Risk management is another extremely important aspect of trading that most people don’t pay enough attention to. As you may know now, volatility isn’t a joke in crypto and even more in NFTs.
Compared to cryptos, your NFTs have way higher chances to become illiquid/very hard to sell (even at a loss). If you’re looking to make money, keep in mind that we’re playing a marathon more than a sprint.
If you’re playing a marathon, you’re looking for stability and sustainability. In that context, it’s more important to avoid big losses than to risk too much for big wins.
Sometimes it could go well, you put 40% of your wallet on an asset and it works out you made huge gains. But the day you fail your trade and lose 40% of your wallet, you’ll be extremely mad, up to a point where you’ll forget all the wins you made in the past. You’ll be focused on your failures.
Strategies
So to make money and enjoy our ride in the long run we need at least one risk management strategy. A strategy that should let you:
- Invest in what you want, whether it’s a risky bet or not
- Take last-minute opportunities
- Take advantage of the bear market/decreasing market
First of all, let’s avoid investing without doing our own research (DYOR!), it’s important to listen to other but you don’t need to follow other people. Except if you’re hanging out with the 0.1% top traders and have a lot of cash to play with, always do your own research and learn how to have a critical look at every project.
Networking is super important, don’t get me wrong, I made a lot of money listening to friends, but you need to understand to elevate your trading skills. Try not to rely too much on people, be the one people are relying on.
Here is a strategy I like that check the 3 previous points
- 20% Solana, extremely important to have some flexibility and being able to catch last-minute deals
- 10 to 20% reserved for risky bets, risky bets are cool to play and can sometimes be very rewarding depending on the meta of the market. People love risky plays, follow the market. But not too much.
- 40 to 60% reserved for safer plays, this should make sense, the safer the play is, the more money you can feel comfortable investing in
- I like to have the remaining allocation filled with stablecoins. It’s super important to have some stablecoins, if we experience a crash or if you need money for whatever reason, having some stable IS NEVER a bad idea.
Example of a high-risk tolerance wallet
Example of a low-risk tolerance wallet
Let’s push the strategy a bit further
In my eyes having some stablecoins in a ledger is extremely important, and you will agree with me once you will experience your first market crash. It’s sudden and brutal, to be prepared you need to prepare yourself during the bull market.
There is this one thing I like to do; On every winning sale, I deduce royalties and marketplace fees and turn 10% of the result into stablecoins. When your start to have a good amount of stablecoins it can be good to split your stablecoins capital between multiple stablecoins;
USDC-BUSD-USDT-DAI
With this method, I grow my stablecoins capital on every sale I make without noticing a huge change in my investment capital. Please notice that even if you’re only focused on trading NFTs, in my opinion, the perfect wallet is also composed of cryptocurrencies.
That being said, I designed the two previous wallet strategies to fit a total capital of 100 to 500 SOL. Here is an example of what a high-level (500 to 1500 SOL) wallet strategy would look like.
I haven’t reached this level yet myself so maybe I’m wrong but I still want to share my opinion on the matter.
Please note that I’m not the best trader, these are some strategies I like and made myself from my personal experience, I encourage you to find a strategy that perfectly fits you, feel free to use mine as an example. You can also try to use them it will always be better than nothing =)
