The trap of Investrading:
"I'm going to trade this project. It's going well! I'll keep it because it's going to the moon! Yes! 10x! Fantastic! Awesome trade! Oh no, it's back to 1x. Damn, it's gone down now. But I'll wait, it'll go back up!"
Read on for how to avoid this.
👇
"I'm going to trade this project. It's going well! I'll keep it because it's going to the moon! Yes! 10x! Fantastic! Awesome trade! Oh no, it's back to 1x. Damn, it's gone down now. But I'll wait, it'll go back up!"
Read on for how to avoid this.
👇
I've made that mistake many times, so it's one I'm feeling very personally. I rode the #LazyLions from 0.6 to 3.1 and... didn't sell. Now they're hovering about 1. They'll go back up, I'm pretty sure, but still - that's a lot of Eth on the table.
I've spoken about the difference between traders and investors before (
The problem for those of us who are still learning arises when you mix the mindsets up. Both are relevant to every situation - but letting them mix leads to poorer decisions.
https://twitter.com/swombat/status/1466455125212467201).
The problem for those of us who are still learning arises when you mix the mindsets up. Both are relevant to every situation - but letting them mix leads to poorer decisions.
Investing: find a project that will do well in the long run; put money in it; mostly ignore volatility
Trading: find a project that will go up in the short term; put money in it; mostly ignore long term value
Both are viable approaches to make money in the NFT market.
Trading: find a project that will go up in the short term; put money in it; mostly ignore long term value
Both are viable approaches to make money in the NFT market.
The problem usually arises when you start with the trading mindset ("I'll mint this and flip it"), then as the hype builds up, you let yourself be caught into the fomo and the thought that "this project is great, it's going to the moon" - and then don't sell at the right point.
Doing this, you end up missing out on the profits, because the "it's an investment" mindset crept in.
What's worse: it's often a terrible investment decision, made at the height of hype without much due diligence.
Let's borrow a leaf from the startup world.
What's worse: it's often a terrible investment decision, made at the height of hype without much due diligence.
Let's borrow a leaf from the startup world.
When I invest in a startup, I don't just "read a whitepaper, check out the roadmap, log into the discord" and then say "yeah this will do well, here's £10k".
I would consider any real investment made like that to be utterly stupid in the startup world.
I would consider any real investment made like that to be utterly stupid in the startup world.
Startup investors have long learned that the most important things when investing are:
1) Team
2) Market
3) Product
In that order.
A great team in a good market will do well. A shit team in the best market with an amazing idea will do poorly.
So the focus is on the team.
1) Team
2) Market
3) Product
In that order.
A great team in a good market will do well. A shit team in the best market with an amazing idea will do poorly.
So the focus is on the team.
Finding out if a team is great is not just about looking at their CVs (let alone their 5-line, unverifiable pseudonymous bio). It's about interviewing them, seeing how they react to new information, how they adapt to unexpected changes, how their team dynamics work or don't...
And then on top of that, when investing in a startup, if the team checks out, I'll research the market to form a strong opinion if their product has a chance of doing well. If it doesn't, I'll see how they react to that feedback. Great teams will take it on and iterate.
The problem with NFTs? The team is not accessible to you. You literally cannot review the most important factor for investing. It's just not feasible with so many low-ticket investors. And there is no "vetting service" like with traditional crowdfunding - at least not yet.
So when I slip from "I'm going to trade this and make a short term profit" to "This is a project worth investing long term!" I'm almost always fooling myself.
I'm in a fantasy world of my own making, likely based on pure hype, especially if the project is currently doing well.
I'm in a fantasy world of my own making, likely based on pure hype, especially if the project is currently doing well.
The allure of the "investment potential" that's basically just in my head, makes me lose track of the trade that's sitting right in front of my eyes right now, and so I leave profit on the table.
That's if I allow mindset to flip flop from trading to investing.
That's if I allow mindset to flip flop from trading to investing.
My suggestion to myself and to others is:
Pick investing, or pick trading, and do one at a time on a given project.
Don't flip flop between the two. Not until you're really good at both separately.
Pick investing, or pick trading, and do one at a time on a given project.
Don't flip flop between the two. Not until you're really good at both separately.
Of course, like all divisions this is arbitrary. Ppl who are good at both trading and investing often mix and match, and masterfully manage their emotions in the process.
If you're one of those you're probably not reading this thread though!
If you're one of those you're probably not reading this thread though!
So for the rest of us:
TL;DR:
Invest (focus on fundamentals, long term, ignore volatility)
or
Trade (focus on hype/volatility, short term, make money from volatility)
Do one at a time, and be wary of switching from one to the other mid-flight.
gm & gl
TL;DR:
Invest (focus on fundamentals, long term, ignore volatility)
or
Trade (focus on hype/volatility, short term, make money from volatility)
Do one at a time, and be wary of switching from one to the other mid-flight.
gm & gl
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