How to be wrong 90% of the time and still WIN
As the new bull run starts we will all be tempted to go after new projects with the hope of huge returns. Bull runs are all about chasing the big prize of life changing, face melting, gains.
When those Altcoins start pumping then the FOMO will kick in and there will be months after month of chasing pumps 24/7.
In essence, we will chase profits and forget about risk. It happens every time.
The #1 rule of trading:
Focus on managing risk.
Some alts will 50-100X and some will get rugged. The problem is that you will not know which ones. Alts are risky for many reasons. And with so many of them out there you could end up picking nothing but disasters.
Now, I’m not a day trader and I’m not interested in bouncing in and out of trades. I prefer to trade the move from the bottom of the bear to the top of the bull, or there about.
I want to give all of my trades the opportunity to thrive in the market during the bull run and see where they land. (I buy and hold, the cycle)
Plus, trying to navigate pullbacks and retracements creates behavioural risks on the part of the trader. So with this in mind I setup my risk management profile with my trading approach in mind.
Among other tactics, I use BTC as a safety net for some of my more irresponsible crypto picks.
I believe it is reasonable that BTC do a 2.5 – 3 X from here.
Some alts will do well and some will fail.
To protect my capital I have hedged my alt picks against the anticipated growth of BTC gains.
For every $2 I spend on alts I spend $1 on BTC. 2:1
If all of my alts go to zero (rugged) I can still end up with a net positive result.
I use this ratio as a base case. Clearly it’s conservative as I also have ETH and some other strong projects in my folder. These aren’t as likely to go bust compared with other ALT’s. When you factor in the stronger picks it makes more sense to be less protective.
But another thought that I keep in mind is that most projects, even good ones, will ultimately fail. It’s just a matter of when. The general crypto market is reminiscent of the early dot com market.
Be honest, do you really see 20,000 crypto projects succeeding in 3-5 years. The odds are not in their favour.
So you have to play it smart with a hedge to protect your capital. Do this and you can be totally wrong on 90% of your selections and still come out on top.
All while exposing yourself to the potential of several 100x picks.