Author: Res
Compiled by: TechFLOW
Over the past three months, after losing a large portion of my portfolio, I have been reflecting on one question:
“Sell when your portfolio reaches your target, not when you think the market has peaked.”
I have always believed that selling based on personal goals is counterproductive because your trading risk and behavior should be determined by the market. As a side note, you can see @DegenSpartan's post where he defends this view.
If I achieve my goal when Bitcoin (BTC) hits $50,000, why would I sell it thinking it could go to $100,000? It doesn’t make sense to me.
Likewise, if your portfolio is already at $870,000 and your goal is $1,000,000, you are not going to force the market to continue to rise just because your goal is $1,000,000, especially if the market may have already peaked.
You have to accept reality and let it go.
However, this mentality is too idealistic, or only 0.01% of people can do it. Yes, this method is perfect, but the reality is that you can't accurately grasp the top of the market.
How many of you have experienced a pullback from your highs? I bet there are a lot of people here who have achieved the financial freedom they dreamed of a few months or even years ago, only to see that wealth evaporate in a matter of weeks.
Junk coins with poor liquidity, revenge trading, leveraged operations… some people even fell from eight-digit assets to nothing.
You can never know if the market has peaked because you don't have that ability.
The reason that makes you make a lot of money is often also the reason that makes you lose everything - most of the time you are a "perma-bull", and your high risk tolerance brings huge returns when the market is good, but this behavior pattern and the positive feedback from continuous victory will make you lose your mind when the market is bad, and eventually be "harvested".
Not to mention the timing issues in the market: bottoms often take months to form, while tops tend to pop up in a matter of days, especially after an exponential rally.
With the exception of a very small number of excellent traders, most people will remain bullish when they should be selling because their trading style is set up that way.
And when they make a mistake, especially a big one, some people can't even handle it. If you've already reached your goal, why not "save your game" and start over from a calm, relaxed, and objective state? It's like playing a video game - you don't beat the game in one go without saving your progress.
When you lose a lot, you will realize that what you once had is more real and more valuable than the numbers on the screen.
On the other hand, I don't think people who have the mindset of "I'll stop when I reach a certain point" will succeed. This mindset will never get you close to your goals, because you have to love the game: Learn > Improve > Win. Money is just a way to measure your progress, but it doesn't mean you can "save your progress" when you reach your goals.
Sometimes, more gains won't change your life much, but the risk you take is high. You will always be tempted to think that now is the time to go all in, and you will always have a reason to be bullish on the market.
The vast majority of people who trade these markets should adopt a systematic approach to profitability and risk management:
1. Avoid "all-in" behavior. Accept the reality that you are not that top trader. Maybe one day you will be, but not yet.
2. As you make a profit, gradually withdraw your funds regardless of your view on the market.
3. Set bigger goals based on your lifestyle and be clear about the risk-return ratio (R:R). When your net worth reaches a certain level, you should start reducing your risk because further gains may not significantly change your life, but losses can have a huge impact.
For example, a rise from $500,000 to $900,000 might not change your life much, but a fall from $500,000 to $100,000 would have a huge impact, even though the net difference in both cases is $400,000.
Take out more money and reduce risk at the level you set. Your goal is to operate from a mindset of abundance rather than being driven by fear and scarcity. You'll be surprised at how objective you can become - suddenly, emotions no longer control you.
4. Manage risk based on market dynamics. In some cases, you can take risk more aggressively, such as when an ETF is approved, the Fed starts cutting interest rates, Trump wins the election, or the next time Trump, Powell or other key figures clearly send a buy signal.
Your risk management and portfolio allocation should be a combination of 1) market rationale and 2) personal life rationale, not the result of considering just one or the other.
Most people focus only on market factors and ultimately fail to achieve their goals because it is not realistic for most people.
5. Love the game and focus on improving, and the money will follow. To succeed, you can never stop. If you stop, you will never succeed.
