I’ve made a lot of investing mistakes.
Read this thread to avoid years of losses & pain in 2 minutes.
Here are 16 common investing mistakes & how to avoid them 🧵
1. The Sunk Cost Fallacy.
When you’re losing money, it’s hard to cut your losses.
I failed to cut losses in time because I thought “I’m down 50% already, how much lower can we go”
And every time I did this, I regretted it. 50% is better than 0.
Cut your losses.
2/
2. FOMO
It’s very easy to resist the urge of aping into a coin that’s pumping.
Everyone is talking about it. Everyone made millions, except you.
It’s super hard to resist the urge of joining them. I’ve done this countless times & it’s always ended up in losses.
3/
3. Not taking profits.
When I just started out, I had a $500 trade reach $11K (unrealized) by pure luck.
I was euphoric - the adrenaline was pumping & I was staring at the screen 24/7
But I was greedy. I was hoping it would go higher & didn't take profits.
It crashed.
4/
This is a big one that everyone does.
In the bull run, everything was pumping & people didn’t take profits.
When the market became bearish, the people who didn’t take profits & stuck to their bad bull habits suffered.
A lot of the blood we’re seeing now is due to that.
5/
4. Don’t revenge trade.
Don’t allow one loss to cascade into a string of losses.
It’s easy to get triggered by a loss & let the emotions take over.
This always ends up with poor investing decisions that your rational self would normally never allow you to make.
6/
A good rule to have it to step away for a bit when you get hit by a loss.
Don't make investing decisions when your emotions are running high.
7/
5. The Cults.
Cults & echo chambers can be hard to beat.
We saw this with Terra: Anyone who criticized them was torn to shreds.
As a result so many folks were sucked into the echo chamber & lost money. Always be on the look out for echo chambers.
8/
6. Don’t be in love with yesterday’s narrative
Narratives change.
In crypto, every cycle has multiple new superstars. But things move quickly here.
If you’re blindly stuck up on a certain narrative, you’ll miss the new ones.
9/
Be open & thoughtful.
Crypto is dismissed by mainstream media for a lot of dumb reasons primarily due to narrowmindedness.
Don’t make the same mistake with new narratives within crypto.
10/
7. Have conviction
On the flipside, have conviction when justified.
If you’ve done your research & have conviction in something, believe in yourself.
It’s easy to lose faith if it’s over a long timeframe or if CT is against you.
Take in new info, but stick to your guns.
11/
8. Sometimes, things don’t make sense but it’s probably your fault.
Sometimes, the market follows no logic. Shit hits the ceiling, everyone on twitter turned out to be wrong.
But, despite the apparent lack of logic, there’s always something you could’ve done better
12/
You could've
• Had better allocation
• Taken profits
• Failed to consider something
As I became more critical of my decisions, it’s clear that I could’ve done a lot of things better.
Don’t blame the market, use the opportunity to learn.
13/
9. Don’t avoid critical reflection
This is a huge mistake that a lot of beginners make.
When things don’t go as planned people put the blame elsewhere.
Or, they acknowledge the mistake but don’t truly think about why they made it.
14/
Critically think about your investing decisions.
Why did you do that?
What were the factors that led you think that way?
What could you have differently?
Make an active effort. Writing it down helps. This is the best way to get better fast.
15/
10. Check Unlocks
Institutions & VCs get tokens in a much larger quantity & a much cheaper price than we do.
When they dump, the price tanks. Don’t underestimate this.
Check how concentrated the token holdings are. Know when it unlocks.
16/
11. Ignoring your rules.
We know that we ought to allocate properly, diversify, practice proper risk management.
Yet we often ignore those rules.
17/
One of my rules was to have no more than 5% in risky plays.
But when things were pumping I ignored that & put more into it. I ended up losing more than I should have.
In the bear market, ignoring your rules will get you slaughtered.
18/
12. Not differentiating between short term & long term investments.
You can make money off of pump & dumps, if you play them right.
If you’re the last one holding, you’re gonna get rekt.
Understand that hype is fleeting. Get in & get out quick. Stick to your rules.
19/
13. Not being patient enough.
I’m pretty impatient, I make this mistake often.
There’ve been times when my thesis was right, but I wasn’t patient enough to let it play out
There is no get rich quick scheme. Generational wealth takes time to build, you need to wait it out
20/
14. The Halo Effect
It’s natural to look around on CT & think of big influeners as these super smart gigachads.
But especially after knowing & talking to some of them, it’s evident that they’re just normal guys.
21/
Maybe they got lucky, maybe they were in the game longer, or maybe they worked harder.
But the truth is, they’re just like you & you can get there too.
22/
15. Not considering where the money is coming from.
A lot of crypto is based on ponzinomics (esp in the bull run).
1000% APY sounds great, but money can’t just magically appear.
Look for where the value comes from. Consider the fundamentals & figure out if it makes sense.
23/
16. Investing without truly understanding how things work.
Crypto is complex, there are many layers to it.
A common mistake that beginners make it that they invest without really understanding how they work.
24/
Do your research.
A a new liquidity pool on another chain may have 500% APY, but have you considered
• The impermanence loss?
• Gas for multiple transactions?
• Where the value comes from?
• Whether it’s a ponzi?
Do your research before you invest
25/
And that's it. I hope this thread on my mistakes was insightful.
• Please give this a retweet
• Follow me @Cov_duk for more actionables & insights
• Subscribe to my Youtube for in depth thoughts, explanations & breakdowns:
youtube.com/channel/UCk43im8I5y_noyb08D5w4OA
26/
