New to crypto trading? Avoid these 9 mistakes

Trading is a skill that anyone can learn, given the focus and time, it takes to do it. But the pitfalls that befall the novice trader are many, and the anonymous mavens of the internet reinforce those all day long.

You will be told, in soaring rhetoric, all kinds of amazing things. They will bamboozle you with facts that won’t make you a dime (or a Satoshi). Cliches about buying low and selling high will fill the forum feeds to provide an air of sophistication.

There will also be lots of anonymous expressions of sympathy when you get creamed on your position.

Novice traders make lots of mistakes, and mistakes are a form of learning, providing you use them as such. But there’s a bunch of mistakes you don’t have to make.
These were made by others before you. And by exploring what not to do, you can save your mistake making and learning for more important aspects of your trading journey.

Here are 9 mistakes you don’t have to make, or perhaps fewer if you already have some under your belt.

A left thumb forefinger holding a physical Bitcoin in front of a trading screen with a price chart on it.

1) You didn’t think security mattered

Now, one of the great things about cryptocurrency is that it’s a secure distributed peer to peer network. The transfers are fast, cheap and easy to do. Trading is amongst the purest available in any market today with 24/7 markets and little regulation.

But in all the talk about the network, a new trader might forget that securing the gateway to this wonderful world is crucial. Because a bunch of dirty scammers are trying to steal your crypto from your phone and computer.

In this case, you would want to get up to speed on how to protect yourself against cryptocurrency theft. And that includes understanding the pros and cons of various wallets.

2) You didn’t check out the platform where you will be trading

Crypto trading platforms have improved a lot since the early days when enthusiasts set up and ran them. Exchange hacks, dying founders, missing keys and various frauds have been exposed, helping to clean up the space considerably.

Some regulatory additions have helped to further thin the crypto trading platform herd. But if you are planning to trade, you should take the time to reduce risks when choosing a crypto trading platform by looking into various elements of that business.

Because the best way to avoid a problem is to use a secure, reputable, regulated exchange in the first place.

3) You make decisions based on anonymous forum advice

The internet is a wonderful place. You can go to Google and ask a question about almost anything and get some sort of answer. And it turns out, you can get a lot of answers about things from forums as well.

The problem is that when it comes to money generally, and crypto specifically, all of that anonymous advice is, well, anonymous. You have no idea who is providing the advice or what their agenda is. You don’t know if they know anything, or if they are enticing you into some pump and dump scam.

Your mother probably told you not to talk to strangers as a kid. As an adult, getting advice about money from anonymous posters deserves a similar rule.

So when you are dreaming of riches in crypto, you should also think about how NOT to build wealth in crypto You thought the news would help your trading

4) You thought the news would help your trading

The news has a job to do. It’s to entertain you and sell advertising. Through articles, blogs, TV and numerous other mediums, their goal is to influence your behaviour.
The problem for traders is that knowing the news doesn’t usually help you. In fact, more often than not, trying to trade the news will chew a hole in your account.

There’s a reason for that.

News is a catalyst for positions that have already been built in anticipation of an event. And the price you see on the screen before the news was shaped in part by that anticipation.

You’re just late.

5) You don’t have any trading rules

Starting out, you might feel a sense of excitement about opening your account, setting up your wallet options and picking the cryptocurrency to trade.

You might have even heard a few cliches to help you get rolling like:

* Buy low, sell high

* Keep your emotions in check

* Take your losses quickly and let your winners run

* Or, you have to hodl if you want to be rich

Once you have some experience, you will realize that these cliches are largely meaningless without some context. Because while they are easy to say, they don’t take into account all the mental and emotional stressors you will be dealing with when decisions are being made.

What you require are some trading rules to help guide you when things get tough. Rules developed in the fire of market activity.

These will take time to develop on your own, but until then, you can borrow some rules from someone with plenty of experience.

6) You forgot the risk management

No doubt, you will be told that you “need to manage risk” when you trade. These pontifications will have some good points, like

* Don’t bet it all on one trade

* Do your homework first

* Have a trading plan

* Cut losers fast

You will discover that risk management is easy to talk about but harder to do. And nobody will tell you that risk management starts with some deeply personal questions.
Because the more you know about why you’re really playing the game, the more effective your risk management will be.

To become a good trader, you will have to understand risk, but to be great, you will have to use effective risk management.

7) You didn’t realize leverage could kill you

In the financial industry, there are certain places where leverage is a part of the product, like in futures or options. In stocks, leverage is always used for short selling and is available for trades on the long side.

Crypto has borrowed extensively from these traditional financial products to expand the offerings to crypto traders.

The problem with leverage is that it isn’t for everyone. Although the potential returns are exciting, the losses can be devastating. On March 12, 2020, we saw the impacts of a volatile, relatively thin crypto market, combined with several pockets of levered positions.

The margin calls cut through prices like a hot spoon in ice cream.

As a trader, leverage can be used in specific circumstances, but as a new trader, you should be thinking carefully before you use leverage to trade bitcoin.

8) You let a crypto trading slump destroy your mojo 

Every once in awhile, you will end up with a losing streak. These can be painful. Many in crypto suffered through 2018, and quite a few will have been scarred by these events. This happens in every significant market decline in every asset.

But if you don’t adjust your thinking during a losing streak, you will lose your mojo and be out of the game.

Losses are a part of being a trader, but they don’t have to be your enemy. These can be part of your formation as a trader if you let them.

Your mission is to turn your slump into a foundational experience and reframe how you see it. The key thing to remember is that trading slumps shape great traders.

9) Your crypto winning streak turned into an expensive mistake

Winning is a paradox. It can increase confidence and drive better results. It can help you to expand your willingness and capability to learn. But when that process goes too far, and you don’t pay attention, the price of winning can be devastating.

As a new trader, you might start with a winning streak, making you feel invincible. The problem is that the invincibility is an illusion.

Plan for a change in market direction based on your emotional behaviour. The more confident you feel, the more the warning bells should be going off. Don’t let your winning streak turn into a crushing defeat when the market turns.

To stay in the game long term, you have to prepare to survive the periodic winning streaks.

Don’t let the whale eat you

Crypto provides new traders with something unique, a pure trading market to develop their skills and try to make some money. By participating in this market, you are helping to expand and develop it. After all, traders are liquidity providers regardless of their size or skill.

You just don’t want to be spending too much of your time paying more experienced traders in your market by losing to them. You can advance your experience by doing, but you can make your doing more productive by preparing for some of the pitfalls of trading.

By being prepared, you can avoid feeling like you are krill being eaten by a whale.




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