How's it going Bitcoinees? Break out the pens and paper because today is day 4 of our 5 day journey through the basics of Bitcoin trading. We will be talking about how to diversify yourself and personal risk when trading. Just in case you haven's seen the previous post here are the links, Monday, Tuesday, Wednesday,. I highly suggest you start at the beginning because we will be building on top of what we learned and you will be lost without them.
As I've said before, my name is Andrew Cook and I am the founder and CEO of Cook Investment Firm. We are professional Bitcoin traders that have an average volume of 4,500 BTC a month. Even though it might seem easy, trading is serious business. Just because we're good at and we're giving you advice doesn't mean you should do what we say. You're adults (I think), use reasoning and know that this is a complex subject. Having said that, all the information here is just advice and should not be taken in any other way. We are not asking you to invest with us, nor suggesting you should, we just want to help out the community. Above everything else, do your homework! Read, learn, watch and grow before making any trades.
Today we will be covering two very important things when trading, how to have diversity in your trades and the risks that come with trading. These are serious topics and they can save your life, literally.
Trading diversity
The simplest way to explain trading diversity is in a saying, “Don't put all of your eggs in one basket”. Do not spend your entire bitcoin fund on one trade. Maybe it will be a great trade, but even if it's a sure thing don't do it. One mistake and all of your bitcoins are gone, and no one wants that. I suggest staggered trading. When the price starts to come up or go down, start buying or selling in increments. For example, at the first sign of an up trend starting go in with only 5% or 10% of your total capital. After the trend looks like it will be staying for a while go in with another 5% or 10%, so on and so forth until you are comfortable with the amount that is in. Word to the wise though, never go in 100%.
Another way to go about this is different profiles all together. One long term, one medium term and one short term (ie. One you trade daily, one you trade once a month, and one you trade once or twice a year). This the best way to minimize you losses while still maintaining the ability to make money. For example at Cook Investment Firm we break it down in to five profiles and then break those down into 3 profiles. This allows us to maintain a certain amount of control across all profiles. I highly suggest trading this way, or at least break it down into two profiles. It will keep you sane and lower your overall stress when trading. Which brings us into to the next part.
Risk
With great opportunity comes great risk and Bitcoin is no different. Trading is serious business. It is not for everyone is should never be taken lightly. When you break trading down the only word you wind up with is gambling. Traders are basically gamblers. There is a fine line that separates us. Gamblers don't have the same formulas and tools that traders have (at least kind of work). And when we buy $50,000 USD of Apple or Microsoft, no one bats an eye. But if you were to go to a casino and put even $10,000 USD on red at a roulette wheel, I am sure your family would have a heart attack. I know many people think there is a big difference. But is there really?
Trading, just like gambling can become a serious addiction with life changing consequences. That first time you increase your holding by 10% is like no other. You just want more and more until you can never get enough. Most addicted traders feel such a drive to get that extra .1% that they will risk vast fortunes just to get it. I have to tell you, it's not worth it.
Checking the Bitcoin price every minute will change everything except the price. Your friends will slowly disappear, your hair will start to fall out (or a least faster), the amount of money you spend on coffee alone will skyrocket and what will you gain from it. Probably nothing. The best trades are not made minute to minute, they are made week to week, month to month or even year to year. Recently someone told me about there experience, here's what they wrote:
I started trading back during the last November run up. I quickly became over invested in it and it began to consume my daily living. When I would be out and about I would have to constantly check Bitcoinwisdom every 5 or 10 minutes on my phone. At home I would have the charts open 24/7 and if I would wake up in the night I would have to go and check the charts before returning to bed. My behavior began to irritate my girlfriend and also negatively impact my mood. It really wasn't healthy and I knew it wasn't. It didn't feel good and I wouldn't recommend it to anyone.
Being overly consumed by anything is just bad for your mental health. I learned rather quickly that I didn't want to be consumed by my desire to maximize my profits to the furthest extent, it just simply wasn't worth it. I settled on just getting my stash an holding, because there is so much more peace of mind that way. I don't really bother with altcoin trading anymore and I just watch for big price movements while staying up to date with the news in the Bitcoin ecosystem.
If the price of Bitcoin and trading begin to overly consume your thoughts, take a step back and examine if it is really worth it to you. I did and I found that the prospect of monetary gain just wasn't worth the toll to my mental state.
They make a great statement, really evaluate what trading means in your life. Is a chart really more important that friends and family. Not in my opinion. Every person is different, and we all trade differently, just know that when you are trading there is more out there. The opportunity to be rich and being happy are not one in the same. Keep that in mind when you trade and constantly ask yourself, “is this worth it?” It may save your life.
That's it for today. I hope you learned a little about keeping everything in check. Remember this is part 4 of a 5 part series that I will be releasing throughout the week around 15:00 EST. The next part will be released tomorrow (Friday the 6th), and we will be review everything we talked about as well as where and how to continue your learning.
If you have any questions or concerns you can contact me here, on Reddit, or the IRC: Acook3, but the best way is through email: andrew.cook@cookinvestmentfirm.com
Also if you'd like to learn a little more about my company and what we do, you can visit our website:https://cookinvestmentfirm.com
Until tomorrow, happy investing!
Andrew Cook | Founder and CEO | Cook Investment Firm
