The crypto market for many investors is a roller coaster ride, and that roller coaster not only has an effect on the portfolio values, but also on mental state. Staying strong, unaffected and positive can be a tricky practice in this highly volatile space, especially when prices move fast in the matter of minutes!
What are some ways we can train ourselves to not let the bad days in the market affect our overall long term perspective? In this article we discuss some ways to keep our heads up when our portfolios are down.
None of the points discussed in this article are financial advices or recommendations, and as such are shared for educational purposes only. We highly suggest doing your own research before making any investing decisions. Any losses or gains made in your investments are not our responsibility.
Having a plan is essential to investing in the long term which prevents you from panic trading and allows you to capitalize on rare opportunities.
In your plan, you should consider your investment time frame (1 Year, 5 Years, 10 Years) as well as the risk you are willing to take. The longer the investment period the more risk you may be willing to handle. On the other hand, if you have a shorter investment period, such as 2 years, investors tend to look at investing in something like Bitcoin which is a much safer investment and imposes less risk. #NFA!
In your plan, you should also prepare a method for how you are going to enter the market, for example are you going to invest on a regular basis(weekly or monthly) or are you going to invest a lump sum once off? Knowing this allows you to gain more control over your emotions in the market which will prevent you from making unnecessary mistakes like FOMO’ing into an overhyped project. Most investors recommend setting a specific date every month to buy or collect their tokens of choice.
Unless you're a trader, there is no need to spend hours a day watching the charts in hope that the price of your beloved token is moving up, especially if you're in it for the long run!
Spending too much time scoping the charts becomes similar to gambling, when the price goes up you get an intense sense of euphoria but when the price goes down you get the sense of dread. For the long term investors it is better to not deal with these emotions as they will cause you to make poor decisions in the market which could negatively affect your long term visions.
Lastly, the chart doesn't dictate the core fundamentals of a project, if you believe in a token in the long run, don't worry about a 10% price dip, use it to your advantage!
Sufficient research is the key to confidence in the market, and confidence is the key to investing. Sufficient research doesn't mean watching one YouTuber who is getting paid to pump a token.
Sufficient research means:
Hopefully, after doing this research, you are left investing in successful projects that aren't scams or pump and dumps. Remember to never FOMO into a project!
Risk management is important, not only for the success of your investments, but also for your mental health while investing.
You do not want to invest a sum of money that could cost you years or decades to recover if something bad had to happen. But another reason you do not want to invest too much is because investing is meant to be a passive practice and if you are constantly worrying about your investment decreasing because you have put your life's savings into, e.g., Dogecoin, then investing becomes more of a full time job. As a result your personal life as well as your day job will be affected by the increased stress that you encounter.
Rather set aside an amount that you deem safe to invest (For example, 5% of your income) and put that into diverse set of projects each month. Therefore, you have a plan on the amount you invest and you won't see yourself suddenly investing a year's worth of savings into Doge next time Elon tweets about it.
In every market, price dips are the norm, but we want you to remember that throughout crypto's history we have experienced dips much worse than this and we have recovered. Crypto is still a new asset and volatility is very much so prevalent and therefore price increases and price decreases will be more severe than traditional markets. If you implement all of these ideas into your philosophy of investing in the crypto space you should come out on top! Do you have any tips on succeeding mentally in the crypto space? Let us know on our twitter!