I have received some new messages recently, and there is a type of question that is asked frequently: Seeing that the Altcoin I hold have been falling, I am hesitant about whether to change my position?
Anyway, as far as I am concerned, because I have always been strictly following my own trading discipline, except for 80% of the Bitcoin positions that have not been moved, the remaining FET, SOL, AVAX and other Altcoin I hold have basically made corresponding profit-taking operations before, and they are currently at zero cost, so I will not make any operations for the time being.
But if you are not satisfied with your current position management, it is necessary to re-evaluate your position at this stage to try to rebalance your position portfolio. Because from the overall market situation at this stage, many Altcoin have already experienced a 50%-70% retracement after the previous round of increases, and many Altcoin have even hit a new historical low. The market is in a bleeding market, but it seems that there are new signs of recovery. Therefore, it is worth considering an overall position evaluation at this stage.
The so-called position switching, in simple terms, is to make up for some bad investments in the past by replacing poorly performing projects with well-performing projects. Specifically, position switching has several main benefits:
The first is to adjust the risk level, that is, to continue to maintain an acceptable risk level by changing positions.
The second is to optimize the R/R ratio. That is, to reconfigure the Altcoin portfolio with a better R/R ratio. The R/R ratio refers to the risk-reward ratio, which is a metric that compares the potential profit of a transaction to the potential loss.
The third is to seize new opportunities, that is, to seize the next possible narrative/trend by reinvesting in those new projects (new possible opportunities).
But it should be noted that you should not change positions frequently without thinking, otherwise your principal will disappear invisibly. Before changing positions, you also need to conduct a comprehensive assessment of your existing positions. So how should you do it specifically?
1. Re-evaluate the Altcoin you already hold
Although you may not be satisfied with the Altcoin you hold now, since you hold them, it at least means that you have recognized these Altcoin before, otherwise you would not buy only these among tens of thousands of projects. Therefore, even if you are not satisfied, you should always treat every Altcoin you hold as a serious investment.
Based on this attitude, what you need to do now is to review each Altcoin again:
- List 3 reasons why you bought the Altcoin at that time (DYOR)
- List 3 reasons why you should sell this Altcoin now (DYOR)
If your selling reason can easily negate your original buying reason, then you can start to consider switching positions. But it should be made clear that switching positions may mainly apply to two situations: one is selling at a loss (cutting losses), and the other is selling at the original price (neither losing nor gaining).
At the same time, you should also calculate the current value of the Altcoin as the principal of the new investment. For example, if the Altcoin A you hold is currently worth $500, then this means that in theory you can use this $500 to buy a new Altcoin B, and try not to count the principal loss of A as B. If you invest in A, you need to accept the possible success or failure of A, and if you invest in B, you need to accept the possible success or failure of B. Don't mix the two investments together.
2. Evaluate the new Altcoin you plan to buy
After sorting out the situation of Altcoin in the existing positions, the next major issue is how to replace them with Altcoin with greater growth potential.
If you still have no idea or clue about the choice of new Altcoin at this time, and are simply dissatisfied with the Altcoin in your existing positions, then I suggest that you do not do anything first, because once you change your positions mindlessly (or just change your positions based on other people's recommendations), even if you buy new Altcoin, you may face a situation like the current one later.
If you have realized that another Altcoin may have greater potential for growth, then at the level of awareness (advance level), you have actually entered the process of rebalancing your positions. The next step is the specific position change operation:
Step 1: Reset and compare tokens A and B
Assume that A represents the Altcoin you currently hold, and B represents the new Altcoin you plan to exchange after selling A. Next, you can do a multiple-choice question:
If you start from scratch (not affected by your existing positions), that is, you do not hold A and B now, then:
- Invest $500 in token A
- Invest $500 in B tokens
What would you choose?
If you still choose A after resetting the comparison, then there is no need to change positions. If you choose B, then good, please continue to give the specific reasons for your choice B?
Step 2: Conduct necessary research on Token B
You don’t need too many reasons. If you can quickly list 3 reasons for buying B within 10 minutes, then you can just switch positions. I support you. But if you can’t quickly list 3 reasons within this time, it only means that you have not done the necessary research or understanding of B. Maybe you just saw/heard others say that B is good.
At this time, in order to improve the success rate of the position change, my suggestion is that you can continue to do some necessary research on B:
Regarding the topic of project research, Hualihuawai has already sorted out a lot of articles before. If you have the time and energy, you can directly use the "Project Research Template" sorted out by Hualihuawai before. If you don’t have so much time and energy, you can also directly refer to our article a few days ago (July 16) on the topic of quickly selecting potential projects. As shown in the figure below.
To sum up, you need to verify why B is better than A through the following basic dimensions:
- B Are there any more favorable factors or catalysts in the near future (media coverage, project development roadmap, etc.)
- Whether B's chart (K-line) performs well (for K-line, you can directly refer to Huali Huawai's article on basic indicators of technical analysis on July 3)
- Whether B fits the popular narrative (in the case of limited market liquidity, funds will definitely go to popular narratives such as AI and RWA first)
- How is B's ecosystem and community developing (is there a possibility of continued growth)
- B’s financing and token economics
3. Reallocate funds from position A to position B
If after some basic comparisons above, you still believe that B may have greater potential for growth than A in the future, then you can directly switch positions and reallocate the funds in A to B.
At the same time, because your overall position has changed at this time, you need to re-count the total position. For example, assuming your original position ratio is 3:3:3:1 (that is, 30% Bitcoin, 30% Ethereum, 30% Altcoin, and 10% cash), then at this time because you have changed your Altcoin position, you need to make necessary corrections to your investment record sheet at the same time, which may become 4:4:1:1.
As your position changes, your floating losses will also change, and the risk of your position will also be adjusted at the same time. You just need to make corresponding records of these.
4. The issue of MemeCoin needs to be discussed separately
We mainly mentioned Altcoin above. Although MemeCoin (including various types on-chain meme) also belong to the category of Altcoin, I still prefer to treat them as a separate category.
Although MemeCoin is a sector that can continuously generate wealth-making stories, our attitude towards MemeCoin has not changed. We recommend playing MemeCoin in various DEXs with small amounts, and the investment position is also recommended to be controlled between 1%-10%. You can choose according to your own risk preference. In short, MemeCoin is a high-risk and high-profit gambling game, and the proportion of funds you invest must be the part of the funds that you can afford to lose.
Under this basic premise, there is actually no need to consider whether to change positions in MemeCoin. Before deciding to buy a MemeCoin, you should be mentally prepared: either it will go directly to zero, or you will get several times the profit (or double the principal, and the rest is up to you).
There are currently a lot of MemeCoins on the market. According to the data displayed by the dextools platform, as of the time of writing this article, there are more than 5.4 million MemeCoins available for trading on the chain, as shown in the figure below.
But most of the MemeCoins actually have no value (many RUG projects, and many projects have almost no liquidity). The only thing that this type of currency can use is the so-called emotional drive, so it is also the most likely to cause people's FOMO. Among the massive amount of MemeCoins, in the end, only a very small number of MemeCoins with a good background or community foundation may be able to continue to exist and develop (even to the first-tier CEX).
In short, when investing in MemeCoin, remember not to All In all in casually, and don’t be too obsessed with a particular MemeCoin. If you have divided MemeCoin into different categories (fields/tracks), then focus on buying the leading and second-largest MemeCoins, which will keep your risk relatively low.
As for how to find MemeCoin, Hualihuawai’s previous articles have already sorted it out. The basic aspects include: joining some relevant discussion groups (X/DC/TG, etc.), using on-chain tools for mining, tracking smart wallets, monitoring through robot tools, etc. We will not go into details here. Interested friends can refer to Hualihuawai’s historical articles by searching for MemeCoin.
This is where we share our content for this issue. This is also the 488th article updated by Hualihuawai.
