Principles of Investing

An underlying investment guideline guiding principle is understanding odds and risk when laying down capital for return. When investing in non risk free instruments nothing is guaranteed. The best approach is making highly informed wagers, while simultaneously appropriating the right amount of capital on each said wager. So position size and outcome probability are the two key components to factor.

New Asset Class

Cryptocurrencies are their own asset class the likes of which have never been seen before. What moves the traditional broad stock markets and the individual companies are not the same as what moves the cryptocoin market. However, basic investing guidelines may still be applicable. Again, position sizing, length of hold time, when to buy, and when to sell.

Risk/Reward

Length of time you hold an asset will impact your risk/reward ratio typically. The size of the the market capitalization of a security also increases the risk/reward profile. More risk is taken from smaller market cap instruments also increasing the risk/reward factor. Large market capitalization securities are more established and have less growth potential. The volume traded determines how liquid the instrument is. Volume determines the overall availability of transactions matching buy and sells. Volume relates to ones ability to enter and exit positions.

Entry and Exit

One of the more difficult aspects of speculating in markets is being able to accurately assess a fair market price. Timing is critical, entry and exit points are key. Obvious, but worth to mentioning for the purposes pertaining to discussions on risk/reward odds. Play the odds and evaluate when to hold and when to fold.