If you are serious about staying in the cryptocurrency world for the next few years and viewing trading as a side job, these 10 essential rules will provide important insights. They offer practical advice for anyone aiming to make a living from cryptocurrency trading. Be sure to bookmark them for future reference!
1. Beware of the Trap of Losses
Assuming you start with $1 million. If you manage to double your investment to $2 million, but then experience a 50% loss, you will return to your starting point of $1 million. This highlights a harsh truth: it’s easier to lose 50% than to gain 100%.
2. Profits and Losses Do Not Cancel Each Other Out
If you have $1 million and your portfolio increases by 10% on the first day to $1.1 million, then decreases by 10% the next day, you will end up with $990,000. The same result occurs if it drops first and then rises—you still have $990,000. Now, if you manage to achieve a 40% profit in one year and a 20% loss the next year, and this cycle repeats for six years, you may only increase your portfolio to about $1.4 million. Your annual return? Just 5.83%, which is even lower than long-term government bonds.
3. Daily Small Profits Can Accumulate Quickly
Starting with $1 million, if you consistently generate modest profits of 1% each day and never exit your position, your assets could grow to about $12 million in 250 trading days, and even exceed $140 million in 500 days. However, maintaining such stable daily returns is not easy.
4. Sudden Profit Increases Are Hard to Maintain
If you start with $1 million and aim for a 200% profit each year, after five years, your portfolio would grow to over $230 million. However, achieving such high returns consistently over many years is extremely difficult and rare.
5. The Power of Long-Term Accumulation
If you want to turn $1 million into $10 million in a decade, or even $100 million in two decades, you'll need to achieve an annual return of about 26%. While not impossible, this is a challenging goal that requires a disciplined strategy and careful risk management.
6. Average Down, But Don't Fool Yourself
If you invest $10,000 in a cryptocurrency asset at $10 per unit, and the price drops to $5, buying an additional $10,000 will reduce your average cost to about $6.67, not $7.50 as you might think. This strategy can help, but it's important to be realistic about your cost basis.
7. Profits and Retain Without Risk—But Stay Cautious
If your $1 million investment yields a 10% return, selling enough to recoup your initial capital allows you to keep the remaining position 'risk-free.' In practice, leaving $100,000 worth of tokens in the market may give you peace of mind, but if that asset drops 50%, you still face significant losses.
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9. Market Crashes Reveal Strong Assets
Major downturns serve as a test for the quality of projects. If the cryptocurrency you choose hardly changes during a market-wide sell-off, this may indicate that large investors or market makers are actively supporting it. Such coins are often worth holding during difficult times to reap rewards later.
Each of these rules offers valuable lessons for cryptocurrency traders, especially those aiming for long-term success. Carefully adjust these principles to your trading style, and always stay vigilant. Cryptocurrency is volatile, and discipline is your greatest asset.
10. Wishing everyone a happy new day, may your trades be all green.
