Top 6 Cryptocurrency Trading Mistakes To Avoid
In this article, we will be covering some of the pitfalls which await anyone just coming into the cryptocurrency market.
Even the best of us make mistakes when it comes to trading. These mistakes are generally common when you are just starting, but over time one overcome them and avoid repeating them. This is on the bright side of things, though. Many who we started this crypto journey together have lost their life savings and are back to working a full-time job. So making mistakes, especially repeated ones, can land you in a terrible place if you don't nip it in the bud right now. The funny thing about these mistakes is that they are usually not always apparent to those making them at first. It takes a lot of losing before realizing that a mistake has been made. This is why you need to take time to learn about some of these mistakes to protect yourself from making them. Knowing about these pitfalls most times is what differentiates a trader or investor on the path to success and a one heading for failure.
In this article, we will be covering some of the pitfalls which await anyone just coming into the cryptocurrency trading market. For those who have been around for a while and are still not making any headway in this market, you could be causing these mistakes. So pay close attention.
Thinking You Are Smart
Personally, anyone who understands how the crypto market works is super smart, in my opinion. So give yourself some credit. It is no news that the crypto market attracts the sharpest minds, so it is not uncommon for a newbie to start thinking he or she is smarter than everyone else. One key symptom of the "too smart" syndrome is trying to reinvent the wheel. So you stumble on a trading strategy on a public forum, which has several people updating it regularly, and so far, things have been positive. But just because you think you are smarter than everyone else on the forum, you started tweaking the system, adding extra indicators, to maximize profit and reduce loss. In the end, you will arrive at the same result or worse.
You know why? Because whoever came up with the strategy is not a novice trader and must have run his or her checks before posting it. So don't waste time tweaking a system that already works and makes money. You will only end up spending precious time. Do not get me wrong, though. You need to check if you can improve a system, but don't waste too much time on it. Because from experience, it never ends well. I try to open about 15 charts at once and run the strategy on it. This way, a trade set up will show up within the hour, and I can run whatever indicator I believe will improve the result. Within an hour or two, I can easily detect a working system and a waste of time without having to wait for a setup, only to get disappointed.
Also, learn to ask questions on public forums and social media pages. You will be surprised at how many tools you can get for free when you ask nicely. In my experience, the crypto space is packed with geniuses, so no matter how smart you think you are, someone else is years ahead of you.
Joining Paid or Free Signal Groups
Honestly, I think every trader is a victim of this particular mistake. The first sign that it won't end well is that it is not a sustainable method of making money in the market. Secondly, a present unbeaten trading run is not a guarantee of future profit.
Take this, for instance, if you go back to your charts and place a Moving average of letting us say period 10 and 20 on it, I can assure you that their will be times where five trades will win a row. (Let me know if I am wrong in the comments section). What does this mean? Signals can only be trusted after it has won trades consistently for at least 6 months. But the sad truth is that these signal providers don't last this long. Also, one thing familiar with these signal services is a fake result. They start by giving free signals, and they post results from a VIP group. But since it takes time to backtest the results submitted, they never really get caught. So think of the money you will be paying for VIP and then the one you will lose before you go forward with a signal provider. One thing I will advise is that you make enough money from the free signal to pay for the VIP package before you join the VIP package. This way, you reduce your risk.
Picking Tops and Bottoms Without Doing Analysis
The market moves in waves. So we all know once it starts trending upwards, it has to come down. So naturally, once an uptrend or downtrend has been identified and established, the natural thing is to look for trading opportunities in the opposite direction. This logical thinking has led to many beginners losing their life savings. The funny thing is that picking the bottom and top of trade with your instincts works for the first few trades (at least for most people). There is this euphoria that comes with being able to pick a perfect top and bottom, but sadly it doesn't last long. All your trades must be based on sound research and correlations. Anything else will eventually burn your accounts to bits.
Buying Or Selling What Twitter Influencer Says you should
Influencers are does paid to promote a product. Strangely though, we all still fall for their recommendations even if we are almost sure they were paid for it. Why? Well, for me, I generally just assume that a celebrity will not want to soil their name or brand with a fake project. Sadly I was wrong and still always wrong, and so are many other people. Even if the celebrity has the best of intentions, what if those behind the project are smart and convincing enough? In the end, they apologize or worse, get fined. You are the only one left with nothing. Don't trust any public figure recommendation until you do your in-depth research.
With getting emotional, trades will eventually end your career on this path. Emotions like revenge, anger, lack of confidence, and overconfidence are known to affect traders a lot. So before anything, you need to keep all these emotions in check. The best way to do this is to have a checklist and follow a plan. Anything that derails from your project should not be entertained.
Not Employing Money Management
No trade is 100% sure. Even with the best system in place, your winning chance will surely be less than 100 percent. This is why you need to employ money management at all costs. You don't want to risk more than 5% of your trading capital on any single trade at any point in time.
Knowing and avoiding any of these common mistakes will help you last LONGER in the market (it takes more than avoiding these mistakes not to lose your account when it comes to trading).
So make sure to run a check through your current methods/system/strategy to see if you are making any of these mistakes.