How to Learn from Major Losses in Crypto Assets Trading

In the Crypto Assets market, most people prefer to talk about their successes, but few are willing to openly share their failures. However, the lessons learned from failures are often the most valuable. This article will share five major mistakes made by an investor in their Crypto Assets trading career, as well as the experiences learned from these mistakes.

1. Ignoring Market Risk Signals

"Position Bias" is a common psychological issue in investing. When holding a large position and seeing the price continuously rise, it is easy to develop a subjective belief that the fundamentals of the asset are improving. This psychological fallacy may lead investors to overlook potential warning signals.

Taking the collapse of Luna as an example, despite realizing the existence of "decoupling" risks, actions to reduce positions were not taken in a timely manner due to the influence of "holding bias." When the price of UST dropped to 96 cents, the market had already shown obvious signs of crisis, but these warning signals were ignored. In the end, the values of both Luna and UST returned to zero.

This huge loss has become an important turning point in my investment career. Experiencing the heavy blows of the market is a necessary path to becoming an excellent investor.

2. Lack of a clear stop-loss strategy

The lack of a clear stop-loss strategy is a common issue faced by many investors, especially in the case of significant volatility in the altcoin market.

Taking Beam as an example, although the price trend has already issued warning signals, the lack of an effective stop-loss strategy has led to a significant reduction in investment value. For coins held long-term, the stop-loss ratio can be adjusted based on fundamentals and investment duration. For instance, strict stop-losses can be set for short-term trades, while allowing a 50% drawdown for long-term holdings.

You can combine various technical indicators (such as moving averages, relative strength index, etc.) to improve the accuracy of stop-loss strategies. In addition, setting price alerts on TradingView is also a useful tip that allows you to take timely action when the price reaches key levels.

It is important to note that stop-loss strategies are not only technical but can also be fundamental. When the market shifts from risk appetite to risk aversion, changes in the fundamentals can also serve as the basis for stop-loss.

3. Failure to Timely Take Profits

Failing to take profits in a timely manner may be one of the most serious mistakes made over the years. When market sentiment is high, it is easy to be misled by the rapid rise in front of you, mistakenly believing that there is more upside potential in the price.

Taking Lucky Coin as an example, the value held during the peak period was approximately $1.7 million, but due to the failure to take profits in time, all these gains eventually evaporated. Although there were some objective reasons (such as the moral standards of content creators and insufficient liquidity), the fundamental reason was still not following one's own investment rules.

When the coin price rises, if profits are not taken in time, once the market turns, the liquidity of many coins can become very limited. When prices fall, the market reacts very quickly; if profits are not locked in during the rise, it may lead to regrets.

4. Position Management Errors

The importance of position management is often underestimated. An overly large position can lead to emotional trading, making it difficult to make rational decisions. Conversely, having strong confidence in a particular coin but not matching it with sufficient capital can also result in missed greater profits.

It is recommended that investments in a single coin should not exceed 5% of the total investment portfolio. If you are very confident in a particular trade, you can increase the position to 10%, but this should be limited to one or two operations within a single cycle.

As the coin price rises, it is necessary to accept changes in position ratios, while controlling risk through phased profit-taking. Although this strategy may reduce potential gains, it can effectively protect investments during market downturns.

5. Holding too many altcoins

Holding too many coins can make portfolio management difficult. It is recommended to focus the portfolio on 5 to 10 high-confidence coins, rather than spreading it across 20 to 30 coins.

By reducing the number of positions, one can focus more on researching and managing each coin, thereby improving the overall efficiency and returns of the investment. With the launch of more and more new tokens, this issue has become more prominent. The increase in the number of altcoins has diluted market liquidity and increased overall investment risk.

Summary

The above five core mistakes are the ones that investors are most likely to make during this period:

1. Position Bias
2. No invalidation conditions set
3. Not profiting in a timely manner
4. Position Management Error
5. Holding too many coins

To maintain consistency in investing, it is essential to first recognize the problems at hand. It is recommended that investors write down their mistakes and the reasons for them, develop a plan for improvement, and strictly implement it. Place this list in a prominent position to remind yourself to stick to your principles when market sentiment fluctuates.

By reflecting on past mistakes, developing solutions, and continually learning and improving, investors can make more informed decisions in future markets, increasing their chances of investment success.