Letter to my younger self
I've been in crypto since 2017… and over the years I've made every single wrong. If I could build a time machine and tell my younger self a few things, these would be it:
- THERE IS NO SUCH THING AS A GET RICH QUICK SCHEME
- While money comes quickly in crypto, as compared to traditional markets, it goes away even faster. Your profit, and return on investment, is directly corelated to the amount of work, effort, research, and attention, you put into your investments. If you do it right, you will have a ton of success… if you don't, your failure will be epic in so many ways.
- Things might sound outlandish in crypto, but if you follow rule #1, you'll be able to figure out which have potential, and which ones are never going to reach the daylight. If someone is trying to make you "Get in right now or you'll never be rich" that's ok… let them have the glory of monster gains, there are plenty to be had that will fit your needs. I'll tell you below how to figure out which projects are good and which ones are not.
- PEOPLE THAT TALK ABOUT BEING THE BEST IN CRYPTO ARE NOT
- If you run across someone that constantly says that they are the best (paid group leaders come to mind), they are far from it. The one's that are the best let their work talk for them, and they are more than happy to help others be successful for free.
- The biggest names in crypto are the ones that show you their work… If you have doubts about someone being who they are, just ask them to show you their P&L. If they are genuine, they will do so without hesitation, if they are not… they will give you an excuse of why they will not. "I only talk to real Alphas" is not the right response to this.
- YOUR NET WORTH IS NOT THE MEASURE OF WHO YOU ARE
- It is easy to look at some people turning $5,000 into $500,000 in 6 months and thinking that you should do the same… you won't. Some of these people are incredibly talented, gifted, and dedicated traders who spend 8-12 hours every day working on their portfolio. They have years of experience that makes them good at what they do… or they are just really lucky. Either way, you're not going to beat them until you become the same.
- Being successful in crypto means different things to different people. Set your goals early and gauge your success based on your goals. "I want to be rich" is not a goal, it's a dream. "I want to make $100K this year using crypto" is a goal… "I want to be a millionaire in 2 years with crypto" is a goal. Once you make it, figure out what you need to achieve it. You might have to educate yourself, you might have to practice trading on paper before doing it for real, you might have to lose some money before you make some. Just make sure you know what you're trying to do and what you need to do to get there.
- The biggest thing that will stop you from succeeding is your ego. Be humble, be smart, be the one that people want to be around. You'll get much further in life if you swallow your pride and admit your mistakes.
- DO YOUR RESEARCH NO MATTER WHAT
- Does it make sense?
- Does it solve a problem that needs solving?
- Does it solve it better than anyone else out there?
- Is there direct competition, if so research them
- Management team
- Are they experienced in the field they are trying to enter?
- Do they have someone external helping them enter the field?
- Do they have experience leading startups or history of long term business development?
- Are people talking about it or is it so far off the beaten path that a handful of fanboys know about it… if it is latter, it's probably not a good projects
- Market cap and volume… a great sign of adoption is high volume as relative to the market cap… you want to see volume in the 10% of the market cap at least… So if you have a $10M market cap coin, at least $1m should be traded on a daily basis… $50M cap coin means $5M trading volume… etc. and majority of that trading needs to come from a large variety of wallets. You want big holding wallets, and small wallets to be moving the coin around… it shows a healthy ecosystem. To that note, small transactions on regular intervals are bots keeping the network alive… if that is most of the volume… MOVE ON.
- Once you get into the coin, it is important to track the progress of execution. Everything might look good on paper but if they are not able to make their idea into a reality you will see a bunch of fluff news around but no actual implementation
- Crypto companies move at the speed of light. They knock out projects in weeks and months, not years. If you run across a team and project that has very few executed projects across a long time span, there is something wrong. Especially if they keep saying "Great things are coming" "Amazing stuff is about to happen" What a traditional company does on 5 years, a crypto company can do in 1… so if they have been around for 4-5 years and they don't have much to their name, it's a shitcoin… you should move on
- Is there transparency with the investors? If the team is not willing to share their roadmap with the investors (YOU) and is reluctant to keep up with regular updates, then something is not right. Right teams will not only update people on the things that are going on but they will also engage the base on a daily basis to keep the interest alive. They need to be as excited about the project as you ara.
- RISK MANAGEMENT MATTERS
- Catching falling knives is dangerous. Don't try to be perfect on your entry and exit. No one can predict that. If you have done your homework, you'll know the entry range, the exit range and the right time to act. When you do, act with intent, not doubt.
- Diversification is going to be a key to your success. Invest in a wide variety of projects, different industries, different fields. No one industry or project will reign supreme so make sure that you cast a wide net.
- Don't put in more than 3-5% of your net holdings into any single project. That doesn't mean that you should ONLY invest 3-5%, no… it just means that any single project should have no more than 3-5% of your overall holdings.
- Use stop loss if you are swing trading, if you're not then have a number in mind where you're going to cut your losses. 98% of traders lose money, it's a simple fact… most of them lose money because they have crappy risk management. Even if you're in love with a project, you should know when to get out. Things change so re-evaluate often. More importantly, if you risked only 3-5% of your portfolio, even without stop loss, you're going to do OK.
- No one is perfect, if you are a trader that has a 70% strike rate (meaning that 70% of your trades are profitable) you will come across a losing streak where 5-6 of trades you have will be bad. Without risk management, those trades could wipe you clean and leave you broke. to recover a 50% loss, you have to make it up with 100% gain to break even… doubling your portfolio is not that easy. Most successful traders have a strike rate of 40%, so using proper risk management is key to their success.
- Keep a journal of all the trades, entries, reasonings, rationale. Part of risk management is knowing when you F-ed up… you won't know that until later and you need to know why. Learning from your mistakes is hard when you don't know what you did that was so wrong. (Credit: u/LittleAce7)
Remember, these are rules and not law. There are exceptions to every rule, but if you have too many exceptions, then you don't have any rules in place. So use caution if you decide to not follow one or more of these.
Most importantly though, remember that crypto and trading is not life. You only live once, and while you will fail often, make sure that you take the time and dedicate it to the things that are more important in your life. Spend time with your family, spend time with your loved ones and share with them the precious little that you have.
No mater what, even if you lose it all, don't give up. Lessons can be costly, but you will be stronger in the end. If you learn from your mistakes, I can guarantee you that you will come out OK in the end. Trust me, I've done it… and I'm doing just fine!
See you in the future.
P.S. Surround yourself with people that are willing to help you succeed. People that will cheer you on with every step forward you make. People that will be happy if you're doing better than them, but if you're not they will give you advice on what you can do better/different. There are many people out there like that, find one first… then find more. Once you do, your success will be almost guaranteed.