WhaleW ire Crypto Handbook Crypto Investing 101Dear Reader, Since beginning my crypto journey in 2013, I've been fascinated by this industry. One of the key factors that has kept me profitable over the years is my strong desire to remain unbiased, read books, and learn new things,. This handbook was created forthe sole purpose of giving back to the community. | wanted to include many topics, and lessons that can strengthen the knowledge of both experienced, and inexperienced crypto investors. While most crypto influencers charge insanely high prices for their handbooks, | have decided to provide this for free. | have lots of respect to my amazing followers, and think of this as a gift back to you all for your support. Thank you. “An investment in knowledge always pays the best interest.’La oy Ss as Red Flags 3 je Market Manipulation eaSsSeS--LULULULUlUlUlUlU 8 y a seeent ey Tips Y01 - Risk Management What Is Risk Management? Risk Management is one of the most important and misunderstood topics in Investing. Because of the extremely fast growth of cryptocurrencies, many new investors haven't had enough time to practice, or learn how to properly manage investment risks. Risk is indivisible from return. Every investment involves some degree of risk, which is often considered close to zero in the case of a Treasury Bills or very high for something such as emerging-markets or real estate in highly inflationary markets. Risk is quantifiable both in absolute and in relative terms. A solid understanding of risk in its different forms helps investors better understand the opportunities, trade-offs, and costs involved with different investment approaches. 6 Risk Management Techniques for Traders: Cy eal Ls Dei a rT) sts Tite) Oh ated Losses aed Cater t) BbRisk Management Technique - Position Sizing Position Sizing is a very important technique used to reduce risk when trading. Even the best trading strategy in the world won't compensate for a trade size that is too big or too small. Position sizing is simply ‘how much’ or ‘how big’ of a position to take, and is the key factor in whether or not you stay in the game, liquidate your account or make a fortune. Most new, and inexperienced traders will blindly throw in a random amount of money into an asset, then expect insanely high returns while ignoring the potential risks. With crypto specifically, I've noticed many going “all in” on some of the most Volatility: A major factor in position sizing is the volatility of the asset one is trading. Volatility simply refers to the amount of uncertainty or risk about the size of changes of an assets price. A higher volatility means that prices will vary over a larger range of NZ) Voom The crypto markets are a perfect example of something with extremely volatility. We've had huge upswings, and huge corrections, many of which have resulted in extreme losses for some traders who can't deal with these rapid fluctuations.How to Determine Position Size? Let's take a quick look at how exactly position sizing should be determined. The first thing to take into account when determining your position size is the preservation of capital and avoidance of any catastrophic losses. Catastrophic losses are those total losses that we will never be able to recover from. This objective obviously takes priority as we must never risk ruining our trading account. If our sole purpose is to preserve our capital, the best solution is not to trade at all, but rather accumulate quality assets at discounted prices, and hold for the long run. However, position sizing also has a second aim for traders, which is to maximize our soNCevilen If we trade a size that is too big, we risk going broke. If we trade a size that is too small, we are limiting our potential profits. Thus, we want to find the sweet spot that maximizes our profit while protecting our trading capital. 3 Position Sizing Strategies 7 esas to tl DL Peeters Pra oh) Ly ert e error rae1. Fixed Percentage Position Sizing Model Many traders choose to limit their maximum risk to a few Xeon MLM UNC Lexol alee LUNAR LAe ER MAO MOMMA lanl ovm fol] should not risk more than 2-3% of your account in a single niclelm For instance, based on your stop-loss, the largest loss per contract is $100. Let's say you have $50,000 in your trading account, and you want to limit your risk per trade to 2% of your trading capital. Here are the calculations: stra ek a Le 29 = Fixed Percentage x Trading Capital = 2% x $50,000 = $1,000 Then, you must calculate your trading position size based on sal M Lane al oom area NM oO Rea em Seat CR Rg lat) Po: ize (No. of contracts) Sell Nala o WN a COLT = $1,000 / $100 = 10 Hence, you would only trade 10 contracts using this model.The Fixed Percentage Position Sizing Model is very popular Lofete- USM RLSM ACe Ue NTO 1ao inn) (om oN 10 LaLa (Loco is also friendly to new traders as it does not need a trading track record. Furthermore, it increases your position size (in absolute terms) as your account grows. Assuming that your trading account is increasing due to your trading skill, your position size depends on how well you trade. This is a logical link that allows us to earn more as we become better traders. 2. Maximum Draw-Down Position Sizing Model If you look at your trading account equity curve, you see peaks and valleys. The difference between each peak and valley is the draw-down. Draw-downs ruin trading accounts. Hence, this position sizing model uses the maximum draw-down to determine how much you should be willing to risk. Pom ia-(elire PCat «| Drawdown Trading Account ($) Ce) SdThe basic idea goes like this. Let’s pretend your largest draw- down per contract is $2,000, that means you can trade one contract for every $2,000 in your trading account. Lice tie (else A MN OMOEA § = Trading Capital / Maximum Draw-down Per Contract The key input in this approach is the maximum draw-down per contract. However, the largest draw-down per contract based from your trading records might be underestimated. Hence, there is a need to adjust the maximum draw-down figure. A simple way to do that is to use a multiplier. A large multiplier implies a more conservative approach. As an example, consider the maximum draw-down per contract of $2,000 and you use a multiplier of 2. In this case, we can trade one contract for every $4,000 (2 x $2,000) in our trading account. The multiplier has effectively halved our position size. The maximum drawdown position sizing model is great because it focuses on the draw-downs of our trading strategy. Hence, given a reliable maximum draw-down input, it is effective for preventing risk of ruin.3. Average Down Strategy The average down strategy has been used by many folrenirsrelal- | MaN-cicolecmm lace Vreliave MN Lac M LLL em Mae Lecce] is favoured by investors with a long-term investment horizon in value-oriented assets. This Position Sizing strategy is also known as “Dollar Cost Averaging” (DCA), and involves buying more coins when prices are red. This lowers the average buy-in price. For example, let's say you buy 100 coins at $50, for a total of $5,000. Then the coin drops to $40. You then buy another 100 coins at $40, for a total of $4,000. You now own 200 coins and spent a total of $9,000. The average price per coin that you own is now $45. If the coin rebounds to $60, then averaging down would have been an effective strategy for seeing returns on your investment. However, if the coin continues to fall in price, then you may lose money. At that point, you may have to decide whether to keep averaging down or bail out and take the loss.Mate al XR Meir) Position sizing is an important concept to understand for both day traders and long-term investors. By understanding the drawbacks associated with opening positions too large, or too small, and applying a system that works efficiently, you will greatly reduce the risks with trading. You've likely heard the phrase, ‘cut your losses short and let your winners ride,’ but many traders make a key mistake. They hold on to their losing trades and decide it will become an “investment”. They will also quickly sell their winners, depriving themselves of potentially much larger gains. Some will even make a bigger mistake; they will add to losing trades trying to buy the bottom in a downtrend and do so with more leverage. This is a quick way to lose all your money, so don’t do that. “Throughout my financial career, | have continually witnessed examples of other people that | have known being ruined by a failure to respect risk. If you don't take a hard look at risk, it will take you.” - Larry HiteRisk Management Technique - Research IC icon ale MUA 1) Kole Mol mag ol Coke Karel OMe ae 1A) be overwhelming. If you browse through social media, you'll notice thousands of traders urging others to invest in some “groundbreaking” asset that they promise will double or triple peoples portfolios very quickly. Oram om Lolo olla lee Roe their hard earned money into these assets, and do little to no research. They assume that Celene aL Mele oR alc 1c RL blindly trust the other persons intuition. The crypto markets are sadly full of people peddling misinformation, and falsehoods. It’s very easy to fall into some traps, and end up with extreme losses. (Ola NA EVAR Veolo Ral RR ORC ERe Ooo! This doesn't mean a 5 minute search on Reddit or Twitter, it means visiting dozens of websites, reading the white paper, analyzing the team, comparing them with competitors, reviewing the technicals and fundamentals, and weighing out the pros and cons. Researching isn't easy, but with practice, you'll be able to more effectively differentiate between worthless garbage shit coins, and the real hidden gems.1. Analyzing the Company's Leadership Without strong leadership at the helm, many companies cannot function well. It’s important to research the leadership team and their plans for the company. HTemestoUa TI ear-1 Zola oT ANCOR C0) Ket ACL SLe (ec and hard working team. If they continuously fail to deliver on their promises, or are riddled with failures, the chances of the reroll ora Cla Molt MiNi ctea al Re ola Iao Re ecee Lie Ng decreased. Investigate beyond just the names and basic bios on the Leroi ora AR coli Mol mA) Lele Corea Leman i lol oll the leadership team to find out more about their background, management style, and past issues. Keep an eye out for red flags that may not be clear outright. Past troubles for any of the executive officers may signal a rocky future for the company. Make sure you're comfortable with the company’s team before investing your money in it.PT 1e Mal Odi tle) Often times when people do research on a company they're interested in, they will limit their research to a single company. Whenever I’m planning to invest into something, | always dig deep into other projects with similar goals and objectives, and are competing with them. For long term investments especially, you'll want to focus on which projects will perform well in the long run, and fo folaniarleM tal Mle ls aM Meola eI CMa VE Mol lita 1 ETRE Vaalindale Mm Ual-lime(e-] ORL ciMiele MCC CME lae Rc LaT| out in a unique way, it may be better to invest in them. That's often referred to as a competitive advantage. PMO ie (Tete lle Mau Me lieu ny ROLLIN Before diving into the actual research, you'll want to also understand the different types of analysis, what they consist of and which route is best for you. In general, there are two broad categories of analysis: Hae Tua): LiL 17 ra a ao oxen Lal E TR Co) fer anal MU aati at MUA Z1I0 Moa Dc Laelia iave MEE Lt-fe] economic and financial factors including the nitty-gritty financials, strategic initiatives, microeconomic indicators, and consumer behaviour.Technical analysis: This type of analysis utilizes data based on market activity, like trading volume and prices, to try to fol -a-lanal ima] colt MS em Colma om olde Pam Delle ALAN LCN doing a technical analysis will use tools, charts and trends to try and predict future price movements. I'll be providing a basic coverage of both Technical and LaViater Tun Nemo nam tele 6 fel Risk Management Technique - Using a Stop Loss A stop-loss order is a tool used by traders and investors to limit losses and reduce risk exposure. With a stop-loss order, an investor enters an order to exit a trading position that he holds if the price of his investment moves to a certain level that represents a specified amount of loss in the trade. By using a stop-loss order, a trader limits his risk in the trade to a Erie LanrelU Lala ea RNCCIA aL RT oLaO Ete For example, a trader who buys a coin at $25 might enter a stop-loss order to sell, closing out the trade, at $20. It effectively limits his risk on the investment to a maximum loss of $5. If the coins price falls to $20, the order will automatically be executed, closing out the trade. Stop-loss orders can be especially helpful in the event of a sudden and substantial price movement against a trader's position.Stop-Loss Orders Are Also a Way to Lock In Profits Stop-loss orders are traditionally thought of as a way to prevent losses. However, another use of this tool is to lock in reuoviicn In this case, sometimes stop-loss orders are referred to as a "trailing stop." A trailing stop loss order is a special type of trade stop order that manages risk and offers profit protection. This exit strategy adjusts the stop price by a certain percentage below the market price. For example, you can put a trailing stop of 10% on your investment, meaning that if the coins price dropped by 10%, your position would be sold automatically. Thus, it offers you profit protection of not losing more than 10% of your investments. The price of the stop-loss adjusts as the price fluctuates. It's important to keep in mind that if a price goes up, you have an unrealized gain; you don't have the cash in hand until you sell. Using a trailing stop allows you to let profits run, while, at the same time, guaranteeing at least some realized capital gain. Trailing Stop ere eatRisk Management Technique - Diversify Funds We're all familiar with the expression, ‘don’t put all your eggs in one eee ree ae tela eine Reva ote] eae eae ca what happens if you drop the basket? No more eggs. By contrast, if you have a collection of baskets and a few eggs in each of them, if you drop one basket, you lose a few eggs. But you still Leo ln Rel oF oai om Be Ter CoA Od CONRAD philosophy - if you invest in a single asset and that asset's price Nm eM aR CR Ne Colao (oe Ee SGA REMC Roem le cue uecay one asset won't be enough to damage your entire portfolio. Why should you diversify your crypto portfolio? The main benefit of crypto diversification is protecting against risk. While mitigating the risk of crypto is almost impossible, by investing in a range of crypto assets as well as keeping some funds in fiat, you can reduce the impact that volatility in any one asset will have on your portfolio as a whole. Diversification with crypto may be tricky considering many alt coins follow the trend of Bitcoin, but this is slowly changing. As the crypto UMN A Cecio R Melee met oan tI celle and move in its own direction. Keeping all your funds in Bitcoin may Teton on Role UM outa a Cin 2 <3Top Portfolio Diversification Strategies As mentioned earlier, there are a wider range of crypto projects available than ever before, which gives you a greater selection of investment opportunities. However, please take note that making a random selection of tokens and putting your money into each isn’t the best approach. ATS Te Rae TaN ma Melt nla] Roan ooo WoL IL oe and ensure your portfolio represents each of those types. Many people in the crypto sector find diversification tricky Leyte mT OL RON oN RECON ee 1 ce ATLA) Bitcoin’s trend. While it's a genuine and reasonable concern, there are still many ways to effectively diversify your portfolio. 1. Type of Cryptocurrency The unique thing crypto has to offer is there are thousands of alt coins with different functions, bases, and technologies powering them. For Instance, you have the option to invest in privacy coins, alt coins, DeFi tokens, and much more. While it's clear most alts have no value at all, and should be avoided, there are still some that could be great long-term investments.2. Industry Diversification When diversifying, it’s essential that you have alt coins in many different industries. By doing this, if one industry takes a hit, the rest of your portfolio can soak in the impact without having major impacts on your total portfolio. For example: Let's say Bob has 90% of his portfolio invested into some “DeFi” tokens, and the remaining 10% in a few utility-based coins. As we know, most DeFi (Decentralized Finance) coins aren't actually decentralized, but simply use that for marketing fois oles LaLa MILO LC Pm aL MC Nol] -Lefelat marco. ae(o lia OLA) this mostly-illegal DeFi industry, a large portion (70%) of Bob's portfolio would be wiped away instantly. A much better approach for Bob would be if he evenly diversified his funds into a range of industries. A word of caution though - don’t plough your funds into a project you have little knowledge about. As | mentioned earlier, it's always important to take some time to research and understand the industry before making a leap.3. Time Diversification Time diversification may sound like a new idea, although it’s actually been around for a while. It's a proven, and reliable tactic when executed properly. Rather than buying your entire portfolio in a single day, you buy it in intervals. For example, you would slowly inch into a position by 10% each month. In that case, it would take 10 months to fully complete your crypto portfolio. This method helps you avoid bad timing by taking away the responsibility of poor timing decisions out of your hands. However, it is gruelling as timing the crypto market is difficult, especially if you're a newbie. It can also be hard to identify the right moment to act. To get the most out of this strategy, set price alerts on the ea oomeel afore) ace el RIM A Ucciclo Rian Price alerts assist you by ensuring you stay up to date with trends and shifts in the market. Additionally, they help you prepare for market movements and allow you to react quickly to these changes.Risk Management Technique - Over-leveraging Pools sano alae MMMM S—ro RY TL AMANO IATO MAIO oX-UiTUlere| investors is their eagerness to make massive gains, combined with their inability to properly manage their risks. They will often sign up for a popular crypto exchange, then dabble in margin trading with all their funds, and end up facing massive losses. Trading with leverage is extremely high risk, and works in a similar way to gambling at a casino. As mentioned earlier, the crypto markets are very volatile. Niel efoto VA dure MM ColMe Lac laa Te RUT Me (OMe cee aTo Re IAe] high leverage to attempt to blindly guess which way we will go is a quick way to get liquidated. Exchanges don’t add x50 or x100 leverage to help users make money. They do it to lure in greedy retail, then have them liquidated. It’s a well-known fact that exchanges like Coinbase and Binance intentionally go “down for maintenance” anytime there's lots of price action. This stops users from opening/ closing positions, and often results in large-scale liquidation notices, which essentially hands over your money to the exchange. This is why they added leverage, it's how they make their profit. Don't fall for the trap!| would recommend avoiding high leverage trades, especially in a heavily manipulated market, which I'll go over more later on. If you're interested in learning about margin, and want proper practice before hand, you should check out www.testnet.bitmex.com which offers a free simulated margin trading experience. Risk Management Technique - Exit Strategy Everyone has an entry strategy, but very few have a proper Coo iiatlarlte lV Mit Ce MALLET TRON Naat AIL simply “HODL forever”, but this isn’t a real strategy. Remember: Unrealized profits aren't profits. If you don’t take Fe codii Rela M oF MTA ton) Am OUR IMAL oko a An exit strategy is basically a contingency plan created with the intent of liquidating a position in a financial asset. Or simply put: A plan to sell some or all of your assets.TOC Raa Don’t be Greedy Ut) enh ics When the cryptocurrency market takes off, figure out when you'll gUY sell. Don’t be greedy and let B your investment ride the wave yt) eA CoyaT\VaCoMs-t-M mr] Nalco GU1I | understand you may be in this for the long run and love the crypto market. You may think a cryptocurrency will replace Sait Lele lac lalen ms Zolt M vod oP MU ZoLe] (elem Retole lal ola MLa-AN Atlan Foto] aPa M-imant Mel MoU alm Vol tana meel eR LIN disappear if you get too greedy. During the last crypto bubble in 2018, | witnessed many friends who refused to take profit on the “hot” alt coins back then. Once the bubble popped, and the hype died down, so feito Rl Miata tall kee aon IT Cole) ant TAN ACM Le om NKorea OMK-C-Leam TWAT LAE Te 110 and many had missed out an a big opportunity to greatly “FUCK.” increase their positions had they sold during the overhyped bull market rally. Exit Strategies are essential, and should Ps even be planned out before buying into anything.If you don’t have a plan for your cryptocurrencies, here are 10 ideas | put together to get you started. | encourage you to take and apply these strategies to enjoy your investment. 1. Create an exit strategy for your cryptocurrency holdings. At what price do you plan on selling or taking profit on your cryptocurrencies? 2. Don't be greedy as you approach the next cryptocurrency LPT Mat-lacclem EL Comer mY Tialal ale om 3. Be prepared to pay your taxes since the taxman will want some of your winnings. 4. Talk to an accountant on how much you'll have to pay and Erma Manoa A-Te (MUA Molt oR aT moe NAO LCN 5. Spend a little and if you decide to reinvest your cryptocurrencies again, then do that.6. Don't try to time the market and expect to quadruple your earnings. Take some of your gains as soon as you can. The feta on Kole ee In MAL lm OR 16M Ne Ke-A tl ee al-lale 9 course overnight when you least expect it. 7. Keep track of your cryptocurrencies and have a detailed plan on what you plan to do. 8. Have an idea where you'll deposit your money for the short term such as a bank until you have a definite plan on where you'll spend your earnings. 9. If you need to reinvest your money into a different asset class such as stocks or real estate, do your research now on some possible places you may want to reinvest your cryptocurrencies.02 - Emotional Control For the average investor, their psyche will often overpower rational thinking during times of stress, whether that stress is a result from greed or panic. Tee] ool Vic olNV Allan LUE LN COLM ANOLE Lalo Mi Tolle COM (<1 coo] rational and realistic approach. This chapter will provide a detailed layout of how to effectively control your emotions.Understanding Market Psychology Life has its cycles, as do the economy and the financial markets. But when it comes to market cycles, emotions often folio RL NA We often do the wrong thing at different phases, buying exuberantly at market highs and panic selling at market lows. Successful investors do the opposite. Market Cycle Psychology — @cypioWhale ee oid wis oa RL Ros ers Helter Sead Belief Time to get fully invested, Optimism cose? co ees possible,Meet the 10 stages of a market cycle Stage 1: Hope ‘Hope’ is the first sign of recovery after “the serious disbelief” stage (see Stage 10 - last in the cycle). The market is showing positive signals for a new bull run. However, investors are still careful. Small amounts of money are being invested. Stage 2: Optimism Optimism defines the second stage where prices are rising as new capital is being invested. This stage is reached when the market has been in a sustained uptrend for many months. The market has a positive outlook, and therefore many investors are comfortable investing money at this stage. Stage 3: Belief As time goes by, the optimism turns into belief. This stage of ‘belief’ is defined as one of the first signs of a bull market. Investors seek new opportunities in the market. Stage 4: Thrill Searching for alternative investment options can be a good idea if you know what you are doing. People easily get caught up in feeling thrilled as they select random projects because they believe nothing can go wrong. Everything is running up. It is important to keep track of your excitement level as being overexcited is a clear sign for closing a position. Stage 5: Euphoria The end of a huge run-up is defined by euphoria. Human emotions are taking over, nothing can stop us now, it’s all puppies and sunshine. There is only one direction — up. In this phase of the bull-run, the “stupid money” jumps onboard the train, this kind of money is the first to leave. At this stage, expect the press to report about the bull market, and you get the “meetthe new young millionaires” articles. At this stage, the smart money is taking profit throughout the parabolic movement. Stage 6: Complacency At this stage, the bull-run is stagnating as people’s lofty expectations are not met. The first signs of a reversing market start to pop up. This is a very dangerous stage as people think the complacency stage is just a short break before the bull-run continues. Many investors are ill-prepared for the upcoming market reversal. Stage 7: Anxiety Finally, people become aware that this bull-run can’t go on forever. They see the market is reversing, losing value and Tiler Stage 8: Denial However, the value of your investments continue to drop, and many investors refuse to sell hoping for an even bigger correction upwards. Investors act defensively as they are convinced they have invested their money wisely. Stage 9: Panic The market continues to decline as a bear market has become the new reality. Investors try to save their funds by desperately selling their investments, as they are afraid to lose everything. Often we see a major sell-off happening at the panic stage. Stage 10: Depression People lose all hope and their belief in the existing market conditions. The market is at its lowest point in the current cycle (as will be noticed afterward). This is where stabilization and consolidation start building again. This stage can take a very long ueBUM CCMA ole lePeel UE Mel ie atLO Traditional economic theories are rooted in the concept that investors make rational decisions and all existing available information is used in making investment decisions. Behavioural finance counters that idea by suggesting that investors frequently behave irrationally and often against their best interests. In other words, the former looks at how Tara coleeyarele CoM ol-iat-\UcMm IA MUA MLN (ele) ce LanTO Ny investors actually behave. fearolat-t eM aT eyo VM el-tat-MUCOO IMA lale Ma Molla te i) number of biases that contribute to investors’ unpredictable and often detrimental financial decision making behaviour. |'ll be examining four common emotional biases that investors are prone to and what you can do to manage them: rnd Prospect lon rated Lt 7 Nc Lye) ALT lod Aeeciitem CSL1. Mental Accounting: Mental accounting explains why some investors tend to compartmentalize their money into separate accounts based on a variety of subjective criteria, like the source of the money or purpose for each account. It also helps explain why some people will drive across town in order to save $5 on a tank of gas. Mental accounting can also lead to asset segregation; where risk and value are exclusively assigned at the investment and not the portfolio level. It's also exhibited by TaN cole RW areola ota R ole retirement accounts too conservatively and run the risk of encountering a shortfall in elt uatcnl ac Lae Eat Re lokd * Focus on the long run and the big picture. The flip side of overcontidence, mental accounting and loss aversion can prompt you to be overly conservative. * Anxiety over the possibility for short-term losses can cloud your judgment and lead you to limit the growth potential of your File Rea aeons © Tune out the noise. Investors who tune out the majority of Lleol Ma AV eR ae ROR Molter meal M lee) rota themselves to the constant barrage of information.PA eels oa Lael Lee Ree Viatexctg cella Ole SolNMcl-licte RCO alMeona(x-1 1 COM LIC accounting, prospect theory contends that losses have more emotional impact than an equivalent amount of gains. For investors, prospect theory can be exhibited through the disposition effect — the propensity for selling winning investments too early and an unwillingness to part with laggard investments. It’s also demonstrated in an innate desire to avoid losses; even if that means choosing not to participate in potential gains Ett le eld ¢ Spikes in market volatility, while unsettling for most, can prompt some to abandon their long-term plan for the short term reprieve that cash and other liquid investments offer. When the Dla LLL COM Cea eer TCO ULE LMAO) oS Cele ELL the market or economic event fuelling the downturn changes your long-term goals? Odds are it doesn’t. Taking on investment risk shouldn't be an all or nothing approach. Consider finding a middle ground with an investment solution that offers a balanced approach to risk and Lidar Taito Rela M Uae eee eee adie RD as an opportunity to accumulate more. If you truly did enough research before investing, and understand what you've bought, a correction shouldn't scare you at all.3. Over-Confidence/Optimism: It's human nature to be overconfident. One study | read found that 90% of the car drivers in Sweden rated themselves as above average drivers. Statistically, you're more likely to be an average driver than an above-average one, even if you live in Sweden. In the investing world, confidence levels are driven in part by recent market performance. For instance, it's easy to overestimate your risk tolerance, particularly when your immediate frame CML icolaec MEM cli ece RMIT clas 1 Very often investors who perceive their risk tolerance to be high exhibit much less confidence when faced with market downturns. Fear that others are more knowledgeable can drive a herd instinct, with frenzied selling (during market crashes) or buying (during market bubbles) when it is least fo) oft Rooter What can | do? ¢ Although it’s practically impossible to forecast when the next upward or downward spike in the market will take place, having a well thought out investment plan can help instil a sense of confidence that you can ride out the volatility. Ce st mrt idfen- are Mg Crem Vala ole iae RT aa) col f ele oe returns, don't focus solely on the upside. CM Bel meee Mee a eRe re eR eRe Le) when your immediate frame of reference is strong returns.Cee Ru cis ae a aN e Rollo ky comparable to ‘keeping up with the Joneses’. Picture a typical investor, who invests in a diversified portfolio and earns a Ko oat ole ore aso Roar C10) NTMI ANCOR ela AL MUA UA ROMO To ie Tea Ola OL} of yummy foods, and seen insanely high unrealized profits. At first, the temptation to join in and invest with friends may be easy to resist, as the investor knows that portfolio concentration is risky. However, as they hear more and more about their friends’ success, the temptation to join in gets stronger, with the investor eventually giving in. Eventually, a geopolitical event occurs and aU Stacie Rta MLN COL LATO OTe (ol Wanting to maximize returns is a natural human emotion. Since humans are not emotionless beings like Star Trek's Spock, we have to control these emotional tendencies, and try not let them fate -tac-c Miao Ome Lolo dale What can | do? * Maintaining a level head is paramount. Investment decisions should be based on logic and reason, not on what other people are doing. ¢ Establish a long-term financial plan that meets your individual needs - and stick to it. * Having a financial advisor to help you keep your emotions in check can help guard against herd mentality.How To Overcome FOMO Warren Buffett once famously said that smart investors should be “fearful when others are greedy, and greedy when others are fearful.” In other words, sensible investors should avoid putting money into trendy holdings merely because of their buzz. By the time the “next big thing” gets popularized, the profit margin is likely to be a small fraction of what it was for early investors. Still, the fear of missing out — or FOMO — on a hot new investment opportunity is hard to ignore. It's easy to wish that you could go back in time and buy a few shares of Google in 2004, or invest a few bucks in Bitcoin when it debuted in 2008. Smart investing means looking forward instead of the past. Sometimes it means ignoring the present, too — especially when FOMO might lead you to buy high and sell oN Where Does FOMO Come From? The concept of FOMO is partially associated with the social anxiety that results, in part, from watching the “highlights reel” of other people’s lives play out on social media. We all have those friends on Twitter or Instagram who seem to pack in an exotic vacation every other day. It’s hard not to feel like you've missed out on some similar experience.But from an economic perspective, FOMO is a psychological phenomenon associated with loss aversion, particularly in terms of financial decision making. PXrcodee lite mM iit: Loar “In behavioural economics, and decision theory, the psychology behind FOMO can be partially explained by loss aversion. Amos Tversky and Daniel Kahneman demonstrated people's strong tendency to want to avoid any losses. In fact, the research suggests that losses are twice as impactful on people, psychologically, as gains. This leads to risk aversion; we just hate to lose out on anything.” Hating to lose out on anything can inadvertently lead to trying to get a stake in everything, increasing the risk of aN silalo MaMa ol-te mv Meola M- Lele Mit-lale Mom CMe Cae Roa on a potentially big payoff rather than for legitimate value. We need to avoid this at all costs. Here are a few actionable steps to avoid acting purely due to the fear of missing out. oat Mote Rolie alee MeL Leela M-leoa Ue Mae MIM nT oLoLar-1aecM Male AIA underrated when investing. Investing should be more like watching paint dry or watching grass grow. If you want excitement, take your $800 and go to Las Vegas. Many of the worlds greatest investors, including Warren Buffet, George Soros, Carl Icahn, and Peter Lynch all have 1thing in common. They outperformed the crowd by always focusing on the long term, and understanding the importance of patience. Ve eee VeRO CLM e RCO CAM Mea TeloR Lal fo YerKol rma Mek oO Lee AM Le MALOU Le) (0) name at age 50. He needed more time to let his wealth grow. It grew slowly at first, then skyrocketed into the billions. Warren Buffett's Net Worth Warren Buffett's AgeStop staring at the charts all day. One of the first things | recommend to new investors is to avoid staring at the charts all day long. By staring at the charts, you are increasing your chances of obsessing, overthinking, and overanalyzing. This can put you into a dangerous worry cycle, and cause extreme frustration, and ETaecinva If your investments are making you lose sleep, or are distracting you from your day to day life, you are likely over- invested. Always make sure to step away once in a while, and focus on your physical, and mental health. Recognize when it’s too late. Zoom Out! Teen Rela Taare cal mae entering is very risky. Look elsewhere.The moment your siblings, friends, teachers, parents, and grandparents are talking about an investment, and the prices have surged hundreds or thousands of percent in a short time-frame, it’s probably too late. By studying history, we know that retail investors are always the last to jump on the band wagon. Once everyone is talking about it, and blindly jumping in, it’s crucial to understand the risks involved. Understand there will be more opportunities. When people have a rushed, and impatient mindset, they tend to make short-sighted, and irrational decisions. It’s important to understand that in the markets, there will always be new opportunities for you. Just because you missed out on one trade, doesn't mean that it's the end of the world. The markets aren‘t going anywhere, and those who are patient, persistent, and calm, will find themselves taking advantage of new opportunities, rather than beating themselves up over missing out on past events.Verbalize Your Reasons for Entering a Trade Most of the rationalization that underpins every FOMO trade Gero) le Ma Cat OR MIL el CROAT] ignoring analysis and logic to simply follow the herd. Verbalizing your reasoning forces you to truly evaluate what you know or think you know about this trade, which will fe lW rol NVA Mime (1m alam OOM ALN ROM OM toola ial] behind a trade or whether you are just making excuses. Investing vs Speculating If you have a strong FOMO when it comes to seeing coins like DOGE breaking out above all resistance, then you may Loko octet] Kola Speculating is generally defined as “form a theory or conjecture about a subject without firm evidence.” or from a stock standpoint, “invest in stocks, property, or other ventures in the hope of gain but with the risk of loss.” The words, “without firm evidence” and “hope” are the keywords in the definition of speculating. | put it in the same ballpark as gambling.According to Benjamin Graham the father of value investing and author of The Intelligent Investor, “An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting Sate oM cre Vcc CLR ole] CLO Bo asoXet re] Maelo) Muir] In an age of social media and 24 hour news cycles, where there's a missed opportunity or the promise of ‘the next big thing’ right under our noses, it’s impossible to avoid FOMO without becoming a hermit. ean ol XSI -Who you follow on social media has a major influence on your trading behaviour, whether you know it or not. If you're following moon boys screaming about an asset surging thousands of percent by next week, maybe it's time to unfollow. It’s best to follow mentally sound, patient, and calm traders (like Mr. Whale) who don’t intentionally try to get their followers to FOMO into shitcoins to pump their bags. Realize That “What Ifs” Will Take You Nowhere Many people who are afraid to miss the next big thing, cannot forgive themselves for not buying Bitcoin or Ether at a low price. They keep thinking of how rich they would be if they had identified this opportunity. As a result, they try to correct this mistake again and again. MoM olor) aan Relate Molla amc cltliae Rol m Urls thinking about what could have happened is a total waste of time. By the way, among the world’s top Bitcoin millionaires and billionaires, there were few random people. Mostly, these early investors had a background in finance, fin- tech, or programming. In its younger days, cryptocurrency was widely seen as a financial tool for geeks, too complicated for an average user.Therefore, for many guys who now regret they didn’t buy bitcoins in 2011, the barrier to entry was actually too high. Even if they had bought or mined some bitcoins back then, they would have probably spent them on a pizza. Or would have sold them when the price reached $100. In that light, it would be wiser to stop asking “what if” and start educating themselves. The more you know about crypto investing and trading, the easier it will be to spot the coins salar NURI Read About FOMO-Based Scams One of the famous types of scams playing on FOMO is the pump-and-dump scheme. Long story short, the group behind SUR ogT LCR oe ie ROO Nee MEU Ae attracts many FOMO traders who believe they have spotted the “next big thing”. When the price reaches a certain mark, Bar Re TATA LERCH RUAN Ti oC aTA-LaLe MAA CCMA ole TIAA AI Oo elolaOReLNCIM 1-1 Unfortunately, scammers use many tricks to cheat people out Cereal tao VAN AM Noses NA -o ole ATO missing-out to reach this goal. Being aware of this fact helps avoid many honey-traps.Technical Analysis is my preferred method of analysis when trading in the markets. It's something I’ve been practicing for over a decade now, and is very useful. While | do use Fundamental Analysis occasionally, | still prefer Technical Analysis, because FA is often laborious, inconsistent and sometimes fruitless, whereas technical analysis is formulaic and reliable. | often come across many traders who think of Technical Analysis as an impossible language to learn, although | strongly disagree. If you're constantly practicing, and learning, you will eventually get a hang of it. The most important thing to do when using TA is to keep it simple. Never over-complicate things by having your mind wander off into some irrelevant and delusional analysis that is mainly derived from your wishful thinking.The Four Pillars of Technical Analysis | want to start off by discussing the four main areas of technical analysis that analysts can objectively measure and use in trading systems. They are as follows: Price is the most important of these areas; we measure profits and losses in price differences between buys and sells. It deservedly gets the most focus by analysts and academics alike, but if all four can be employed together, the odds of making successful decisions can be dramatically increased. Volume includes such concepts as accumulation and distribution, market breadth, open interest, and trade count. Time includes cycles, seasonality, and relationships between patterns and trends from a duration point of view. Finally, sentiment is a more subjective area that seeks to Cer anal eel UN Ma oe Mm a Reels aU Rend investors—is tipped too far in one direction. At that point, it pays to consider positioning against the crowd. Such indicators as cocktail party chatter and options premiums play roles here, and there will be more on each aspect later in Welter M oll lea amen oe LeleTrading Chart Patterns In Technical Analysis, the main focal point is the several different patterns that occur on the charts, as well as the many technical aspects in using this data in order to identify a LTT Rola fe LAr] Technical Analysis Price Patterns make strange shapes and outlines in all markets. It may seem weird to the uninitiated that such shapes could have any value, but the fact is that these patterns created by price action on market charts repeat themselves over and over again when certain interactions occur between market forces. eke cutekcs vat : ip i x c \ N WA i IN : : Wi WAVAN A VA