Regarding BTC, ETH or other altcoins, in addition to DCA (dollar-cost averaging) and holding, do you also use part of your position to do high sell and low buy? Or do you wait for what you consider to be a bull market to sell in batches?
After seeing this reader's comment, I was reminded of the experience of a very successful Chinese investor, Li Lu, that I had read about recently.
Before introducing Li Lu, let me first respond to the reader's question.
I see DCA and high sell/low buy as two different approaches: one is medium to long-term, the other is short-term.
Speaking for myself, since I entered the crypto ecosystem, I have never had a portion of my investments in DCA and another portion in high sell/low buy.
The vast majority of my operations have been to just hold.
So my investment approach has been medium to long-term (holding), without any short-term (high sell/low buy).
For the assets I hold, if I find issues with the team or the project itself, I will not hesitate to sell everything off.
If I think the price is too outrageous, I will also sell everything off.
There is also a situation where I'm not too sure about the project's development, but I haven't found any major issues with it, so I will reduce my position a bit.
In the past, when I made such moves, I didn't have a strong rationale behind them, perhaps it was just based on my previous failed experiences with short-term trading.
But recently, after reading Li Lu's account, I found resonance in my approach in my own thinking.
We all know the two elder gentlemen, Buffett and Munger. Li Lu can be considered a long-term partner and friend of Mr. Munger, and many of his own investment insights and experiences have been deeply influenced by Munger.
Li Lu's account mentioned his own experience with short-term trading.
There was a period when Li Lu felt that the buy-and-hold approach was too inefficient, as one wave and price difference after another slipped right under his nose while he remained indifferent.
Not seizing these opportunities not only wasted the timing but also greatly reduced the efficiency of capital utilization.
So Li Lu began to loosen his grip, trying a more flexible approach: keeping a portion of his capital to continue operating in his familiar long-term holding method; while dedicating another portion to short-term trading, utilizing various financial instruments (long, short, etc.) to maximize the efficiency of this short-term capital.
This mutually non-interfering, win-win approach seemed brilliant.
After a period of time, Li Lu conducted a thorough review of his operations during that time, and he found the following issues:
- The short-term trading did make some money and the returns were not bad;
- But inevitably, some of his time and energy had to be diverted to the short-term trading, causing him to miss out on several projects that he was originally very optimistic about but didn't have enough time to research further;
- The potential returns from those good projects he missed out on were far greater than the gains he made from the short-term trading;
- His attention and depth of thinking were not as sharp as before he started the short-term trading.
In summary, he felt that this experience with short-term trading was a net loss.
From then on, he completely abandoned short-term trading and focused on his approved long-term holding approach.
His requirement for his fund investors is the same: if they don't agree with his long-term holding investment approach, they shouldn't invest with him.
I deeply resonate with Li Lu's sentiments, but my results pale in comparison to this senior - in fact, they have been disastrous.
My past experiences with wave trading and high sell/low buy are ones I'd rather not revisit, even though I did occasionally enjoy the fruits of victory in the process. But overall, the total returns were pitiful.
So later on, I completely isolated myself from short-term trading, and would rather spend the time and energy on studying various materials, reading reports, and gaining deeper understanding of the projects I'm interested in.
