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It’s not luck
Everything around us is melting or that’s what it feels like on Twitter. CZ made some gangster moves and the people in the crypto space are the bystanders who got shot. I have been pretty much unbothered by the price volatility and have been enjoying my late-night chamomile tea with some soothing music. I want to share why not because I want to appear better than anyone but so that people who are stressed right now can avoid feeling like this again in the future.
I only entered the crypto space in October 2020 so didn’t go through the usual cycles as many seasoned participants in the space had. My first experience with extreme volatility in the space was on May 18th, 2021. Everything dropped by at least 50% that day. I was celebrating that day because I got lucky a few days earlier. I went to a family function on May 15th and dropped in on my distant relatives talking about their recent Cardano and ETH buys. They had no business discussing crypto much less buying it. I had a gut feeling that if they also bought, then who’s left to buy?
With that thesis in mind, I sold almost all my crypto holdings the next day. It was pure luck that saved me from a huge crash just 2 days later. After a few days, I realised that I could not leave this to luck next time. I needed to create rules for myself that will allow me to remain calm if such an event ever occurred again.
Hoping that something like this never happens again is not a sound strategy. The rules that I created for myself have helped me stay calm during the last year. The first rule I had was to never hold anything without a stop-loss that I wasn’t willing to hold for the next 3 years. It is pretty straightforward and the most important trading/investing rule I have.
Whenever I am entering a position, I ask myself if I can see myself holding this for the next 3 years or not. If the answer is yes, then I don’t bother checking the daily price of the asset. There is no need for me to concern myself with the daily prices if I don’t intend to sell it anytime soon.
If the answer is no or maybe, then I define a stop-loss at the time of entering that position. In my head, that asset has already hit its stop-loss and I’ve lost that much money. I only risk what I can easily bear if the stop-loss is hit. Now, I’m not anxiously checking the price to see how much I have lost. I know what I will lose and am prepared for it before entering the trade. Then it’s just a matter of sticking to my plan and hitting sell every time that stop loss is hit.
This rule alone has saved me so many times from massive falls in most NFT projects and allowed me to preserve my capital from 50–90% drops in prices. So, why am I perfectly calm today? I don’t hold anything that I am not willing to hold for at least 3 years. Everything else I just trade and exit when I see an opportunity to book profits or when my stop loss hits. There are other rules I made for myself but feel like this is the most important one.
I will stop writing here because it’s 2:20 am in Delhi and a massive earthquake just hit here! The ground underneath is literally shaking from CZ’s moves. I can’t have rules for this sort of event.
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