If you want to try your luck and make money, you don’t even need to leave your home for it: the internet offers many opportunities that you can use for this purpose. For example, you don’t have to go to Nevada to play card games in Vegas: you can try one of the dozens of games at an Vegas online casino site right now. But if you want to combine gambling with investing, you can do that too: there are many people who make a living by buying and selling cryptocurrencies.
This special market has its own terms, and most of them can sound quite strange if you’re not familiar with them. Below, we’ll explain what the “hands” terms mean and compare different trading techniques to discuss which would be the better option.
The Origin of “Hand” Terms
Contrary to popular belief, the origin of these terms is not Wall Street or other financial markets. All the terms that we will explain below originated in r/WallStreetBets on the Reddit platform. This is a subreddit run by retail investors, i.e., regular people who try to make a profit by buying and selling shares, and they became quite famous for the “GameStop short squeeze” scandal. Although casual users coined these terms, they are now used in all markets.
This means not selling a certain asset after purchasing it, regardless of price changes. For example, if you bought Bitcoin, you would not sell it, you will continue to hold it even if the BTC price goes up or down. Diamond hands is also known as “HODL”. This is a misspelling of the word “hold” and has become a meme on its own. In the GameStop scandal mentioned above, investors who bought GME shares ignored the price changes and stubbornly and persistently chose not to sell them: this is called diamond hands. By this, it is meant that “hands as strong as a diamond that will continue to hold on, no matter what”.
Paper hands, on the other hand, mean the opposite. It is simply a name given to investors who, after purchasing an asset, panic and choose to sell at the first price change. Once again, let’s say you bought Bitcoin, but after 24 hours, the BTC value dropped by 2%. If you panic and sell all your BTC, you are a paper hand investor: your hands are “not strong enough to be patient and/or weak as paper”.
Weak hands mean almost the same as paper hands, and it is referred to investors who sell their assets at the first price change. The only difference is that the price change can also be upwards this time. In other words, if you are selling your asset to make an instant profit after the asset’s value has increased by a small amount, you are a weak-hand investor.
Which One Is Better?
It is difficult to say for sure which of these techniques is better. First of all, they are very simplistic terms, and some (i.e., paper hands) are used to demean, so it’s impossible to say they are real trading techniques. However, each of them contains three different scenarios, and we can evaluate them separately. These scenarios are:
- Investing in the future by purchasing assets and holding them (diamond)
- Selling immediately at the first price drop after purchasing an asset (paper)
- Selling immediately at the first price increase after purchasing an asset (weak).
It is not possible to say that one of these scenarios will be the best possible option in every situation. Each can be a good choice for a different purpose. This will depend on what you are investing in, what your aim is, and how experienced you are in the relevant market.
For example, if you don’t have the time or patience to follow crypto price changes and you plan to make profits in the long run, diamond hands would be a good choice. You buy BTC or ETH, add them to your wallet, and just wait: after a certain period of time, if you believe you’ve made enough profits, you can consider selling them.
However, if you are an investor who follows the market closely, uses arbitrage techniques, and is not afraid to trade different cryptos, weak hands may be a better option for you. You do not make high profits, but you always earn more than your investment, which will give you an advantage in the long run.
Paper hands, on the other hand, could be the best choice if you have certain information that the price of a certain asset will decrease so as not to lose too much. For example, the price of Bitcoin dropped almost 70% in 2021: if you had sold your BTCs at the beginning of this decline, you would have stopped a big loss. Therefore, even the paper hands technique, which is often used for disdain, can be the right option.
The key here is to be a flexible trader: there is no rule that says you should pick only one technique and use it no matter what. Depending on the market situation, it will be best to be sometimes diamond, sometimes paper, and sometimes weak.