book on trading. The book is super simple, short and to the point. It focuses on simple, practical advice, for multiple market trends, and the best thing is that there are no stories of the author’s trading glory, or links to his special, top secret system that you can have for a mere thousand dollars more. Everyone makes money when it’s all going up. However, how do you deal with trades going sideways or down? It’s in this book.
The book is focused on traditional markets. However, most of the rules the author puts forward can easily be applied to the crypto markets, and his reasons for why new traders lose money on the very first page is worth the price of the whole book.
The reasons why new traders lose are:
- They trade without an edge, or to put it in other words — they gamble
- They trade too big
- They use excessive leverage
- They over-trade
- They trade low price junk stocks
Trading with leverage in the cryptos is like juggling Cobras, so if you are not a professional trader, don’t fucking do it. The crypto markets move at video game speed and you can easily lose someone else’s money that you don’t have to pay back.
That brings us to the one crucial difference between the regular and the crypto markets – crypto markets move too fast.
When he talks about how a market might take weeks or months to play out, that could play out in days. We literally just saw the market crash out 40 percent, going full bear, and then in two days recover to new height. That’s how fast the crypto market moves.
This is one of the reasons why cryptos are not understood by pop-press. They regularly report that Bitcoin is over and dead for good, which is ridiculous.
The problem is the popular press is used to playing the game at slower speeds and it’s as if they were great football players in college only to go to the pros and have guys blow right past them. However, this is the e-Sports universe – a totally different level.
Cryptocurrencies are the computer generation’s stock market.
It’s run by children who never lived life without the Internet, and to them it’s just like a tree, it was always there. The NYSE comes from „the old days, “the days of ink and wood pulp.
Forbes or FOX or CNN are usually right for a reasonable period when they report on bear markets in the traditional stock world. That market will go cold for months, but in crypto, it could go nova hot tomorrow.
It’s warp speed and you need an edge to keep up. That brings us to book number two, which is a monster – Encyclopedia of Chart Patterns (http://amzn.to/2tLuMQ2).
The book is heavy and dense and filled with information, and you’ll probably begin seeing patterns everywhere, even when they don’t exist, after reading it. Don’t worry and study them anyway. You’ll regularly see people drawing random lines on the chart on Twitter and calling it “technical analysis”. However, it is important to note that this book is much more serious and disciplined.
You can start trading once you have Bitcoin in your exchange account.
However, I recommend you do some research first before you just randomly pick some cryptocurrencies and watch their charts; otherwise you’re trading blindly. The best way to learn about each coin is to search it, like “Cannabiscoin ann”, and this search phrase will lead you to the bitcointalk.org forums, to the official announcement thread of Cannabiscoin (https://bitcointalk.org/index.php?topic=827998.0).
An official announcement thread of a coin will show you important information – community speculation, mission statement, development plans, technical details, total coin supply, and much more. Twitter is also a great resource for news. It can also help you to track down web pages and other forums related to a cryptocoin.
Researching the market is referred to as “fundamental analysis.” It becomes easier to stay predict trends — essentially whether or not a cryptocoin will rise or fall, by gaining the right information at the right time and understanding how it will interact with the market. You also have “technical analysis”. Technical analysis is equally important. However, it refers specially to studying charts and finding patters—for instance, a coin will fall repeatedly at a certain price.
Technical Analysis works pretty damn well in crypto trading. My gut tells me it’s because most of the people trading cryptos are geeks, and because it makes sense to the engineer brain, we’re prone to liking Technical Analysis. It also works because there’s lots of machine trading going on and you’ll be trading against bots regularly on the exchanges. They have no choice but to make decisions based on moving averages, breakouts, pull backs, and all the other things that Technical Analysis aficionados love.
People want to take gains and cut losses, so the other reason it works is because Technical Analysis is all about psychology. It’s going to fall after a certain amount of rise, it’s just natural.
It is very important that you remember that Technical Analysis is not a magic eight ball.
It does not work all the time and it’s often just junk voodoo. It’s prone to all kinds of false signals, and difficult to do right and easy to do wrong. Still, it’s a useful tool, and it saved me many times and helped me avoid big crashes.
One Up on Wall Street (http://amzn.to/2ufAewy), by legendary investor Peter Lynch is the last book on my list. Yeah that Lynch. The one that beat the market for fifteen years (statistically after ten years most traders bust out). The one with his name on the marquee. A lot of the advice in the book is outdated, e.g. making sure you purchase a home before investing in stocks. For today’s young people homes are regularly a huge money pit of debt. However, his investing advice is timeless and can be applied to any market.
How did he make his mulah? Like Warren Buffet, he focused on “value investing,” which means that he only invested in what he knew and understood. When his wife or children came home with a shopping bag from a new store, he’d research that company and purchase it, because he figured it was a good company if people were purchasing from it.
Investing in what you know and understand is a great mental heuristic. Warren Buffet regularly refuses to invest in all kinds of companies. For example, he doesn’t understand tech, so he doesn’t want to invest in the tech stars everyone loves. He can’t make a good call ahead of time because he doesn’t understand it. That’s why he stays out. You should also stay out if you don’t understand the purpose of a coin. Don’t purchase it only because some idiot in a Slack forum told you it’s killer.
In crypto, value investing means not purchasing a bunch of shit coins, because ICOs happen all the time and new coins pop onto the market, promising amazing returns. Some of those coins will deliver one day, but most of them will go to nothing in the next couple of years.
Personally, I tend to invest in “infrastructure” coins or coins that have a chance to be multifaceted and serve lots of purposes, and because I was a systems administrator for more than a decade, I have a background in building systems. I’m looking for the people building the railroad tracks of tomorrow.
Bitcoin, Ethereum, Tezos, and QTUM have multiple purposes, but Pot Coin does not.
Over the years, Peter Lynch made all his money on 20 percent of his “home run” trades. On the other hand, he lost or made modest returns on 80 percent of his trades.
So, the formula is 80/20.
Even if you manage it for a number of years you will never do better than that. You’ll revert to the mean eventually, and that’s statistics baby.
And of course, even after you read all these books, it is very important that you remember that there is no ultimate, super-secret ingredient.
Actually, there is – You are the secret ingredient.
I know it’s cheesy but it’s true.
Check news feeds daily because news spreads very fast in the crypto world.
As long as you pay attention to the news on twitter you will usually see smoke before there’s a fire. Crypto exchanges and businesses are being talked about on twitter, so you should check in on twitter and crypto forums on a daily basis, follow hash tags, see what people are talking about. It is important to remember that news is power, information is power, and rumors are opportunities!
There is no substitute for personal experience, so the way to get better is to get in the game. There’s an old saying in the ancient game of Go (http://amzn.to/2ufZ2Vf):
„First lose 100 games fast to learn Go. “
This is true of everything in life, including trading. You have to get into the arena and play the game. You won’t learn a damn thing without skin in the game.
It’s one thing to read about something in a book. However, it’s another thing entirely to do it. When your emotions are against you and the pressure is on and you’re fighting with your significant other because you’re watching thousands of dollars vaporizing in minutes and absurdly blaming her for taking you to dinner and “causing” you to lose your money because you weren’t watching the trading screen, then you’ll understand.
I’m not kidding.
This is not hypothetical, and this happened to me a week ago.
But I learn every day.
Oh and I did make money, but I was just mad I didn’t make more. That’s when I knew I needed to take a break. I allowed myself the freedom to do NOTHING for a day. I got up late, took a walk, had a delicious breakfast and apologized to my gorgeous wife for being a jerk.
You don’t need to catch every damn run and the markets will be waiting for you when you return. You have to recharge and do the things that matter in life – go out, listen to the birds singing, see the trees, and play with your pets and your kids.
Here’s the deal: You’ll make mistakes and you’ll learn from them. That’s the only way.
But you just might do OK in the world if you let this awesome and legendary quote by the great Teddy Roosevelt be your guide to trading and to life:
“It is not the critic who counts. It’s not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena; who errs; who strives valiantly; whose face is marred by dust and sweat and blood; who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who spends himself in a worthy cause; who knows great enthusiasms, the great devotions; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”