Find what you’re good at and stick to it
When playing poker I would take advantage of the many statistical tools which provided player insights. One of the more interesting features was to analyse your own performance by starting hand. I wasn’t overly surprised to see my worst performing pair was AQ but what did shock me was just how badly I was performing with it.
It wasn’t just that my winning percentage was poor. Rather, the more telling statistic was that my losses with it significantly exceeded any other starting pair, likely because I was playing it with less caution. With weaker hands losses were limited as I got myself out of hands more easily; with AQ I was committing myself more and staying in hands far longer than I had any right to. The greatest single improvement I could have made to my game was to muck AQ as soon as I saw it (obviously I didn’t do that and tried to work on it instead, but I never got to a position of true comfort).
Why do I bring this up? Because I was struck by how similar this situation was when I analysed my Delta trading performance. Each unit is a blend of performance vs both £ and ETH (with the exception of ETH, which is just against £). % gains are similarly derived. The below isn’t complete as my trading history got lost when I switched from Blockfolio to Delta — if this had my full 2017 history the list of different assets would be easily into triple figures.
ETH accounts for the bulk of gains because that was pretty much the entirety of holdings during the initial market rise in 2017 (other tokens, such as GNT, I haven’t traded since switching to Delta so these are rolled into that ETH figure). ELA, the biggest loss both by % and units, was the perfect storm of entering near the top of the market as well as immediately before adverse news specific to the project emerged. It might be surprising to see BTC near the foot of the list; this is largely as I have traded into BTC during market downturns and then back into other assets as soon as I think the market is picking up again.
Unsurprisingly small caps are my best performers. Looking at the list I think I’ve played them well overall. I limited downside whilst achieving huge upside. This is why I’ve always been convinced that — moral/ethical concerns about investing in dodgy projects and time commitment/risk appetite aside — the best strategy has probably been a BTC or BTC/ETH heavy portfolio with a varying allocation to micro caps. I suspect this holds true as much now as it has done for the past 24+ months.
Secondly, I’ve killed myself deviating from this strategy, a frustrating experience. Three of the worst four performing cryptoassets (excluding BTC) I’ve held have been mid-large tier projects. I have constantly preached that projects with large market caps are no more trustworthy than those with small ones and yet it is undeniable that I treated them as if they were. I invested a higher proportion of my stack and didn’t set myself exit points if they dropped, leading to heavy losses. Indeed, much like with AQ, I’ve committed myself further as they’ve dropped and thus incurred further losses.
Finally, the most pleasing aspect of the above was it arguably shows both good risk management and decisions. Excluding ETH, which skews things somewhat, over 50% of the above were losing trades. However, the winning bets returned 19.3 units on average while bad bets were confined to a loss of -11.3 units. Given this partially reflects a market downturn of some 80–90%, I lean to the side of satisfaction on this although admittedly certain successes and failures alike leave a dirty taste.
Obviously there are some bad misses, but there always will be. This is why capital preservation is the most important lesson to adhere to, just as bankroll management is in poker. It takes a long time to build up capital, but without good risk management this can be wiped out in an instant.