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How to keep more of your crypto trading gains

If you’ve been long BTC and ETH through all the volatility, congratulations! With BTC over $50,000 USD and ETH tapping $2000, your trading thesis has been validated.

A big score as a trader feels amazing. It’s intoxicating.

You are likely feeling excited and fearless.

You’re probably feeling a lot more confident in your abilities.

And if you’ve been talking about crypto with your friends for a while now, they may see you differently.

People will likely start asking you for your opinion on all matters relating to BTC, DeFi, and all things crypto. Eventually, they will ask you for advice about all kinds of trading and assets because of your success.

This attention may cause you to view your crypto trading skills differently, almost god-like.

After a while, you might notice yourself daydreaming about the symbols of your newfound wealth.

And this can be when the trouble starts.

A cellphone held in a woman’s left hand with a price chart. A quote board is in the background.

The evolution of a crypto bull market

Great bull markets in any asset class are filled with opportunity.

Liquidity is high.

Large positions can be added and distributed with ease.

Michael Saylor at MicroStrategy and Elon over at Tesla were able to add size and ride the bull wave. This is a contrast to the experience of Mike Novagrotz leading up to the bull run. He got slapped around like a rag doll on the way there.

As the leaders in any asset gather strength, traders will start looking around for other opportunities. The liquidity and gains will spill into other lower-quality assets.

In crypto, some gains are moving from Bitcoin and Ether into DeFi, crypto’s innovation sandbox.

Projects that are new, high-risk and untested are generating big moves. Various altcoins that were previously ignored are now hot. People normally complaining about how they hate their job are bragging about doubles in the fringe coins they are buying.

This is normal in any bull market.

All this optimism has a way of changing attitudes. Taking on positions used to have some worry or fear involved. That used to keep traders honest.

Strong markets move from “a wall of worry” in old Wall Street terms to fearless.

And when you start to feel fearless, and maybe a bit cavalier as you buy and sell, that’s when you should start to pay attention.

Is your crypto trading success making you fearless? 

Strong markets and big gains change the way you see the world around you.

Your big gains become “the house’s money,” allowing you to stretch your hodling period. And that big win can change your perception of risk.

You might be tempted to try a flier on some altcoins you haven’t put through your process yet.

What the hell, right? It’s only money. And you now have lots of it.

Or maybe you’ll grab some stonks you heard about on a forum somewhere.

But under the surface, something is happening.

Your risk management process has become too much work.

Whatever trading rules you were using to get you to this moment are starting to seem passe.

Homework on your trading positions becomes unnecessary. Everything is going up after all and you’ve cracked the trading code so to speak.

You’re no longer scared about losing.

And yet, it’s that fear that helped you develop your trading idea and build your winning position in the first place.

Crypto trading demands discipline

For traders, bull runs eventually lead to a focus on gains at the expense of everything else.

In big bull markets, like BTC and ETH right now, the trading plan starts to feel like a burden.

Position size can become a competition for bragging rights.

Substantial gains have a way of inflating into peak hubris.

Without discipline, the ability to see problems develop becomes impossible. Your overconfidence will slow down your ability to recognize the change.

Large position sizes in speculative altcoins will reduce your ability to manage downside risk. These positions will be difficult to get rid of as volatility increases, and liquidity starts to fade.

Remember, use liquidity when it’s available instead of praying for it when it’s not there.

Those altcoin punts are ripping higher now based on the moves in BTC and ETH. But these high-risk, untested assets will be the first to weaken as conditions change.

The liquidity will evaporate as fearless buyers turn to panic.

And if you’ve been lazy with your risk management, trading plan and trading rules, the losses will start to add up quickly.

As a wise old portfolio manager once told me, money is easy to make, but hard to keep.

Keep more of your BTC gains

When you’re bullish and fearless, the longer it takes to adjust to the new conditions. And that adjustment problem translates into unnecessary losses.

Keeping as much of your bull market gains as possible going into a down market is a big advantage.

Those extra assets will protect you mentally and emotionally in challenging conditions.

Bull market gains let you take advantage of unique buying opportunities.

So take steps to maintain your discipline. Actively looking for why you’re wrong is a good way to keep yourself flexible. You will do a lot better than those who ignore everything due to hubris.

Most market players are overconfident, undisciplined and fearless near the top. And they tend to be overcautious, lacking in confidence and gun shy at the bottom.

Let lazy crypto trades be your guide

As you build your trading skills, understand that bull markets will make you lots of money if you play them right. Whether this performance is repeatable will depend on several factors.

The way to stay in the crypto game is to start planning for trouble as you become successful.

The time to start building a reserve is when you are flush.

The time to consider crypto market weakness is when these weaknesses are dismissed and move out of focus.

The time to prepare for trouble is when your confidence is highest, and you are lazy about your trades.

The time to start making these decisions is not when you have everything on the line, and the market won’t forgive your mistakes. 

As trading psychologist Brett Steenbarger astutely observed: “…I have seen more successful traders derailed by personal financial mismanagement than for any other reason.”  

No matter how much your account is up, remember the process that got you here. That process will keep you out of trouble if and when the market turns.

Your process is your advantage.

And ruthlessly executing your process, trade after trade, is the secret to keeping more of your crypto gains.

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