It’s more difficult to recover a loss than make a profit, and even if it sounds counterintuitive, it is super important. Let’s assume you have a $1,000 budget, and you lose 50% of it, resulting in a $500 loss. This is why risk management is so important: avoid significant losses and don’t be greedy, even a small profit is definitely better than a loss. 100% return to recover the initial amount, meaning that it’s significantly more difficult to come back from losses.

Similarly, cognitive biases influence your perception in various ways, usually causing mistakes and distracting you from your predefined trading model. These biases often arise from emotional reactions or psychological tendencies, such as overconfidence, loss aversion, or herd behavior. Be aware of cognitive biases and try to implement a rational approach, strictly following your trading plan. Cognitive biases are mental shortcuts or errors in reasoning that can lead to poor decision-making in trading. Loss aversion, on the other hand, may lead to holding onto losing positions for too long in the hope of recovery. For example, overconfidence may cause a trader to take excessive risks, believing in their ability to predict market movements accurately.

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Mistakes are common, especially when trading actively, and starting small will allow you to improve before starting to invest larger amounts. It is impossible not to make mistakes, at least at the beginning. Perhaps you will discover that the strategy you have chosen is not right for you, and you will be able to modify your trading model according to what you have learned through experience. Start small and increase gradually in line with your improvements in experience and skills. Accept them, and you will learn important lessons that will help you improve your trading model.

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Smart beta crypto index funds are baskets of digital assets designed to implement sophisticated strategies passively, increasing the potential for higher returns and/or decreasing the risks associated with trading. Our BTC Momentum Crypto Tradable Index, for example, allows traders to get dynamic exposure to Bitcoin depending on price trends, meaning that it automatically increases or decreases the exposure to Bitcoin, becoming an effective solution for swing traders. For example, at Trakx, we offer the widest selection of crypto index funds designed to improve diversification, implement automatic rebalancing based on predefined parameters, and reduce risks through sound risk management.

The choice of strategy depends on various personal factors, such as time and funds available, time horizon, risk tolerance, experience and skills, goals, age, and tools available. With this strategy, you “just” need to buy a cryptocurrency and hodl it for a long time, usually years. Let’s analyze the most common strategies in more detail! Carefully assess these factors to reflect. Hodling is the simplest strategy but requires significant patience and steady nerves. Decide on which strategy is more designed for you. Investors who apply this strategy believe in the underlying fundamental value of the asset and believe that the price will appreciate over the years without considering short and medium-term volatility.