Bitcoin has gone from a low of sub $1,000 USD, to highs of around $20,000 USD (depending on what exchange you use) in little under a year. Ethereum has gone from $8 USD to over $850 USD. Some smaller ICO’s have gained even more value than this. Every chart has hockey-stick growth and is gaining momentum; this is money printing season.

You told your boss to shove it because the 3 BTC you bought in May earned you more than working 9-5 for six months did, and it was just so damn easy to earn!

However, trading isn’t just about pouring money into a coin, watching it grow 4000%, cashing out and buying a Lambo. I would argue that most of the ‘Bitcoin millionaires’ and amateur investors that exist in this space haven’t really liquidated many of their coins – especially the ones who lost their private keys 5 years ago because they mined those 3000 Bitcoins for fun, and are now digging through garbage tips to find their old hard drives.

It may sound crazy, but there have been bear markets in cryptocurrency, that have lasted years – they look inconsequential based on this years growth (you need to really stretch out your chart to see it), but still the road to this point hasn’t always been +40% day after day. If there is a voice in your head shouting “BS! This crypto is going to $100 per coin by the end of the year!!!!” you may be correct; and you may be delusional. Firstly, I’d like to see how you concluded exactly why this project is going to hit whatever price, and secondly why did you choose next year? Why not 6 months, or 2 years?

Whether you correctly or incorrectly predict the value of a coin or token in 6 months, how do you make sure you’re making money and taking profits during the bull runs, and protect yourself during the bear cycles.

Step 1. Define what you are.

Are you a Trader or an Investor?

Traders are active and shouldn’t be ‘attached’ to what they are trading – you’re in for a run from x to y and you’re out – you should have pre-defined entry and exits and a system that you follow to test and revise your plan to always improve and evolve with the market you’re trading in. If you don’t know what short-selling is, and the concept seems risky to you, you aren’t a trader.

Investors are typical Buy & Hold, or buy and Hodl. In Cryptocurrency I’ve found this to be the most effective way to make money. Why? Because 90% of traders fail. And in a market that has gone in 1 direction over the past 12 months (with a brief bear market that lasted about 2 weeks back in September) it has been so easy to make money. Just buy 50% BTC, 30% ETH and 20% split among some random alts, and you’ll be fine. Investors also need a plan for their investments, albeit a longer-term one than a trader.

Step 2. Have a Plan

There is a reason why 90% of traders fail across all markets: they don’t take profits, they reinvest everything they make into the same asset class, and they don’t have a plan. I’ve been trading, dealing and educating traders for over 10 years, and I can say that greed is the common emotion that eats away at every trader. That share/future/whatever that has gone up 500% is so dear to you that you can not be rid of it, because it is destined to go up another 500%… right… right!?!?

Emotion, “gut feel” and any intangible reasons for buying or selling need to be removed otherwise it’s not a system, its gambling. In fact emotion is by far the biggest killer of trading profits. When you lose it makes you severely reduce your risk; meaning you will be taken down by market volatility by selling out of losing positions way too early. And when you are winning, it makes you overconfident, leading to a trader taking larger position sizes and taking larger risks – so when they inevitably have a losing trade, they give back any prior profits they may have earned. There have been multiple studies done on traders and investors that have shown this.

So how do you eliminate emotion, reduce your overall risk and ensure that you take profits? Develop a system to trade a market and execute trades on that system regardless of how you’re feeling/ time of day or if you have work/classes/are sleeping. The idea is that if you want a consistent return, you need to be consistent about your system, how you trade it, and monitor the outcome over a set period, adjust if necessary and execute the system again. The system can be as technical, or non-technical as you want – so long as its repeatable, measurable and definitive. For example If you found out that every time a new episode of The Walking Dead is released the price of bitcoin drops 10%, you better go short around 8pm Central US time every Sunday.

Step 3. Manage your Risk

These things are said so often, however they are rarely paid attention to because maybe they are too easy to follow, they are also easy to ignore. Don’t invest more than you are prepared to lose, take out your initial investment when you hit key levels or over time and don’t get greedy.

There is a saying on Wall street – Bulls get paid, Bears get paid and Pigs get slaughtered. Don’t be a pig.

Step 4. Take Responsibility

YOU are solely responsible for your investments. As it rises and falls it’s on YOU not the random YouTube ‘Crypto expert’ that told you to get into xyz coin just because. If you don’t understand what you are investing in, you are essentially gambling – except it may take slightly longer to lose all your cash. Of the 1300 or so currencies out there, the vast majority will fall over and be worthless. There are some fantastic projects out there, but if you don’t know which ones they are and you’re just punting on whatever sounds good, it’s on you.

Step 5. Profit.

I’m just going to say this again because of how important it is – take profits! Get your initial investment out as soon as you feel comfortable enough to do so, but don’t make the classical mistake of watching your investment go from 10c to $1, then holding the whole ride down back to 10c again, then selling at 5c when the pain of holding is too great.

By taking profits, and either reinvesting to diversify, or at least pulling your initial cash back out again and banking it, you can’t lose.

No one ever went broke taking profits.

If you manage to do all this, you may survive this crazy crypto journey – remember, 90% of traders fail – this has held true for the past 100 years at least and will continue into the future, and crypto is no different. Never in history has there been anything that has made hundreds of thousands of people millionaires over a short period of time. During the tech boom, thousands became paper millionaires only to have it stripped away when 60% to 100% of their investment value was ripped away.There are a great many people sitting on moon-like profits at the moment who WILL eventually lose them. I’m happy to be proven wrong, but stupid money always flows to smart, and people who have no idea what they are doing, have no plan and are still sitting on huge paper profits which camp do you think they’re in?