🧘♂️The True Story
Market Meditations | May 11, 2021
Don’t worry, this article will set the record straight.
Have you been led to believe you have to be a whale to make serious profits in the crypto markets? ? It’s not true. Our focus today will be on how you can grow a small trading account. We share tips, tricks and insights to help you build wealth.
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Whilst the crypto markets are definitely exciting, it’s easy to feel frustrated seeing large position sizes and profits of people on Twitter and YouTube.
? You may feel like you’re at a disadvantage if you have a small trading account. However, per the example below, it’s very possible to make serious returns with a small trading account.
In this article, we’ll walk you through why a small trading account can actually be beneficial and our top tips to help you grow your account profitably and consistently whilst minimising stress.
? TIP: In absolute terms, we’d define a small account as anything less than $10,000.
1️⃣ Concentrated Bets
If you have a small account that you’re willing to lose, then you can take on more concentrated bets that have the potential to grow by large multiples. Let’s consider an individual named Bob who works at Starbucks earning a weekly salary of $600.
If Bob takes his weekly salary of $600 working at Starbucks, for example, and concentrates this amount on six individual $100 trades, all of which are high risk opportunities, if one goes 100x and the other five go to zero, he has still turned $600 into $10,000.
Please note that this is a high risk strategy and if you are considering it you need to make sure that your lifestyle will not be affected in any way if you do lose your entire investment.
2️⃣ Focus on Lower Liquidity Coins
The second tip is to use lower-liquidity coins to your advantage. If you’re trading with large position size, often you can only focus on Bitcoin, Ethereum, and other large and mid-cap coins because as you start increasing size, you run into issues like slippage and illiquidity. Thus, if you have a smaller account then you actually have an edge.
Whilst bigger firms and investors have the resources to create trading strategies you may not be able to, their focus will not be on illiquid coins. This puts you in a position to profit and potentially get large profits by building systems around these types of coins since it’s exactly these coins that move very quickly and aggressively.
In these sorts of situations, your small account is actually an edge that billionaires and institutions do not have. Please exercise caution when it comes to low liquidity coins as there are a lot of scams. Watch our video Find the Best Altcoins to Day Trade (2021 Tutorial) to see which altcoins to trade and avoid.
3️⃣ Consider Investment Strategies
There’s so much overlap between investing and trading that it’s worth learning a few core principles of investing if you’re looking to truly compound profits and build wealth. Here are a few principles you should be aware of:
If you never learn how to make your money work for you by leveraging passive strategies that almost always outperform traders such as dollar-cost averaging, you’ll always be trading time for money. As an exercise, ask yourself if since the crash in 2017 if you did nothing but dollar cost average into Bitcoin, Ethereum, or any of the large cap coins, would you have made more money? 90% of readers who are honest with themselves will answer yes.
Whilst concentrated risk is helpful with a small trading account, it’s important to understand the benefits of diversification. If your entire portfolio is DeFi coins, for example, what if the sector takes a hit? What if you’ve put all your money into $DOGE on the back of Elon Musk, but he suddenly deletes his Twitter. What do you do now?
For the sake of argument, let’s say a third of your portfolio is crypto, a third is real estate, and a third is stocks in the legacy market. Whenever your stocks increase and crypto decreases, you rebalance your profits into crypto from stocks. Continue rebalancing to keep the percentages you’re comfortable with and you’ll decide those percentages by learning more about investing. In fact, rebalancing to stablecoins is one of the most underrated and underutilised tools to build wealth in the crypto bull market. Read our full Passive Income guide to see how you can earn anywhere from 10% to 100% APY on stablecoins.
? Growing your crypto account is made easier with access to the right resources. For guides, insights and analysis, be sure to join 22,000+ others in the Market Meditations community ?
Top Signals Re-Imagined
? OPINION. Some analysts believe the rise in popularity of certain tokens such as $SHIB are a market top signal. In a very interesting tweet earlier today, Qiao Wang stated that this time round, timing the top for the cycle will be especially difficult.
Indeed, we seem to find ourselves at a juncture whereby crypto markets are big enough to be impacted by macro factors such as monetary policy. That is, crypto is no longer an isolated system. Building on this idea, yesterday’s ‘Bloody Monday’ price action is reminiscent of what we tend to see in legacy markets. Suggesting the markets are beginning to become more complex.
? FACT CHECK. Bloody Monday is an extension of ‘the weekend effect’. A phenomenon in financial markets in which stock returns on Mondays are often significantly lower than those of the immediately preceding Friday.
And so, perhaps our best course of action, as Qiao suggests, is to approach SHIBA, market tops and all other events by staying true to our risk management strategies. We’ve got a full course on risk management, seems a good time to check it out. A sound risk management strategy will make you far less susceptible to the feelings of FOMO.
Bitcoin is becoming more and more mainstream. Even major celebrities are starting to get in on the action. But which NFL quarterback has hinted he has Bitcoin?
Following on from our Shiba story, Ki Young Ju suggested in a tweet earlier today that $BTC is going down despite strong fundamentals because of the popularity of DOGE and related tokens. He went on to say that the market will become smart money soon, and the funds will go to major coins that have intrinsic value. Over to the fundamentals:
? Recall our lessons in our On-Chain Analytics guide regarding exchange inflows and outflows:
By tracking exchange inflows and outflows, we can see whether big money is moving coins onto exchanges in large quantities (suggesting that they plan to sell coins), transferring stablecoins onto exchanges (suggesting that they plan to buy the dip) or whether a large number of coins are moving off exchanges (suggesting that they plan to hold coins in the short term).
Trading 101: Crypto Market Cycles with Koroush AK
In this episode, we talk about maximizing returns through the understanding of market cycles.
On Monday, Brady changed his profile picture on twitter to him with laser eyes, a common way to express support for Bitcoin.
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