Assumption is the mother of all mistakes. Although the original statement puts it even more bluntly than that, the statement still rings true.
The worst part is that people only discover a topic, develop some surface-level knowledge on the subject matter, and then proceed to make assumptions and even make investments based on these presumptions. Imagine their surprise when some of these “cunning” investments end up losing them money.
The biggest problem is that some of these assumptions sound completely logical, even outright intuitive. This is what makes them so tricky and dangerous. Here are five worst such claims and if you’re completely honest with yourself, you’ll admit that a couple of these might have crossed your mind on occasion, as well.
1. The news of promising new crypto will reach you passively
No, you’re not going to overhear the news of a promising new crypto on a public transportation ride. By the time you hear about it on the news, it’s already too late. In fact, by the time you pick up stories about it on social media, it will probably be too late, as well.
Instead, you have to be on the lookout for news on the source. Find blogs and communities that specialize in new crypto and be regular there. By the time you hear your neighbor tweeting about this new coin, everyone and their grandmother are already buying it, and your window of opportunity has passed.
What we’re trying to say is that you shouldn’t expect that someone is going to just come and tell you what to buy.
Just keep in mind that, just because someone is talking about a new coin, this doesn’t mean that their words have any credibility. Yes, credibility is the magic word and you need to focus on finding credible sources of information. For instance, cryptocurrencies listed here are more likely to have a future.
Why?
Because they’re reviewed by experts and evaluated using a disclosed (and rational) methodology, you have someone with years of experience, writing under their own name, with a linkable bio that you can check. This way, you can see that they have quite a few of these pieces under their name and see how the past predictions on this portal (or their own predictions) held up.
Sure, no projection is ever 100% sure, but this is as close as it gets.
2. You can never know if a crypto is really going to explode
Sure, you can never know if crypto is going to explode with 100% accuracy, but comparing crypto investing with a casino is outright dishonest. You see, at a crypto casino, you’re openly taking a chance. Just because this is how a lot of people trade doesn’t make it the same thing.
To clarify for all those who are confused by the analogy.
There are two groups of people who approach trading with cryptocurrencies wrong:
- The first group approaches crypto trading from a luck-based perspective. They hate the idea of actually doing research, verifying information, or getting information from several different sources. Why? Because this is too much work. So, they take the easy way out and convince themselves that it’s all luck-based anyhow, so they just have to place a bet and hope that they’ve got it right.
- The second group waits for the first signs that crypto is actually exploding before starting to invest. The problem is that, by the time this happens, it’s already too late.
The truth is quite simple, actually. No, you can’t ever know with 100% certainty. However, this is true for every other asset, as well. It’s not crypto-exclusive, and it’s used this way only by people who are trying to downplay the potential of crypto.
There are a lot of clear signs that a certain crypto might do well in the future, and if you learn how to recognize them, you’ll have a better chance of recognizing a promising crypto early enough.
3. Past performance is useful for drawing conclusions about future market trends
People learn more effectively from their own experiences than from stories and testimonials they hear from other people. The problem is that empirical experience only gets you so far. You’re just one trader, and this tiny sample size shows.
Just imagine if you were to evaluate the likelihood of winning a lottery on a single person. The result will always be in absolutes. You either interview a winner and realize that the success rate is 100% or interview a loser and realize that the likelihood of winning is 0%. In reality, the odds are one in 300 million.
Another thing to watch out for is the overconfidence. Sure, you’ve made a successful trade. Does this mean that you now understand how things work? Probably not. You have a better idea of it with each trade (successful or not), but you’re not going to turn into a crypto whisperer after two successful trades.
Every trade is an instance of its own. Sure, these tokens move with the market. When a crypto market is not doing very well, things won’t look up for new coins either. At the same time, just because the market is going up, this doesn’t mean that your coins of choice will.
Just start from scratch every time you plan to make a trade, and you won’t go wrong.
4. Strategies don’t really make a difference
Remember when we said that the biggest problem with these false assumptions is the fact that they sound logical? Here’s an example.
You see, you control a small piece of the market, which means that your direct actions don’t really impact the value of the asset as a whole. This means that an individual asset will either go up or down, which means that the “strategy” doesn’t determine whether the trade is successful, only the market.
In other words, it’s not like a trade is a failure, but if the strategy was better, it would have been successful.
The truth is that while strategies don’t affect outcomes, they affect your exposure, risk management, and response to market occurrences. In other words, it changes everything that matters to you.
Moreover, it helps you understand what you’re doing a lot better and, in the process, alleviates a lot of stress that you must be feeling. People tend to downplay the importance of this, as well. For instance, while there are a lot of crypto calculators and converters out there, the use of a strategy known as dollar-cost-averaging can replace the need for these tools completely. This way, you just count your investments in dollars and don’t have to worry about the amounts that you’re putting in.
Check, research, and analyze; don’t assume!
Assuming means taking the easy way out. It means that you want to skip the regular process and just conclude on the spot. This is why people assume it saves time (more importantly, it saves labor). Now, do you want to save time and labor, or do you want to save your assets? You can rarely do both. Just keep these four assumptions in mind and give yourself a reality check when they cross your mind. Also, don’t “assume” that these four assumptions are the only ones on the list.
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