Traditional Solo Investing & Trading Methods vs Precog Finance

6 min readFeb 2, 2022

Traditional Solo Investing & Trading Methods vs Precog Finance

So you’ve been exposed to the world of cryptocurrencies and green charts have lit up your eyes, or you’ve been in the game for a while and have always pondered about the best investment strategies out there. Whether you actually believe in blockchain technology and DeFi, or are in it for the profit, one fact rings true across all retail investors and traders — investing or trading solo is a tricky affair.

Of course, everyone starts somewhere, and it is not wrong to take financial matters into one’s own hands — that is the point of DeFi after all. But the question persists: What’s the best approach one can take towards the market? Can an individual figure it out enough to make substantial gains on a consistent basis?

The short answer is: no. The market is too big and too complex for almost anyone to figure out on their own; and yet, numerous trading strategies exist that try to exploit certain market conditions. Some of these strategies are fundamental, whereas others are technical (trend following, reversal, breakout, martingale… etc), and some are borderline gambling.

In this blog post, we’ll be comparing Precog Finance’s algorithm to traditional solo investing methods to help traders, investors, and newcomers weigh in their options before deciding to adopt a particular methodology.

Day Trading

One of the most popular, basic, and easy-to-perform methods is day trading; whereby a user bases their decisions on technical analysis, news, and signals to try and execute profitable trades in a very short timeframe. Oftentimes, leverage is involved in the equation, which, while used with the intention of magnifying profits, exposes traders to proportionally higher risk — and thus could be an unwise move considering the already high volatility of the market even without leverage.

It should come as no surprise, therefore, that the vast majority of day traders end up losing money. It is estimated that around 85–95% of all-day traders end up with a net loss in their ventures, and most end up quitting the practice a few months down the line. Hence, much more often than not, solo trading, unfortunately, ends up being not only a costly exercise but also one that leaves a bitter taste in most solo traders’ mouths, ensuring they won’t be using crypto anytime soon.

Hodling

Holding — as of recent more popularly referred to as “Hodling” — is one of the safer strategies out there. The concept is rather simple: 1) invest in a promising project, 2) wait a few months/years for the price to appreciate and 3) exit your position with a profit. While it sounds simple on the surface, there’s more to it than meets the eye.

The underlying principles of hodling stress the importance of a project’s fundamentals, i.e. realistic and probable use-cases, sound tokenomics, effective solutions to real problems… etc. Various facts and metrics have to be taken into consideration, both internal and external, to determine whether or not a project is worth it.

Some of these projects take years to wake up and provide returns; which can translate to frequent chart-checking and market and project monitoring, and the subsequent stress that follows. Even in successful cases, the ceiling can be uncertain and timing for the best possible profit is nearly impossible. It makes for a great slow and long-term strategy, but lacks short-term potential.

Algorithmic Trading

Using conventional trading bots and algorithms can be a tricky task, especially when they’re not preconfigured according to a user’s needs. Upon booting them up, traders are likely to face a complex UI that is difficult to navigate, and relies on command prompts, value inputs and the configuration of other variables to function. It is at this point that most retail investors uninstall the software and proceed to something else.

Those that persist start their research and their due diligence; they read guides and documentation, watch YouTube videos and tutorials, and widen their understanding of the technology they will be entrusting their capital with. On a side note, such characteristics are praise-worthy and this article should in no way discourage anyone from going down the path of knowledge.

What is important, however, is to understand the risks involved, and the ever-present possibility of beginner error. While many algorithms provide test environments for users to practice and improve their skills, unforeseen circumstances will still persist, and errors that take long to surface will dwell in the dark.

Another factor is the user’s understanding of the market and trading strategies, or lack thereof. One may be capable of configuring a bot blindfolded, but without the sufficient aforementioned understanding, one may not see their efforts bear fruit. While preset algorithms exist, the vast majority — if not all — aren’t flexible enough to adapt to an ever-changing market, and rely on frequent human input and updates to remain relevant.

Honorable Mentions

While not enough to stand out as valid strategies on their own, we thought these strategies were still worth glossing over:

Memecoin Moonshots: Some people are tempted at the idea of becoming millionaires overnight and find themselves on a quest to find the next Dogecoin or Shiba Inu. The unfortunate reality is that most of these coins are rug-pulls, and the initial gains they display are artificially caused by the team behind them. Yet, these facts don’t discourage certain investors from taking the risks to try and find their fortunes in fundamentally useless digital assets.

Solo Mining: Solo mining can be considered an investment strategy in the sense that a user invests a certain amount of capital into mining hardware with the hopes that their machine will solve the next Bitcoin block. To elaborate, Bitcoin miners use their computing power to solve the hash puzzle for the next block, and the first machine to do so currently wins a whopping 6.25 BTC — almost $250,000 as of writing! Most miners join mining pools to combine their computing power and share all the earnings of the pool amongst each other according to the contribution of each miner, thus ensuring a steady stream of guaranteed income. However, one can imagine the temptation of going solo to keep 100% of the block rewards.

Sentient — Precog Finance’s Trading Algorithm

While trading algorithms were covered above, Precog Finance’s Sentient differs to such a degree that an exception has to be made. It performs in a league of its own, and as such, has to be discussed separately to properly contrast the differences between itself and all the other trading algorithms in the market.

To start, Sentient is rather simple to use; this immediately exposes it to a very wide audience as its technology can be leveraged and utilized by anyone with a basic understanding of crypto and the market. This is in part thanks to its user-friendly UI, and also due to its preset trading strategy that doesn’t need to be configured by the end-user.

But unlike other preset algorithms, Sentient manages to adapt and improve on its own, and this is due to the Machine-Learning AI that actively learns from past trades and applies them in real time without the need for stopping and re-adjusting the algorithm manually.

While the algorithm provides enough flexibility and self-improvement on its own, a team of professionals such as trading, statistics, mathematics, algorithm and programming experts continues to study and work on Sentient to ensure constant upgrades. This combined effort presents the main value of Sentient, which when contrasted with the alternatives above, highlights its qualities in every possible aspect.

As for its strategies, Sentient relies on arbitrage strategies that only execute trades where profits are virtually guaranteed. Since it runs around the clock and trades at speeds no human can possibly match, across multiple strategies, asset pairs, timeframes, and exchanges, such opportunities are spotted and seized at high frequency and consistency, which makes Sentient the ideal trading protocol for a diverse range of investors and traders.

In the future, we’ll be sharing private test results that demonstrate the raw capabilities of Sentient.