I am blessed with the natural demeanor of the HODLer. You might not be so lucky.
Do you spend your days starting at the CoinMarketCap charts, trying to spot the trends? You might know all the different names for different price trends/patterns and constantly question your previous trades.
One of these tokens is going to moon… maybe?!
Did you maintain that short position too long? Did you grab the wrong bag of altcoins? Is the crypto train leaving the station without you, heading straight to the moon?
A Harsh Truth: You Aren’t Earning More Money by Trading
There is a lot of literature about financial trading in the stock and bond markets from the last century. My favorite take on it comes from William J. Bernstein’s The Four Pillars of Investing.
William explains it in no uncertain terms: “Odds are good that the person on the other side has an I.Q. of 160 and has better access to information and systems than you do. It’s like playing tennis with someone you can’t see, and that person is Venus Williams.” (source)
A good question to ask is this: “What value am I adding to the system?”
If you succeed at day trading, do you add value to others? Let’s say that you put $1,000 into Steem at a price of $0.80, on a lark. Your friend said it was a good idea, so you just do it. Two weeks later, you sell it all for $3.20 and make a few thousand bucks.
That’s awesome. What comes next though?
?????? source: pixabay
Do you spend a year studying financial charts to learn how to buy lower and sell higher? If so, what is the point? Are you trying to add value to others through these studies? No - clearly not, your only goal is to learn to trade better than others and win for yourself.
If your only goal is to trade better than others, you are playing poker. There’s nothing wrong with poker - but you wouldn’t try to become a full time poker player off of a thousand dollars and a few months of practice, even if you had one really lucky week at the casino.
Asking: “What value am I adding to the system?” can change everything.
The same person in this story, after earning her first few thousand dollars, could decide that she wants to learn a lot more about “steem.” She starts reading - the bitcoin white paper, some Nick Szabo essays, a few Matt Sokol Token Investigations, the Dan Larimer essays…
For example - this essay was a game changer for me in 2017.
Now, this person may not do a single trade. They might not even hold any cryptocurrency. But after a few months of learning, they’ll be valuable. They have some domain knowledge now and can participate on Steem in a valuable way thanks to that education.
Perhaps they go on to work with a community group here - MSP, Curie, Open Mic, being a Witness, growing the Poker League, sponsoring the Sandwich Competition, helping facilitate more cool shit at Steemfest…
It doesn’t matter what they do. It only matters that they want to create real value for others and are working with that goal in mind.
Seeking short term value - i.e. trying to become a master at trading tokens back and forth - is mostly about enriching yourself. Look, if you are truly talented there, I don’t fault you for doing it. It is strictly rational to earn a shitload of money trading if you really can.
But you probably aren’t the Tiger Woods of trading - you’re probably just a shmuck holding a golf club the wrong way. I know I am.
In conclusion,
What You Think You Look Like While Day Trading Dank Tokens
vs.
What You Actually Look Like While Day Trading Shitcoins
The HODL and Learn Strategy
You can always HODL. Put away that thousand bucks into a few tokens that you believe in.
Don’t touch it for a year. Let it do what it does. Educate yourself. Build long term value.
I suspect that this simple “HODL and Learn” strategy will earn you more than you will earn from trading.
You may be happier working towards tangible goals focused on people and knowledge, rather than trying to obsess over the daily price fluctuations of the cryptocurrency market.
Furthermore, - and perhaps most importantly - you will get good at resisting bullshit and hype. One day, a lot of shitcoins will bite the dust. The traders will be the first to fall.
You dig?
All opinions in this article are offered as guidance only. I am a 26 year old musician & self-educated cryptocurrency person… Bitcoin class of 2016. So take my opinion with a grain of salt. Do your own research and consult a professional before making any decisions that could impact your financial well-being.
To be honest I've been tossing stuff around on Bittrex for the past couple of weeks. The funny thing is that all of the coins seems to be mirroring what Bitcoin is doing, more or less. Sure, it's satisfying to see my account value go up every day, but people are pouring money into coins like crazy right now, so of course things are going up. It's pretty easy to make money in any bull market. It could get ugly if this turns into Dutch tulips after all.
Oh the other hand... meh, I'm learning how to trade and reading up a bit on the technologies behind the coins. And we're talking chump change here, at least until DOGE goes to $10.
"people are pouring money into coins like crazy right now, so of course things are going up."
This is basically it, right? Everybody is earning - you'd have to be really really bad, abysmally bad, to lose much money in cryptocurrency over the last few months. But nobody is tracking their actual earnings vs. the earnings they would have by HODLing from, say, early 2017 to late 2020.
If you tracked everybody who trades and HODLs between 2017 and 2020, it would be fascinating to see how many earned more by trading than they would have by HODLing that same investment.
IDK if we'll ever know for sure - and many people want to keep the waters muddied so they can make profits off the confusion - but as far as I know from The Four Pillars of Investing, in-depth studies have shown that the vast majority (99%+) of professional financial traders lost money over their decades-long careers as opposed to if they'd done a HODL of the global markets during that same period.
So is Learning to Trade even a real thing? Or is it an illusion?
I would argue that getting better at trading is futile. It's kind of like learning poker, except you have to play against the Micheal Jordan of poker every single session.
And furthermore - right now it's like you are playing against the Michael Jordan of poker, but there are 10,000 10 year olds also at the table. So you might make a ton of money because 99.99% of the players are throwing money into the pot like idiots. But what happens when the game tightens up and now you're at a 6 hand table with only the top professionals, literal Harvard PHD teams of traders and etc, to your right?
Basically - amateurs will only make money by trading in markets that favor HODLers anyway. That's my main idea I think.
/megacomment
At this point it feels a little like a pyramid scheme. And it's working because there's still enough people out there that hadn't heard of crypto that we can sustain geometrical growth for a bit longer.
But when new money stops coming in from the outside, things are going to go pear-shaped in a hurry. All the coins that don't add real value are going to disappear. Even the good ones will have to stabilize.
But where's the stable level? I guess that's the question that only Michael Jordan knows the answer to.
Sometimes I kick myself because I didn't listen to the Wife and buy a bunch of Bitcoin at $300.
And then I just kick myself back and say, "Yeah, but I would have just sold it at $500 and bought a few pizzas with the profits."
And then I just kick myself back and say, "Yeah, but I would have just sold it at $500 and bought a few pizzas with the profits."
amen lol
That's a nice sentiment, but I think you might actually be wrong on this one. Hodling is good for stability, but if you hodling is still guessing the long-term tend. If you are certain that a certain coin if going up long-term, than you can certainly make some money along the way and it's going to be more than if you just buy and hodl.
Of course, while this is theoretically and technically the case, I really like the question you suggest we should be asking ourselves despite the fact that it applies only to steem. Steem allows us earn not by trading, but by being a valuable member of a community. But this does not apply to many of the other coins where all you can really do is trade or invest long term and hodl.
Hmmm but what if you sell right before a big jump?
Let's say I love LTC. I sell off a bunch of LTC at the then-high price $100 to buy up some altcoins based on some market analysis . Then I wake up the next day and LTC is at the insane new All Time High of $250. That would suck!
Risking things like that has always stopped me from pursuing a "buy at the peak and sell at the low every few days" kind of strategy, as easy as it looks. One big loss can completely undo all of the small wins. I could be wrong though - just my $0.02
Oh, I'm definitely not a trader, I'm just saying that if a coin is gradually going up and you are right in that prediction, daily trading could earn you more than simply hodling. Having said that, I'm actually hodling all my steem and I haven't yet sold any SBDs or Steem for bitcoin or anything else. I see a lot of value in this platform and I'm here for the platform and the opportunities it presents, not for the speculation.
Speculation is always risky and hodling could lead to losses if a coin crashing (which doesn't seem to happen that often right now, but is not something impossible and wouldn't be something unexpected if it happens to some).
Gotcha. We're on the same page here, 100% agree
I agree. The vast majority of Day traders lose money. It’s far easier and more profitable to simply identify decent investments and hold them for the long term. Crypto is so volatile that you need to be able to stomach 80% drops (it’s happened 5 Times in bitcoins history) but still hold if you believe in it.
I say this as someone who has sold hundreds of bitcoin since 2011, only to see prices reach around $20k!!
OUCH! You could be a $20-millionaire!
Holy s***! This is the most awesome post I have read for a long time! Really.... Can´t thank you enough for this perspective!
The interesting thing is, that I didn´t know FOMO at all before I joined the cryptoworld. Since them, I can feel it each and every day.... Even when I tell myself, that I won´t suffer from it and that I´m beyond this, when I´m honest, I´m fully into it.... I decided to put my stakes into a project I really believe in and at the moment I do so, the price moves sideways and I look at all other cryptos going up. Then what I did was classical in the past: Sell my coins and go into other coins that I expected to grow fast and as soon as I did that, it was going sideways again and the other coin I moved away from, was going up.... Rinse and repeat... Same story... I learned from this and will now stick to my hodl promise, but there is still big FOMO - even with Steem now, where today I told myself several times, how shitty I am, that I didn´t buy more some days ago - but for that I would have needed to sell my other coins and I really try to stay firm this time. ;)
Thanks again for your post - it really is one of the best on this topic I have ever read!
You are welcome @atmosblack! I think many people have fallen into the FOMO trap like you describe it... and most of them aren't making any more money than the HODLers. Especially on a day like today when Steem is through the roof.
I like the idea of "Die on Your Own Sword" - if you're gonna make mistakes, may as well make them by doing things you believe in. So for me, believing in Steem in a no-brainer, no matter what happens next :-)
While I mostly agree, your attitude has...well, I'm not saying "issues", because expecting people to actually contribute instead of selfishly earning money is a totally valid approach.
But people work differently. Not only many of them are greedy but are also impatient. What you've described takes time and effort and people often don't like that.
Also, on my behalf, I have always preferred not to put a single real-life cent into the cryptocurrency market. There was no money for me I could afford to lose, but in order to get noticeable amounts, I needed trading.
And honestly, this is the best I can recommend to anyone.
Hmm....
I think I agree with you lol. Many people are indeed greedy and impatient, so they avoid things that take time and effort.
But I don't think most people want to be that way. If we think of 100 random people from the world population, all of whom are greedy and impatient - maybe only 10% of them are bad people who just don't give a fuck. Then 90% of them are genuinely confused by life - they want to be good people, but between advertisements on TV, bad parenting, shit luck, whatever, they're stuck in bad patterns and habits leading them to be less happy.
Maybe a post like this could grab the attention of some small number of those people - even just one or two of them - and provide a valuable alternative perspective. If so, mission accomplished. And if not, at least anybody who reads this can get a little motivation/inspiration boost.
Who knows though lol - maybe it is a lost cause.
Either way you and I are actually the same regarding not buying into cryptocurrency markets - I've almost never bought crypto with fiat. I earned it all on Steem (and some from a blockchain called LBRY), but it took a TON of time to make that possible.
/megacomment
Since I quit actively trading both cryptos and stocks I have had zero FOMO.
When I was trading it was all FOMO all the time.
I had to sell all my stocks to cover funeral expenses for my mother and I don't know when or if I will buy more. But I will always purchase more crypto.
I am strictly a fundamentals guy now. I take positions on coins I believe in that solve real world problems. Then I HODL.
This will only get better now, because Steem will be my main currency. I have bought no Steem. If I only use earned Steem to buy other coins I can't possibly lose money.
My goals are definitely about contributing value to the ecosystem. This is how you get by in life, by adding value. The taker mentality is a dead end.
Take the advice of this fine post...
Thanks for the post.
Keep Steeming!!
Lol, is this copypasta or original?
The comments are mine. The gifs are all from giphy. lol
I never copy text without attribution. I attribute pics in post but not comments, though I can start if you would prefer. I like to add pics sometimes when I comment. Google search thinks everything is better with pics so it assigns a higher rank to the page.
When I find quality posts I like to add value to them if I can.
Good for you. Good for me. Good for Steem.
Hasta.
lol cool! It was a very well written comment, I couldn't tell if it was a meme or something that I didn't recognize.
Thanks for sharing your story Doug, I'm glad that you are participating in these good times with Steem. Hopefully we can maintain these new high prices as 2018 goes on. Cheers!
Thanks dude.
I hope so too.
Peace.
Adding value to system > taking value from system
Always
There is a lot of money coming into the market right now. Day trading is a risky strategy in this volatile a market, especially when most alt-coins are generally trending upward at the moment. If you have a knack for it, it might not be a bad idea to increase your # of shares, but I wouldn't day trade crypto to turn to fiat right now though.
As almost everything leaps up in price. Trading for more units is definitely a challenge. I have made very few trades since the new year.
Totally, sounds like you and I are looking at it the same way. Basically holding as much crypto as possible (without losing your home) is a smart move
By trading you have a bigger chance at getting bigger short term profits, but no guarantees, at least not as many as just Hodling. Succesfully day trading is basically a constant gamble.
Yea you are absolutely right. It reminds me a lot of some forms of gambling, like poker.
Crptocurrency is awesome but always super risky, sometimes I can't get it out of my head while doing my other things..thanks for the post.
That distraction in your head is one of the big problems with trading IMO. Its so hard not to think about it!! I have a hard time even though there are only two tokens I really care about lol, I can't imagine if someone is trading dozens of tokens at a time.
Research and stay current! convert fiat to crypto however you can. Then create your own index fund and re-balance weekly biweekly or monthly.
Good idea @billmega - maintaining a balanced index fund is probably what I will do when I'm done paying off my debts. Seems like a simple way to manage risk while investing in a wide range of exciting projects... I look forward to it. And seems totally in line wiith HODLing - re-balancing is just advanced HODL as long as you plan ahead lol
Very well written. Really agree. Day-trading can be fun but bobody knows the bottom and nobody knows the top. For most of these coins there will be a bigger top and that means hold and gain
Thank you! You got that right... there will be a way bigger top. And then we'll all be financially good, as long as we keep it smart right now.
Yep. I'm in this for a long time, not the short wild ride.
That was always the thing about rollercoasters at fun parks. I'd have to wait forever in a queue only to be in fun rollercoaster for like 1-2 minutes. WTAF?!
hahaha I feel the same way about rollercoasters and lines in general. Waiting in line is so lame, it's to be avoided whenever possible
Thanks for another well written blog. A good down-to-earth view.
You are welcome @elbrava
Congratulation
Today one year ago you joined SteemItThank you, for making SteemIt great and Steem on for more years to come!
(You are being celebrated here)
Shit are you sure? I thought it was Jan 4th not 2nd. I might have my dates wrong
What does hodl mean?
Just means hold. I comes from this post https://bitcointalk.org/index.php?topic=375643.0
^^^^ this