Crypto trading slumps shape great crypto traders
Losing is painful.
And losing day after day is disorienting and potentially destructive. It doesn’t matter whether the losses come from a leverage bomb in Bitcoin or a protracted sideways market in ETH.
Losses are hard.
You went from a can’t do anything wrong trader to a nothing seems to go right trader.
If you’ve only had winners during a Bitcoin and Ether bull market, these losses can be psychologically devastating.
Great traders are never made in bull markets. They are forged in pain, adversity and challenges. Those of us that have been around a while have been through many of these periods before.
We have learned that if you are in a slump, that pain, adversity and challenge are part of your development and formation.
These slumps will become part of your long-term preparation.
How you handle these moments will shape what kind of crypto trader you will become in the future.
Losses create FUD, and FUD create losses
Trading slumps can be that disorienting period after a big selloff. They can be periods where you take endless small losses like a thousand paper cuts in a sideways market.
It can be long stretches where you can’t figure out how to make money.
Or quiet markets where you can’t find an edge.
Trading slumps are characterized not just by financial losses but by fear, uncertainty, and a loss of confidence.
These feelings are unsettling. They have a way of bleeding into every other aspect of your life. Your sleep becomes less restful. Healthy lifestyle habits may fall by the wayside. Burdened by fatigue, you feel lethargic and heavy. Everything becomes a chore.
But it won’t always be this way. It won’t last forever.
The secret is to embrace this moment and learn from it.
You can’t control what other Bitcoin traders do
Embracing the moment starts by taking stock of the things you have control over and the things you don’t.
You have control over your interpretation of events in the crypto market.
You have control over your trading process, resource allocation and your execution.
You have control of your risk management.
You have access to some trading rules to help keep you on track.
You have control over what and when you trade.
And you also have control of what you do during good market periods in anticipation of weaker periods.
What you don’t have control over is the behaviour of the crypto market. Nor do you have control over the other participants in the Bitcoin, Ether or Dogecoin market.
You can’t control the news flow either.
Reframe your thinking, and get your trading back on track
Your interpretation of events is the most important item on your list.
If you interpret the crypto market as a threat, a scam, a danger, something you fear in some way, then your first step is to get your head straight.
It’s time to reframe your thinking.
This reframing will change your thought process. It will help you deal with the emotional burden of a painful period. Because when you are afraid, you will hesitate and fail to take the necessary risks to get back on track.
Fear and lack of confidence will drive you to take superficial losses too quickly.
Fear will mean missing key moves on sharp, shallow reactions.
Your caution will lead to overthinking and overriding solid trading plans, only to see your idea play out —which further burdens your already weakened confidence.
Instead of focusing on trading not to lose during this period, trade to win.
Crypto trading losses are tuition
If you begin to accept the idea that you can’t get anything right, losses become personal.
This acceptance becomes a form of need.
A need for a win.
That need drives either excessive or suboptimal position size. The need manifests itself in erratic trading activity that is purely reactive and out of sync with market sentiment and movement. Old traders call this having your head in the mixer.
The financial and emotional hole you are digging with your frantic activity increases desperation and reinforces these negative responses.
This is when you start trading not to lose.
Human beings extrapolate the future from the present and recent past. When times are good, we think times will be good into the future. When times are tough, we assume these tough times will never end.
As a trader, you will learn that these assumptions are flawed.
Periods, where people think the good times or bad times will last forever, are moments to look for the other side. They are opportunities to shift your thinking and your focus.
So start with reframing your slump as a learning experience.
It’s an opportunity.
Part of your formation as a trader.
This experience is simply tuition.
Explore your trades and evaluate the problem
Once you’ve reframed your slump into an opportunity, it’s time to consider what happened.
Was your trading process the problem?
Was the event unforeseeable?
Was your risk management less than ideal given the conditions?
And what did you do well proceeding the event to now?
Look carefully at the thinking behind each trade. The execution. The market conditions. Then examine the outcome.
Your slump might be the byproduct of the Bitcoin market adjusting to a drop and changing information.
It might be the result of internal personal problems that are negatively influencing your decisions and interpretation about the market.
You may have a structural problem like not taking on enough risk, or your stops might be too tight. Maybe your trading process needs further refinement.
Start with one element at a time. Make an adjustment and test until you get back on track.
Ruthless crypto markets require ruthless evaluation
If your slump is taking place in a down market, these types of markets tend to be more ruthless and unforgiving.
Here your mission is to protect your capital as much as you can.
Again, take a look at your trading process and approach. It may be good in some market conditions but not useful in every market condition. If this is the case, then ask yourself if it’s better to sit and wait.
Remember, you don’t need to trade every day or have a position on all the time.
If you are confident that your trading process is sound, sometimes waiting for the right market conditions can be the right approach. However, during these periods, you may want to stay in tune with market activity so that you are ready as the market adjusts to your strengths. This means using small trades as a series of market condition experiments.
Using small amounts of capital on each trade will allow you to manage your market tuition payments.
Tuition will help you to determine when and where to step up your activity as the market evolves.
Don’t let the Bitcoin market beat you down
Too often, traders fail to recognize the change in the market and try to fight their way to profits in a declining or flat market.
This approach vaporizes valuable capital and destroys psychological resilience and confidence.
A lack of discipline in a declining market eats up a lot of time and energy. And when the next move eventually comes, these fighters are too exhausted. They are too beat up, and capital depleted to take full advantage of the opportunity in front of them.
When you’re in a slump, you will also learn important things to help you in the next one.
For example, when you are in the midst of a bull run, it’s always good to start planning for a change in market sentiment and profitability potential.
That means the more successful you are and confident you feel, the more you should remind yourself that a market goes up and down. Set aside capital during periods of extreme optimism and profitability to provide yourself a cushion for those periods where your trading may not be working.
A solid capital cushion will protect you psychologically when the market is tough and you are dolling out tuition.
This financial cushion gives you strength when a reversal comes. It gives you mental and emotional durability when other market participants are chewing their fingers off, frozen by fear and doubt.
Slumps make traders. They test their mettle. They help them develop valuable skills for the upside and future downside.
So embrace downturns as opportunities to grow.
And make sure to take the steps necessary to work your way through these difficult periods and come out stronger.
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