Intro

What should I invest in? Is now the right time to jump in? I see these questions asked inside Facebook trading groups, Discord channels, and crypto subreddits all day, everyday.

The answers I see most are based on the potential ROI (Return on Investment) or some grandiose vision painted by the token’s website. Investing in something with a high ROI or a project that sounds like a literal moonshot isn’t inherently wrong. The problem is that most people don’t use any other piece of information.

In my experience, the more data points you can obtain on a prospective investment, the better the outcome will be. The following will expand on this thesis and help you frame your decision in a much more structured way.

What Are Your Goals?

This question seems simple, right? The goal is to make a lot of money trading crypto! While this is true, it’s not clear enough to help steer your decision making moving forward.

I want to begin my explanation by looking at this from a non-crypto perspective. Let’s pretend your goal is to eat dinner. How many data points do you use when deciding on dinner? What time will you eat? Are you going to cook or are you going to have it delivered? Are there any dietary restrictions? How much will it cost? What type of cuisine? How many people are eating?

As you can see, the questions pile up quickly and this is just one meal! Are you asking this many questions when investing your hard-earned money? If you’re chasing ROI, that’s one data point. In the example above choosing one data point looks like this:

What time will you eat? Let’s say 7pm. Now what? That answer represents about 10% of what you need to know. By asking better questions, you can get better answers.

Asking better questions can be challenging at first but over time you will become better at it, much like anything else in life. Regarding investments, my first question is always “what is the goal?” or put another way, “is this something long term or short term”?

How does one decide what their goal is? Well, that’s not for me to decide – each person has their own goals, dreams, hopes, and ambitions. What I can offer is a very effective way to outline what your goal is and the exact amounts you need to realize them.

Check out this article from Tim Ferriss. By actually sitting down and visualizing what you want, you’re that much closer to realizing that vision. Unfortunately, this practice is very rare – especially among young investors.

Robert Herjavec from Shark Tank says it best:

“A goal without a timeline is just a dream”.

Short Term

A short term goal can mean something different to everyone. For our purposes let’s call short term less than one year. The majority of those in the crypto market fall into this category and will want to either day trade or swing trade.

Very few have the patience to hodl something more than a few days, but in my experience having that patience is the key and an advantage against the rest of the market participants. We’ll discuss advantages later in this article.

Day Trading

For those of you that have a high risk tolerance, enjoy getting rekt, and want a quick flip, this is for you. I personally started trading traditional securities (stock market) in this way. Some days I did well, but most days I lost. I’m not here to deter you from following this path, but I want to make sure you understand how risky it is if you don’t know what you’re doing.

Still interested? Here are a few resources to get you started:

Swing Trading

This is my personal favorite. It gives me the ability to buy something one day and then sell it a few days, weeks, or months later. Unlike Day Trading, Swing Trading helps bypass much of the daily volatility. It is sort of a “set it and forget it” method.

Essentially we’re talking about making 100% profit per month (Swing Trading in a bull market) compared to a stressful 30% profit per month (Day Trading in a bull market). I realize it’s foolish to give blanket statements like this but I do it to illustrate a point.

If you want to make one trade per week for a 20% gain you can choose Swing Trading. If you would rather make one or more trades per day for 1-5% you can choose Day Trading. Keep in mind, approximately 90% of Day Traders lose money.

We wrote about a Swing Trading technique based on catalysts titled The Two Week Portfolio – How to Invest Like a Crypto Millionaire. Since we have that article already written, I won’t repeat the details of the process here but I will list some helpful resources to get you started below:

Long Term

While rare in crypto outside of hedge funds, this is for those that are patient, focused on market caps, and macro trends.

There are many different ways to decide on what to invest in long term. Namely, you could invest in all the projects that are related to privacy coins (Monero, Verge, etc), you could invest in the top 10 by market cap, or you could invest in the top coin by market cap in each sector.

It goes without saying that you’ll need a plan or goal to decide on what to invest in, just like the other strategies we’ve outlined. See a pattern? If you want to invest in the crypto space for broad exposure, you would invest in the top project by market cap for each sector or maybe even a couple in each sector. Or, if you’re looking for a long term but high growth portfolio, you could take a stab at hand picking various projects throughout the crypto space or you could pick one sector like privacy coins.

Below are a few resources to help you get started:

Do the Market Conditions Match Your Goal?

There is a saying that I picked up back in my penny stock day trading life and it sums up what this section is all about: “the trend is your friend”. All the planning and preparation in the world means NOTHING if the market isn’t being friendly.

Think about this: you wake up and check coinmarketcap.com to see how everything looks. As you scroll down the page you notice that everything is red, EVERYTHING.

Now, unless you’re investing long term (about a year or longer), do you think day trading is going to be effective? Even if it’s for 1%, chances are you’ll lose that day.

Swing Trading is a bit different here because it is more than a one day hold. But, if the market has been red for multiple weeks back to back, it would be wise to look at the charts and decide whether or not the trend is bullish or bearish.

So, what do you do when the market is red for an extended period of time? You could hodl long term, you could learn a new skill, build a company, research investments that will be good trades once the market is bullish again, and/or get yourself a passive income machine like a masternode.

What is Your Advantage?

The market is competitive – this isn’t a surprise. Do you have an advantage? What gives you the edge over the competition? There are a few advantages a trader can have and some of them are knowledge, speed, and/or patience.

Knowledge

We have access to much of the same information, but not everyone uses it, nor do they know where to look for it. Even if you have the right information and no one else does, do you know how to use it?

The market may be bullish, and you have goals in place, but do you have the right knowledge to take advantage of the conditions? What I mean by knowledge is do you know where to put your money, when to buy, and when to sell?

Speed

This advantage relates to day traders specifically. Since day traders rely on quick moves (how fast they can pull the trigger), the speed of your internet connection actually matters. Do you have lightning fast internet? If not, it would be wise to avoid buying and selling minute by minute. Rather, use more of the 24hr period to your advantage and time the move as best as possible.

Patience

The majority of those in the market are not patient. They want to moon today! When lambo? Since this is a reality, anyone that has patience can deploy this as a huge advantage. The use of patience is very effective when we consider the swing trading strategy.

Many traders try to jump into a coin that’s mooning, riding the wave to the top. The problem with that strategy is it could plummet at any moment. There is very little support when something spikes 50% within a few hours. Alternatively, imagine you know about that coin before everyone else and you jump in a week or two before the event. You ride the “slow” wave up until the day of the event and get out before it spikes. Sounds boring, right? It’s not quite as adrenaline pumping as the day trade but it does typically provide bigger returns than the spike. Seriously.

Summary

We have covered a lot of material here on goals, strategies, and advantages. And there is a lot more that could be said for each of them beyond what’s written above. The focus of this piece is not to provide every answer and give you an exact playbook. There is no way I could help everyone from this content alone because everyone has their own unique goals and circumstances.

What I do want to accomplish with this article is helping those that may not be familiar with investing or those that want an alternative perspective on investing as it relates to crypto. I have been investing in one form or another for over 10 years and have made a ton of mistakes because I didn’t have a proper education on how to do it.

Hopefully this brief framework can help you gain a more focused approach. As you consider these various strategies, think about what your goals are and how these strategies may help you achieve them. As always thank you for your reading and I appreciate any comments/suggestions you may have.