Firstly determine what kind of trader you are-
Diamond Hands- Long term holder despite conditions
Fast Fingers- Babysits risky moves (not for the inexperienced!)
Paper Hands- Panic buying and selling.
Ground Rules for Yield Farming
Do not try to time the market.
Do not try to time your entries.
Keep dry powder (usdc, busd, other stables) to leverage up and down.
Yield Farming Strategies
Initially, you need know your appetite for risk, your personal mathematics abilities, and your expected exit time.
Before choosing an investment, you should understand the fundamentals of the farm, the pertinent reward token economy, and the fundamental analysis of the project itself.
Combining the stated knowledge of yourself, with the stated knowledge of the project, you’ve taken a first step into choosing a unique farming strategy.
SAFU = stablecoin/ big cap coin .
Determine the difference of holding a SAFU bag versus the risk level of the farm given the preceding factors. (Viability of the project, reward of farming vs risk, etc.)
Strategies-
1. Swap SAFU bags into the farm token to stake. Reap reward tokens, and swap them back info SAFU bags.
Pay attention to the entrance and exit fees when you harvest, you’ll want to make sure they aren’t eating your profits, as that is part of risk/ reward assessment.
This is the best strategy to use if you’re not super familiar with the project or the tokenomics, or not comfortable with keeping a long term major exposure to the reward token. Keep an eye on reward token price action. Consider that at any time, your bag of reward token could get rugged, so you’ll want to keep track of your original investment and see when you’ve broken even and when how much risk you can afford.
2. The second strategy is to swap and stake your SAFU bags as before, however, this time, instead of swapping back to SAFU, the following can be employed:
Protect your original SAFU investment, then take your earnings and put them into more high risk high reward farms. In other words, get back your original investment, swap it back to SAFU, then play with the profits like a casino, DYOR.
You can see here how the beginning of your own personal investment system can be built using these strategies as fundamentals. Maybe you’ll add a percentage to your SAFU bags, then play. Set targets. Hopefully you’ll have both strategies employed simultaneously. Just remember the number one rule, never lose money :).
Strategy 3 is to stake reward token liquidity pairs (typically one that involves high cap or a stable coin), then swap these reward token that you earn back to your SAFU bags.
This strategy is best employed in the early days of a token’s offering, in which the APR is a high percentage.
Strategy 4 is similar to strategy 3, but with an added risk factor-instead of selling the reward tokens back to SAFU, add the reward tokens back to the liquidity pair, or single token stake the reward tokens for further gain.
Both strategy 3 and 4 give you significant exposure so the project’s native economy, as you are holding the blockchain native and stable coin, as well as their tokens, and signed up to receive more.
Again, as an overall strategy, you’ll want to recoup your principal as a priority. The recommended strategy is, while you are earning decent rewards from any of the employed strategies, keep an eye on TVL of the project. When the TVL starts to drop, rewards are likely also to dip. Before rewards dip, sell a good amount of your bag, recoup your principal, and then form new liquidity pairs and enter into farming with the profit that you’ve just secured with a new risk assessment. Investing with profits is the best way to destroy FUD and FOMO. Remember to DCA in and out of projects instead of APEing in and out.
Also, with the latter strategies, if you miss selling your rewards on the high, if you have faith in the fundamentals of the project, single token stake your rewards, to avoid impermanent loss on your rewards, and to add extra rewards to your bag on the way back up to a good sellable price.
5- Buying reward tokens and hodling or staking them. This is usually the noobie, didn’t read, just bought method. High risk with little protection, beware!
Combating your own fear is one of the biggest parts of this game. That’s the battle, and in battle, it’s clutch to have plans, and a weapon.
Plans= fundamentals and the strategies that we’ve covered.
Weapons = dry powder (cash), and knowledge of yourself and the market.
A simple way to check the value of your LP tokens is to divide the total value of the liquidity pool being used by the total number of LP tokens circulating. Keep in mind, your personal LP tokens have been earning swap fees, so you wont know the true value until you unpair them.
Consider buying a PokeGan NFT.
You'll gain so much more than the basic outlines here.
Tokengated lessons provided by Omakasea.
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