Mathieu Hardy, the Chief Development Officer at OSOM, says that it pays off, in the long run, to avoid losses during short-term price swings. Crazy price swings can happen to anyone who buys or sells cryptocurrencies. Check which is the best place to sell bitcoin.
Setbacks in money are an inevitable part of investing, even though no one wants them. If you’ve decided to invest in cryptocurrency, this is especially important to remember. Still, there are ways to get through even the worst crypto winters and make it to summer.
Some people might say that cryptocurrencies are one of the riskiest and most profitable investments. Based on how volatile these assets are, we can say that they have the potential to make very large profits. But this assumption is probably wrong if you don’t know what you’re doing.
When cryptocurrency markets drop quickly and for a long time, it shouldn’t be a surprise that many investors lose money. This is especially true for people who buy at the top and sell at the bottom, as well as for people who invest money they would need but are forced to sell at the worst times. Price discovery and “black swan” events are almost impossible to avoid, and they almost always lead to temporary losses. But if the right steps are taken to manage risks, they may become much less of a problem or even go away entirely.
Modern Portfolio Theory (MPT) says you shouldn’t put all of your money into one type of asset. In other words, investors shouldn’t put all their money into just one thing. They should instead spend their money on many different things. Diversity can lower risk, and it may be able to do so without lowering the return on investment.
A portfolio with two assets that each have a compounded annual growth rate of 200% and a downside deviation of 20% would be less risky than a portfolio with just one of these two assets. Even though the numbers make them look the same, they are very different in other ways.
Since your main goal is to stay alive, the first thing you should do is protect yourself from anything that could kill you. This is called “semivariance” in the most recent versions of Modern Portfolio Theory. It is a way to measure data that can be used to figure out what bad effects a portfolio might have.
Instead of trying to make as much money as possible, you should try to make as little as possible.
How soon do you think you could get your portfolio back to its previous all-time high if everything went wrong but you were still alive? You can handle it by using the asset’s Ulcer Index.
The Ulcer index has the best name in banking because everyone knows what it means: any time below “all-time high” is bad for your stomach. No one likes having ulcers, and everyone wants to be the way they were before they got ulcers.
You can see how likely different assets were to get you out of a rut in the past by looking at their Ulcer Index and how they compare to other assets.
The basic structure of a portfolio is made possible by math. It needs to be diversified, controlled so that you don’t lose everything, and able to bounce back from bad times.
On the other hand, trading bots, artificial intelligence, and other types of automated systems are not likely to make hasty decisions. When the basics no longer make sense, they can close their positions automatically to cut their losses.
This lets them look at a wide range of issues without getting stressed out. Computers don’t care about people’s investments, communities, or pictures on their profiles of cool things they’ve done. As long as you don’t do anything to hurt them, they give you a better chance of being successful.
Learn to deal with how you feel. During the Crypto Winter, rules that have already been agreed upon may be followed by automated systems. This would take almost all of the “human element” away. But investors must always learn to control their emotions before jumping into the market. All that needs to be done is for people to stop buying the tops and selling the bottoms.
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