Crypto Academy Week 7 - Homework Post for [@stream4u]. Money Management & Portfolio Management

Hi @stream4u. Once again I am grateful for another week of classes. I will be deeply grateful to you forever as the knowledge you are sharing is invaluable, and I feel that somehow we have gone hand in hand between what you teach each week and my experiences in this great world of cryptocurrencies..

I really must congratulate you because the content you have chosen for your classes is 100% appropriate, I really mean it. Although it seems funny, every time I doubt some step of my operations... you answer that doubt with your next class. I guess experience has given you that intuition to direct the new ones.

Precisely with today's class you are helping me to clarify some doubts that have been hanging around in my head for the last few weeks. So let's get started.

1.Discussed Money Management.

In essence, Money Management helps us to Earn the most with our money, and Lose it in a controlled way so that our wallet does not suffer excessively when we face a bad streak.

In short, it helps us to know how much money to invest in each operation we make. This is a simple question that many of us in my condition ask ourselves when we start in the world of trading, especially because in my case I do not manage a high amount of capital. In fact, at the moment I manage an extremely low amount of less than $20.

Money Management leads us to know a new concept which is Diversification, which is summarized in one phrase: Don't put all the eggs in the same basket.

_{Money Management and Portfolio Management in one image. Source: https://www.edmundsondesign.com/logo-design-dont-put-all-your-eggs-in-one-basket/}

Diversification from a formal aspect is the process where a company or an individual invests its capital in different businesses, in our particular case crypto-assets. For this reason, it is recommended that our investment capital is not allocated to a single asset, but is distributed among three, four, or five.

Diversification is the best alternative to achieve the expected returns and reduce risk. Each investment carries an associated risk, so if one asset does well at a given moment, it does not imply that the same will happen with all of them, and if on the contrary, if one does badly, not all of them will lose.

Actually, with diversification we do not distribute money, we distribute risk. The calculated risk is divided among the simultaneous positions or assets.

2.Future plan on your Money Management.

For some years I had wanted to trade in the stock market with the purchase of shares, however, due to some restrictions and shortages in my country, it became impossible.

The cryptocurrency market opened that opportunity for me, so my plans are first of all to increase the capital that I manage in my trading platform which is Poloniex.

My source of capital initially came from the first crypto I handled in trading, the TRX that Steemit gives us as a curation for every post. (This also opened the doors to this new world for me). However, I had been limited to rely solely on this cryptocurrency as a source of income due to a lack of knowledge.

So secondly, I must diversify in the management of several cryptos, and fish the opportunities that each one gives me. To achieve this I recognize that I must invest hours of study and reading.

This brings me to the next topic.

3.Discussed Portfolio Management, if you have an investment and if it is okay with you then show portfolio and explore it briefly.

First of all, we must understand the meaning of a Portfolio, which refers to the set of financial assets acquired by an investor. In a broad sense, it refers to stocks, bonds, commodities, currencies, but in our case, it will be cryptocurrencies.

Considering that, there are many different types of cryptos, creating an investment portfolio requires an analysis of the assets that are more in line with our investor profile and the level of risk we are willing to take.

Thus, portfolios are usually made up of assets with diversified movements in the market, being different but when put together they can be focused on the same objective, either for short or long term goals, which represents an advantage, since the loss of one operation can be compensated by the benefits of others, preventing the investor from going bankrupt.

My portfolio is currently small, I have only 3 cryptos at the moment, investing in ETH, BTT, and using USDT as a stable coin. Actually, until this week I had 4.

_{My Portfolio, image taken by me from my Poloniex account.}

As a result of last week's class, I started to become familiar with investing in DOGE, in fact, my first trade allowed me to make a small profit in 4 days.

_{DOGE History. Taken by me from my Poloniex account.}

I know it seems like very little but I am making baby steps.

In the case of BTT, my investment was also a product of last week's research concerning penny cryptocurrencies. To make this investment I put together some TRX with USDT.

Finally, the cryptocurrency with which I have been investing for the longest time is ETH. Which has brought me good experiences, but also some negative ones that I will share in question 5.

_{ETH History. Taken by me from my Poloniex account.}

4.Future plan on your Portfolio Management.

I plan to diversify further. I plan to research more about penny cryptocurrencies in the mid-cap segment.

In fact, as a conclusion to last week's class, I have decided to focus my investments in that sector, so I should expand my Portfolio in that direction.

Above all, I am learning that the way to expand the Portfolio is to do it based on cryptocurrencies that have a valid reason to exist and a value for the users, and not based on cryptocurrencies that are in fashion or that are the ones I like the most.

My approach will be to find assets that are at the beginning of the uptrend and not those that my tastes and feelings dictate to me, in fact, these should be cast aside because otherwise, you can have negative results... which brings me to the next question.

5. When was the last investment failed and Why? (those who have experienced this can provide views.)

Precisely my last failed investment was the second time I invested in ETH. It is actually a work in progress, but for the primary objectives I had, I consider it a failure.

_{My last investment failed. Image taken by me from Poliniex on March 22nd, 2021.}

What were the causes?

First of all, I didn't realize I was buying on a downtrend. After analyzing it for days I think it was because I was influenced by the first good experience I had with ETH. However, the fact that you know how an asset took off in the past, doesn't mean you know how it will do in the future (not 100% of the time). And the fact that you did well the first time is no guarantee that you will do well the second time.

The second mistake I made was that I did not follow up on the asset. Once I made the investment I forgot to check it daily. The investment was made on March 8, however, it was not until the 19th that I checked the chart again.

This would be fine if it was a long-term investment, but in my case, I am focusing on short-term investments. I don't know what happened to me here. I made a big mistake.

I actually missed a valuable opportunity to sell on the 13th and 14th... after that, the price of the asset has not stopped going down.

My third mistake: I did not set a stop-loss. My confidence in the asset was such that I got overconfident and did not set the stop-loss.

_{Summary of events. Image taken by me from Poliniex on March 22nd, 2021.}

At the moment I am trying not to let this affect me, but I must admit that I feel a bit lost. I think that concerning this investment I have no choice but to consider it for the long term and wait for the price to go up again.

The only good thing I did well in this experience: I did not invest all my capital in this asset, otherwise I would be stagnant at this moment. On the contrary, I can continue to trade my other cryptos. This brings me to the last part.

Conclusion

It is because of situations like the ones I experienced in my last investment in ETH that Money Management is important, which teaches us how to invest our money and in what amount.

If it had not been like this, I would be resigned to only two options: to face a big loss and continue or simply wait for the price of ETH to increase, however, this wait can last weeks or months... weeks and months in which I would miss the opportunity to invest in other assets and perhaps recover my losses.

Money Management and Portfolio Management allow new people like me, not to stop or stagnate due to failed investments, but to manage our capital in such a way that we can have different fronts of action, thus distributing the risk.

Finally, I'll do something that is not customary: Ask an open question about a doubt that has come up this week, regarding question 4 and my future plan in my portfolio.

Among other things I said that: "My focus will be to find assets that are at the beginning of the uptrend and not those that my tastes and feelings dictate to me".

This part leads me to ask the question: How can I detect at a glance which assets are entering an uptrend from a list of thousands.

We have already learned that with the Watchlist you can easily visualize those assets that are being tracked. But what if the ones we are looking for are not on that list, and what if we are not even aware of their existence?

Should we look at the Coin Market Cap list one by one? Or check the candlestick chart of each asset one by one? Or is there any external indicator that the platforms offer to indicate which assets are trending uptrend or downtrend?.

In this way I end my assignation of this week, hoping that I can fulfill the set objectives of the assignment and also wishing to know your opinions about the questions that I formulated in the conclusions.

Have a nice day.