Crypto Portfolio Management, Execution, Psychology – 8 Tips to Level Up Your Game

We’re in a bullish market and despite multiple opportunities, it’s important to remain focused and learn how to become a sharper, more structured, and focused trader.

Proximity Labs’ Chief Degen Officer, Res, shared a thread on X, on how traders and improve their portfolio management, execution, and psychology to level up their crypto game.

Proximity Labs is a research and development firm focused on NEAR protocol that offers financial, strategic, technical, and marketing support.

8 Tips on Becoming a Better Crypto Trader

1. Take the 100% Cash Test

Res begins his thread with this simple test in which traders have to ask themselves a simple question, to optimize their portfolio allocation.

If your portfolio were to reset 100% to USDT today, would you choose to reallocate funds exactly in the same current position?

Most traders would answer that they wouldn’t make the same choices, but they still struggle to act. These are most likely the key psychological barriers:

• The sunk cost fallacy
• Emotional attachment
• Fear of being wrong

What is the Sunk Cost Fallacy?

This is the cognitive bias where traders continue to invest time, money, or energy into something simply because they already invested in it, even when it doesn’t make sense anymore. This applies to more aspects of life, including relationships, projects, and more.

In trading terms, this means holding onto an underperforming position because you’ve already spent very much on them, financially or emotionally, rather than cutting losses and reallocating to better opportunities.

Traders who feel like they would have done things differently, need to act, despite feeling overwhelmed at first.

The question is if you would buy the same exact amount of a specific token today, and this must be applied to all tokens.

Emotional Attachment/Fear of Selling

Selling is emotionally difficult as it feels like missing out on potential future opportunities. However, clinging to positions based purely on hope or fear, leaders to stagnation and poor judgement.

2. Keep a Structured Portfolio

Res identifies two clear categories for better portfolio management:

Core Positions

High conviction translates into being able to handle violent swings. This doesn’t necessarily mean that you have to hold long-term, especially as the opportunity cost is very expensive in the crypto market which has aggressive changes. Res advises traders to believe in something.

Trading Positions

Short-to-medium-term opportunities mean capturing specific trends or price movements at the right time.

This allows for:

• More flexibility
• Faster rotations
• Tighter invalidations

Mixing these two types of positions can often trigger confusion and emotional decisions, and by clearly separating them, traders can see the purpose of each position, avoiding regrets.

3. Fewer, but More Concentrated Plays

This is what Res calls an underrated skill that only some of the greatest traders can master. This is most likely the secret to promoting from one big league to another.

He offers an example of a portfolio worth $1 million with four coins, PEPE, ARC, ZEREBRO, and ENA, and another portfolio worth the same amount, but with more coins included besides the four.

Every trade taken should somehow impact a portfolio, otherwise it’s not worth it.

Fewer plays help with the following:

• Better portfolio management
• Avoiding traders’ fatigue – hesitation
• Avoiding mental exhaustion

On the other hand, when you have fewer assets, this can also be an asymmetrical bet. You could have a 1%-2% risk, or you could get a 20%-40% impact on your portfolio.

Overall, traders are advised to take asymmetrical bets and size up properly with conviction and compound, without simply collecting meaningless pumps.

4. Build a Portfolio Based on Personal Goals

A personal portfolio should mirror financial objectives. If a trader’s goal is to grow from $200,000 to $2 million during this bull run, every decision should get him closer to this target.

Key questions worth asking include the following:

• Does this trade contribute meaningfully to my goal?
• Am I simply chasing a pump to avoid feeling left out?

Lack of focus is a trader’s one of the worst enemies.

For instance, investing $5,000 in every asset could sound tempting, but trade-offs are also worth considering:

• The asset won’t meaningfully impact the portfolio.
• It could consume disproportionate time and energy.

Most traders buy something, hoping to make 10x with the coin, but caution is required regarding wishful thinking.

Knowing your goals is vital and understanding whether you are working to achieve them is crucial.

Res posted a quote by Elon Musk in which the tech mogul says that one of the biggest mistakes people generally make, including him, is wanting something to be true, even if it isn’t. Real truth is ignored, because of what people want to be true, and this is a very difficult trap to avoid.

5. Focus on Edge

When traders reach a high point in their development, they did it by leveraging their strengths – so they should stick to them.

Res also offers an example, saying that he leveled up his portfolio by hitting and compounding several on-chain winners. As the portfolio grows, liquidity could become a concern, but scaling into higher market caps will not be the answer.

This usually involves competition against participants with sharper and more specialized edges in large markets, and we don’t have to assume that a bigger portfolio makes up expert perps traders.

Traders should stick to what they already know they’re good at.

If there’s no inflection point and a trend keeps going, venturing into unfamiliar territory can lead to the following:

• Low conviction, leading to allocation of less capital due to risk aversion
• High effort, ending up with consuming a lot of mental bandwidth

6. Avoid Being a Contrarian

Being a “contrarian” can be alluring due to those who have successfully spotted inflection points and were recognized with a rising reputation. But what exactly is a contrarian in terms of crypto?

What Is a Contrarian?

Being a contrarian in the context of crypto means taking positions or making investments that go against the prevailing sentiment or market trend.

Contrarians believe that the crown is often wrong, especially at extremes of market optimism or pessimism, and they aim to capitalize on this behavior by acting in the opposite direction.

Key features of a crypto contrarian include the following:

• Buying during fear
• Selling during euphoria
• Ignoring hype
• Focusing on fundamentals, while the market follows trends/narratives
• Being critical of herd mentality, preferring independent analysis

Risks of being a contrarian include:

• Timing issues, and irrationality risks
• Misjudgment sentiment, as the market reflects valid reasons, and going against it could bring losses
• Psychological pressure and emotional challenges

Being a contrarian pays off during important turning points. In a bull market, traders need to add fuel to the market, not try to extinguish it. Momentum is traders’ ally, and that’s why it’s best to:

• Play the trend
• Take profits when it’s over
• Leave contrarian heroics behind

The main target is not to be a market prophet but to grow your portfolio.

7. Have a Thesis, an Invalidation, and Detach Yourself Emotionally from Tokens

Res says that tokens are merely vehicles for achieving financial growth, they don’t have loyalty nor care for traders. When opportunities are evaluated, traders should document their rationale and strategy.

What Does a Thesis Imply?

Traders should answer a few questions to set up a viable thesis:

• Why are you buying this token?
• Is it a catalyst-based trade?
• Are you betting on an asymmetry of information or that the market has mispriced it?
• Is it just FOMO from selling your favorite KOL shilling the token?

What Does Invalidation Imply?

Res believes that traders should:

• Identify clear criteria that will force them to close their position – price, time, or market conditions changes
• Detach feelings from the investment

If traders see a better opportunity, they are advised to choose it because the ultimate goal is to increase the portfolio value, regardless of which token delivers returns.

8. Avoid Punishing Yourself

Res believes that the outcome of a trade does not define whether it was a good or bad decision. He says that a good trade is one that was made with the best information and reasoning available at the time, it’s not one that necessarily ends up in profit.

Assuming that a trader didn’t gamble, but approached a trade with, favorable conditions, a thesis, an invalidation, proper risk management, and a clear understanding of whether it was a core/trading position, this means that he made a good decision, regardless of the result.

Traders should avoid punishing themselves and fall into self-criticism following a loss. Losses are sometimes inevitable and even the greatest traders can fail, while bad ones can succeed.

Self-blame can lead to the following:

• High pressure
• Poor judgment
• Hesitation
• Emotional trades
• A downward spiral makes you think that you do everything wrong, or others do everything better

Conclusion

As a conclusion, Res believes that the best thing that’s left is to look forward to the future. Past decisions were made so that traders could make better decisions next time, not to be consumed by them.

According to him, there is no way to learn in the crypto market without failure, and there is a price to pay for every success story.

Trading is not about how many pumps one collects, not even about who makes the most money on the way.

The crypto market is about how traders play each hand, whether they reach their goals, and most importantly, whether they keep their money when everything else collapses.