Over the past three months, after losing most of the assets in my portfolio, I have been reflecting on a question:
"Sell when your portfolio reaches your target, don't wait until you think the market has peaked."
I have always believed that selling based on personal goals is counterproductive, as your trading risk and behavior should be determined by the market. Incidentally, you can see the post by @DegenSpartan, where he defends this view.
If I had realized my goal when BTC reached $50,000, why would I sell when I think it could reach $100,000? That doesn't make sense to me.
Similarly, if your portfolio has already reached $870,000 and your goal is $1 million, you won't force the market to keep rising just because your goal is $1 million, especially if the market may have already peaked.
You have to accept reality and let go.
However, this mindset is too idealistic, or perhaps only 0.01% of people can actually do it. Yes, this way is perfect, but the reality is that you cannot precisely time the market's peak.
How many people have experienced their funds plummeting from their highs? I bet there are many here who have achieved their dream of financial freedom a few months or even years ago, only to see that wealth evaporate in a few weeks.
Illiquid shit coins, revenge trading, leveraged trading... Some have even gone from eight-figure assets to nothing.
You can never know for sure if the market has peaked, because you don't have that ability.
The very reasons that made you a lot of money are often the same reasons that make you lose everything - most of the time you are a "perma-bull", your high risk tolerance brings huge returns when the market is good, but this behavioral pattern and the positive feedback from continued success will cause you to lose your mind when the market is bad, and ultimately get "harvested".
Not to mention the timing issue: bottoms usually take a few months to form, while tops often appear suddenly in a matter of days, especially after exponential upswings.
Except for the rare few exceptional traders, most people are still bullish when they should be selling, because that's how their trading is set up.
And when they make mistakes, especially big ones, some can't even bear it. If you've already reached your goal, why not "save your game progress" and start over from a calm, abundant and objective state? It's like playing a video game - you wouldn't complete it in one go without saving.
When you've lost a lot, you'll realize that what you once had is more real and valuable than the digital numbers on the screen.
On the other hand, I don't think those who hold the mindset of "I'll stop when I reach a certain point" can succeed. This mindset will never get you close to your goal, because you have to love the game: learn > improve > win. Money is just a way to measure your progress, but that doesn't mean you can "save your progress" when you reach your goal.
Sometimes, more gains don't make much difference to your life, but the risks you take are very high. You'll always be tempted to think now is the time to go all in, you'll always have reasons to be bullish on the market.
The vast majority of people trading in these markets should adopt a systematic approach to profiting and risk management:
1. Avoid "cross margin" behavior. Accept the reality that you are not that top trader. Maybe one day you will be, but not now.
2. While profiting, regardless of your market outlook, gradually withdraw funds.
3. Set larger goals based on your lifestyle, and be clear about the risk-reward ratio (R:R). When your net worth reaches a certain level, you should start reducing risk, because further gains may not significantly change your life, but losses can have a huge impact.
For example, going from $500,000 to $900,000 may not make much difference to your life, but going from $500,000 to $100,000 is a huge impact, even though the net difference is $400,000 in both cases.
Withdraw more funds and reduce risk at the levels you set. Your goal is to come from a place of abundance, not driven by fear and scarcity. You'll be amazed 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 on more aggressive risk, such as when ETFs are approved, the Fed starts cutting rates, Trump wins, or when Trump, Powell or other key figures clearly signal a buy signal next time.
Your risk management and portfolio allocation should be a combination of 1) market-based and 2) personal life-based, not just the result of considering one factor.
Most people only focus on market factors, ultimately failing to achieve their goals, because this is not realistic for most people.
5. Love the game, and focus on improvement, and the money will come naturally. To succeed, you can never stop. If you want to stop, you'll never succeed.
