Every Game Has Rules
Do you want to know why so many Crypto investors experience enormous gains only to lose them? It’s primarily due to a lack of structure. Imagine watching a football game being played without any rules. It would be an unstructured, chaotic mess. That’s exactly how many portfolios are managed, void of structure or discipline. Assets are bought and sold on a whim, often without research or market analysis. In many cases, assets are bought and never sold.
Portfolios skyrocket and plummet all because they are not being effectively managed. There are many ways to analyze and strategize regarding an altcoin position. However, having a fundamental practice or discipline provides safety and stability. With experience comes understanding and a knowledge of what works best most of the time. The law of averages plays a crucial role in discerning and identifying a strategy with a high level of efficiency.
It may take time. However, every investor or trader must establish their own rulebook, a set of disciplines to apply in specific cases or market conditions. These rules and techniques are then applied systematically and without emotion. Being emotional is never advisable regarding financial markets. Altcoins can pump and dump instantaneously, leaving investors wondering what just happened.
A Foundational Practice
A rather simple yet effective practice has benefited me on multiple occasions. This is the 50/50 rule and I use it often. I sell 50% of an airdrop fairly soon after receiving it. In this way, I have secured a form of income while remaining exposed for long-term gains. In certain instances, I will adjust this to 70/30 depending on various factors. However, I prefer to stick with the 50/50 approach.
Another scenario where I have found this strategy to work favorably is altcoin investments, which have performed exceptionally well. This also applies to memecoins and is even more applicable due to the volatility. Choosing to capture 50% of a position after a significant rally is usually always a good move. If the market continues higher, a 50% allocation is “at work” within the market.
A significant portion of the value has been captured in the event the market corrects or even crashes. As mentioned, this is what I did in 2021. I sold half at $65K and then proceeded to offload the remainder once it was clear that the market had reversed. This is a foundational practice that helps to promote effective risk management. Applying the same practice but only selling 10% will not aid much regarding risk management.
Selling half of a position or portfolio ensures that a large share of the gains have been captured. At the same time, a higher continuation can still be profitable due to the remaining 50% being exposed to the market. This is the simplest and most effective strategy I have utilized. It is also an approach that can be used in multiple scenarios and provides a great way of protecting your capital.
Final Thoughts
Capital preservation is equally as important as capital appreciation, perhaps even more important. How can you enjoy appreciation if you no longer have capital? This is what can occur if capital preservation strategies are not in place and being utilized. Cutting it down the center keeps the odds favorable on both sides of the coin. It’s a very effective strategy. All the best! See you next time!
Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.
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