What Mistakes You Should Avoid When Trading Cryptocurrencies
By Space Coast Daily // September 22, 2021
The most important mistake to avoid when trading is thinking you can avoid mistakes. Trading is a game of probabilities and although some trades may have a higher probability of working out, nothing is certain. Believing that any trade, however great the probability may be, has a certain outcome is a mentality that will guarantee loss of capital.
How depressing that may sound at first. When you fully accept that trading is not a certainty and anything can happen, you will be much more at ease and you will be able to find more joy in trading. Logically, the best traders understand this. But not before investing lots of time and money on their education and of course having to keep funding their trading account.
Because most traders consistently lose money we can easily identify what their mistakes are. If you want to be a 1% trader with consistently profitable calls and puts on Bitlevex, then this video, in terms of trading psychology, will help you a lot.
Do not be afraid to change your mind
If most traders lose money consistently then there is no point in doing what most traders do.
When you are in a trade and you defined your stop loss, profit target and you got in at the price you wanted but then suddenly the context or the market structure changes, do you change your mind or do you hold on to the reasons you saw when you entered the trade? Changing your stop-loss is never a good idea only if it gets you to break even.
But how many times does it happen when you are in a slightly profitable trade and the market gives you an opportunity in the opposite direction, you hesitate or ignore the signal your profits disappear and your stop loss eventually gets hit.
Even if your stop-loss is set to break even it would have been more profitable to change your mind as the market changes than to hold a position that is not based on a valid signal anymore. Consistently profitable traders do not care if they are right or wrong and you shouldn’t either. The only reason to trade is to make as much money as possible and not being able to change your mind does not benefit you in that quest.
Listening to influencers or signal groups
This might be an obvious one but basing your trades only on the opinion of influencers or signal groups is a recipe for disaster.
- You putting your capital at risk not knowing how much research has gone into the opinion formed by this influencer or this particular signal
- You run the risk of being involved in a pump and dump
- You don’t learn anything
- You are subconsciously training your mind in thinking you don’t have to DYOR
The biggest problem is when it works the first, maybe the second or a third time. You will get the euphoric feeling of winning and are not prepared for the mental stress of loss. You may even be inclined to ‘’Win it all back in one trade’’ and that mentality will have disastrous consequences for your capital. This does not mean there are valuable influencers with great content and good signal groups but it is important to always, Do Your Own Research.
Never give up
The Dutch have a saying which in English translates to ‘’No is what you have and, Yes is what you get’’. This is just a way of saying that if you quit you’ll never succeed. Of course, this is easier said than done and this doesn’t mean that you should quit your job to start trading full time if you are not experienced yet. But it does reflect the mentality a successful trader has to have.
If you are in a so-called trading drawdown and things are not working out for you. The best practices to preach whilst in a drawdown are:
- Take a break (enjoy life, outside work)
- Reduce your trading size
- Backtest or paper trade
- Read up on your Technical Analysis and Trading Psychology
Things to always avoid while in a drawdown:
- Blame the market (even if the market is ‘’clearly manipulated’’)
- Keep entering without signals thinking you found the top/bottom
- Blame yourself for not responding like you wanted to respond
Last chain of thought
The only thing a trader can do is define the risk in a trade, and then decide to take the trade or not. If the trade happened to be a winner or a loser is determined by the market. After the trader has either taken the profit or cut the loss, whatever amount of time has passed since the entry, a trader can only reflect and learn from the choices that were made. And again it is easier said than done.