Top 10 Trader Mistakes Leading to Failure - Try To Avoid It
The cryptocurrency market is especially attractive for beginners in that it does not require special knowledge or resources to join. In order to become a cryptocurrency trader, it is enough to have a stable Internet, smartphone, or computer and a little start-up capital. However, successfully trading and making a profit is not as easy as it might seem at first glance. Therefore, we propose to consider 10 common mistakes made by newbie traders.
1. Bidding immediately for real money
If you are just starting to trade, then with a high degree of probability you do not have the necessary skills, knowledge, and skills for profit. Therefore, most likely, you will lose money. Then what is the point of immediately starting to trade for real money if you lose them all? For starters, it’s worth developing a trading system that is based on simple recommendations for entering and exiting the market and testing it on DEMO account. And only then, in case of successful results, start to practice it for real money.
2. Trading without stop loss
Another basic mistake. Many professionals recommend trading exclusively with stop orders because they allow you to control risks and losses. Moreover, it is important not only to set a stop loss but also not to move it in the course of the transaction. Many make this mistake. Set a stop order, and when the asset begins to make a loss, then move it away. At some point, it seems to make no sense to close a losing trade and it still hangs with a dead weight.
3. Inability to maintain balance
Successful traders try to diversify their portfolio and, accordingly, risks, creating a balanced set of assets. It is considered quite reasonable to invest 10% of your total capital in cryptocurrencies, of which 70% are long-term investments (most often they mean buying Bitcoin), 15% are in fiat currency for re-purchase in case of a market drawdown and 15% for trading.
Portfolio rebalancing is bringing assets to their original position according to your investment plan. For example, if Bitcoin started to grow and already accounts for 80% of the portfolio, and fiat currency and the trading part each account for 10%, then rebalancing involves the sale of a certain amount of Bitcoins for redistribution to the starting position.
4. Averaging in trading
If you trade without leverage, then in general, averaging will not completely merge your deposit, but it can significantly reduce it. If trading is carried out with leverage, then averaging is a direct way to lose all the money. This is especially true for beginners. Experienced traders can operate with borrowed funds and manage risks, and beginners usually do not know how to do this. How does it work? A trader buys an asset, and the price starts to fall. Then he/she buys again at a lower price, and it continues to fall. Thus, the deposit is reduced.
5. Inability to keep a trade journal
Successful traders always record their trading operations, as well as the reasons for joining and leaving the market. This is done to analyze your trading system and improve it in the future. In other words, in order not to make the same mistakes. Beginners, unfortunately, do not pay due attention to this item and ignore keeping a diary. And this is a significant mistake. We advise you to keep a diary, writing down your thoughts, emotional state, trading results, and then study it and adjust your trading strategy.
6. Risk in excess of the allowable amount of losses
It should be understood that the cryptocurrency market is highly risky and highly volatile. Your capital can easily depreciate twice, or even more. However, many do not understand this, because they are fascinated by the idea of earning "easy money", therefore they bring their latest savings to this industry. Try to invest in cryptocurrencies only that part of the funds that you do not mind losing. I have already said that this is 10% of the total capital.
7. Insufficient capitalisation
It should be understood that for successful trading, first of all, you need to control the risks without overstating them. And the lower the risk, the lower the profit. Accordingly, in order to live on trading income, you need to have sufficient capital for this. For example, if you manage to earn 10% per month (which is quite a lot by the standards of traditional markets), and your expenses are $ 1.000, then you need to have at least $ 10.000, or better, to capitalize part of the profit. Unfortunately, many do not understand this and are trying to earn millions, while having several hundred dollars. As a result, they overestimate the risks and completely lose money.
8. Use of leverage
Margin trading can both help earn superprofits and completely drain the deposit. We said above that if you average the position in the spot market, then in the worst case you get a cheap asset. If it once grows back, then you will return your original investment. However, if you trade with leverage, then you risk losing all your money.
Leverage is best used only by experienced traders who have been steadily making a profit for several years.
9. Using trading models and indicators that are incomprehensible
In cryptocurrency trading, you can use many indicators and trading models that came here from traditional markets. However, newcomers are weakly savvy in technical analysis, so it is better for them to use simple trading systems and avoid making decisions on models or indicators, the meaning of which they do not fully understand. If you don’t know anything about technical analysis at all, then first try moving averages. This tool is not particularly difficult to master.
In general, I would not use technical analysis at all in cryptocurrency trading, since it doesn’t work there in 90% of cases, but if you use it all the same, try to use the simplest models of type, support, resistance, levels.
10. Follow the general behavior
Many newcomers are often seen enough by various bloggers, other crypto traders, or “experts” and blindly follow them, buying and selling assets on their advice. However, this is not the right approach. Firstly, they may be wrong, which often happens. Secondly, even if they were right, this does not mean that you will be able to earn on the advice of others. In trading, it is important not only to guess the direction of the price, but also competently join the market, and then competently leave it.
In particular, it is worth highlighting the various signals on twitter or telegram. We do not advise to follow the advice of these, even specialists. With a high degree of probability, they either manipulate you for their own benefit, or they want money to subscribe to these signals, which do not represent any significance.
Top 5 Services For Instant Crypto Swaps - Full Review 2020
Compare Exodus vs Coinbase - Which Wallet Is Better In 2020?Apr 28, 2020 4
DENT Price Prediction 2020-2025 - Should You Buy It Now?Apr 29, 2020 2
Compare Ethpool vs Ethermine - Which Pool Is Better?Apr 30, 2020 1