The recent market decline caused by the unconventional succession of bad news has drastically erased the portfolio value of many investors. In response, Lark Davis, a popular crypto trader and YouTuber, shared important tips on what to do to avoid losing money on crypto investment.
Making a Plan
The fear of losing causes most new investors to panic and makes it difficult to act right. Davis first advises investors to make a plan before entering the market.
“Having a plan means you know what you are doing.”
As part of the plan, investors should have a goal for the sale. They should also examine the asset, have reasons to buy it, understand what it is about, know its use cases, partnerships, and read the roadmap. These factors can affect the plan formulation and provide a good reason to exit the market at the right time. According to Davis, investors with good plans should exit their positions when the conditions surrounding the project change.
Analyzing the Crypto Time Spectrum
It is important to understand that some cryptos have long-term potential while others have short-term potential. Many of the leading cryptos, backed by key technologies like Ethereum, have long-term prospects. Altcoins, like some popular joke cryptocurrencies, often have short-term potential. Davis suggests that investors should consider the price-cost averaging strategy for long-term assets to avoid losing money. When assets with long-term potential spread to diversify portfolios, investors can set aside money for rare bottoms. The analyst suggests that assets backed by substantial fundamentals should be purchased, showing a decrease in value of about 30% to 40%.
Crypto is one of the most risky asset classes in the world. But Davis believes the risk can be minimized. Investors think that the lower the asset in the market value ranking, the higher the risk.
“Think like an investor, not a gambler… Always buy on the spot to be safe. Leveraged transactions are for experienced traders. ”
Protect Your Capital
“Making a profit is vital when investing in crypto, but protecting your capital is just as important.”
According to the analyst, investors should develop the habit of removing their capital from position after making a significant profit. They can also save their capital by going back to their plans. Often, when the foundations of the asset change or the team fails to implement a technological feature as promised earlier, it is important to sell it to prevent a collapse. However, when there is a major correction, investors should never exit their positions.
“The plan is to buy at a low price and sell at a high price.”
There are many opportunities in the market for investors to have multiple sources of income. To avoid losing money, it is important to make profits and put them on a centralized platform or even decentralized finance to earn about 15% or 16% of dollar-based stablecoins. In other options, profits can be borrowed or staked if the assets are staking coins such as Polkadot, Cardano or Elrond.
“Only a few people take advantage of the incredible opportunities in the crypto market to earn huge returns.”