Written by: Talking about Li, Talking about the Outside

Although ETH has seen a good price increase recently, if you entered the market only in the past year, looking back at the overall situation of your holdings over the past year, you may find that your ETH holdings often rival stablecoins, especially when watching some other coins continuously rise and break new highs, while the value of your ETH position seems like "a stagnant pool" with no movement at all.

In investing, it seems there are two extremes: one is giving up too early, and the other is unwilling to give up.

A few days ago, I saw a friend complain that he invested $20,000 to buy ETH last year, and after a year, although ETH has risen again, his account still remains at $20,000, which feels like a wasted year. He wished he had just bought BTC instead.

In fact, regarding this friend's investment philosophy, I think there is nothing wrong with it, because he bought the king of altcoins, ETH, rather than various junk projects or meme coins. However, this does not change the fact that buying ETH has been a relatively poor investment experience for him over the past year.

From last year to now, ETH has experienced four waves of increases, as shown in the image below. This means that over the past year, this friend theoretically had at least three opportunities to withdraw funds from ETH and invest in other more promising projects.

Zoom image will be displayed

But why didn't he do that?

I believe this can be psychologically attributed to a manifestation of the sunk cost fallacy or cognitive dissonance.

The sunk cost fallacy refers to the tendency for people to be less willing to give up on something they have already invested time, money, or energy into, leading to the thought of "I've already put in so much, why should I give up now?" Cognitive dissonance occurs when a person's internal thoughts conflict with their actual behavior, leading them to stubbornly maintain certain behaviors or beliefs to reduce discomfort, such as knowing an investment is failing but unwilling to admit their mistake and seek better opportunities.

This mindset can be simply summarized as "unwilling to give up."

Continuing with the example of the friend mentioned above, he has been holding onto ETH despite having at least three opportunities to withdraw without loss. However, due to his "unwillingness to give up," fearing he might miss out on a rally, he prefers to watch his money (position value) stagnate for over a year rather than admit he was "wrong" and look for better opportunities.

This situation is somewhat similar to an office worker who fears "what if I lose this job in the future," thus hesitating to leave and enduring a low-paying, overworked position.

So, how can one overcome this mindset? From an investment perspective, one of the better solutions is: reasonable goal planning and strict position management.

Reasonable goal planning means using long-term planning to counter short-term temptations. For example, if your investment goal is to see ETH reach $10,000 in five years, then being temporarily stuck at $3,800 is something you shouldn't worry too much about.

If you don't want to bet 100% on a single goal five years down the line and also want to seize other short-term opportunities, then you need to further plan your position management. For instance, as suggested in our earlier articles, you might consider dividing your position into a 5:3:2 ratio, where 50% of your position is allocated to long-term investments in ETH (or BTC, or any project you believe has long-term industry potential), 30% can be used to trade a few blue-chip coins you are optimistic about (and a small portion can be allocated to gamble on meme coins), while the remaining 20% should be kept in cash (USDT) for liquidity.

However, for many people, some strategies that seem reasonable may appear ineffective or meaningless. For example, the 5:3:2 position management plan we mentioned earlier was frequently referenced in our 2022 articles, but so far, it seems not many people actually follow this advice (of course, I haven't followed it either; based on my personal risk preferences and goals, I currently use an 8:1:1 position plan, which I have shared in previous articles).

A core issue here may also be the "amount of capital."

For instance, someone entering this field with only $1,000 may prefer to gamble on meme coins for quick, high returns, rather than devising a 5:3:2 position plan.

Conversely, for someone entering the field with $1 million, this shouldn't be a problem, as they would know how to act relatively safely and reasonably, and they wouldn't directly gamble $1 million on an altcoin (unless that $1 million came easily).

Thus, for those who are prone to gambling, there are essentially two outcomes: one is to achieve overnight wealth, and the other is to go to zero. Every gambler entering the market believes they can get rich overnight, but over 99.9% of them end up with nothing, which is the stark reality, yet many choose to ignore it, especially those who have just stepped into the casino.

Position management is not just about dividing funds or selecting targets to buy. In trading operations, "buying" is relatively easy; as long as there is a reasonable goal plan and execution strategy, it is also relatively easy to buy at a relatively low point. However, "selling" seems to be a dilemma many face. I often see people complain: "I sold too early, I regret it." "I sold too late, I regret it."

Imagine this example:

Zhang San buys a certain token, and after it rises by 50%, he sells it because he thinks that if he doesn't sell now, he might lose his profits. However, after Zhang San sells, the token continues to rise by 500%, leaving him deeply regretful for selling too early.

Li Si, seeing the token's good performance, jumps in and quickly gains a 200% profit. However, he believes that if he continues to hold the token, he could achieve 10x, 20x, or even more returns. He thinks the opportunity to change his fortune has finally come, and the 200% profit is no longer satisfying. As a result, he watches the token quickly drop from its high, and while his hopes of getting rich linger in his mind, he loses half of his principal. Li Si also falls into deep regret, blaming himself for selling too late, feeling reluctant to cut losses, and unable to sell while watching other tokens soar, feeling only envy and frustration.

The stories of Zhang San and Li Si may reflect many people's experiences, and the main reason for these outcomes may stem from the "unwillingness to give up" mindset we mentioned earlier.

The market is hard to predict, and I don't want to engage in any thankless tasks. Regarding the issues of buying and selling, we won't provide specific targets; that is, we won't tell you which coin to buy to get rich, nor will we tell you at what price to sell a corresponding coin.

What we can do is share what we currently favor, what we have bought, and how much we have sold at certain positions in some articles. At the same time, we will also provide some methodological suggestions, such as those mentioned in previous articles: a long-term trading plan, suggesting that operations can be conducted in batches. The simplest strategy is to keep buying during a bear market and sell during a bull market; or, you can consider combining weekly (K-line) indicators for right-side operations, such as using the EMA21 and EMA55 indicators (when EMA21 crosses above EMA55 from below, it can be seen as a bullish signal, and when the Bitcoin price touches above EMA21, it is a good entry point). For mid to short-term strategies, it is recommended to combine the project's fundamentals, K-lines, market sentiment, and capital flow to buy in batches and sell in batches, while also having a profit-taking/loss-cutting plan to control your greed (i.e., establishing strict trading discipline).

Making money has no upper limit; there will always be endless money and various new opportunities in the market. However, losing money does have an upper limit; your capital amount is your limit, and your principal is your ticket to participate in the market. A significant loss could mean you lose the chance to return to the market forever.

Just like we believe that in this bull market, Bitcoin could still reach $130,000, $150,000, or even higher, we still decide to start selling in batches from $100,000 to take necessary profits. We won't regret selling too early, nor will we regret selling too late; we are simply executing our trading discipline and plan strictly according to our risk preferences.

"First protect your life, then make money" is a good investment philosophy. The market will never lack new opportunities, but whether your capital and mindset can wait for that opportunity is the key question you should consider.

Often, when a person becomes obsessed with achieving perfection in every trade, it usually leads to a reduction in "good trades" overall, and they may even fall into a pattern of revenge trading. Therefore, we do not pursue so-called perfect decisions (always buying at the lowest point and selling at the highest point), nor do we seek absolute returns on individual trades; we place more importance on the overall position size under risk management.

In summary, always make clear decisions regarding your funds, striving to be able to attack when possible and defend when necessary. Whether you are a diamond hand or a paper hand, there is no need to engage in meaningless comparisons with others; as long as your position allows you to feel comfortable most of the time, that is sufficient.

Everyone has a different understanding of money. The reason people lose money is fundamentally not due to market makers or whales, but rather due to their own "unwillingness to give up" mindset.

The market is ruthless, yet full of opportunities. It often rewards those who are disciplined, patient, and possess long-term strategic thinking, while punishing those who are greedy, emotional, and lack any strategy. So, which category do you belong to?

That's all for today. The images/data referenced in the text have been added to the Talking about Li, Talking about the Outside Notion notes. The above content is merely personal opinions and analyses, intended for learning and communication purposes, and does not constitute any investment advice.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。