How to Avoid the Most Common Mistakes in Bitcoin and Altcoins Trading?
We’ve reached a point where good trading opportunities occur on a daily basis. With so many coins out there, it’s impossible to be on top of all of them. Well let me tell you a secret, you don’t have to be. You have to be patient and in control of your emotions. Some days you’ll be sitting on your computer, looking at those hypnotizing green candles and big bull runs and you’ll want to trade so badly. If you missed out on those trades, let them go. You can’t enter such trades based just on an assumption that the bull-run will continue long enough for you to gain a portion of those profits. There’s a big chance that your impatience will cost you dearly. It often happens that you buy at the top and face a big drop in price afterwards.
Entering in a hasty trade without a clear strategy is a terrible idea. But if you put in some effort and learn how to analyze the coin/chart, set up entry, exit and target points and adjust position size correctly, you will be able to know the difference between a good and a bad trade. Your goal must always be to pick the best possible trade. And remember a good trader always trades less.
The cryptocurrency market is booming and it will continue to do so. What started in 2009 can’t be undone. More and more people are learning about cryptocurrencies and are thinking about investing in them. I get asked these questions: Is bitcoin going to rise even more? Should I invest some money in ethereum? Which cryptocurrency is the best?
My answer usually goes something like this: trading in the cryptocurrency market was extremely profitable for us so far. It seems like we are doing the right thing. We got really good at spotting potential profits and taking advantage of them. Of course sometimes things don’t turn out as expected, but we know the risks and we know how to minimize them. Trading nowadays seems simple, because we have the knowledge and the experience.
In order to make your life a little easier, especially for beginners, I listed some of the topics, you have to take into consideration before you start trading:
1. Don’t let Bitcoin out of sight.
Bitcoin is an essential part of cryptocurrencies. You must always know what BTC is doing. Is it in a consolidation state, a bull run or in a bear run? What’s the latest news that might influence sudden price change or a trend reversal? This is important because, you’ll be mostly trading with an altcoin/bitcon pair. You’ll have to keep an eye on both currencies. There’s a general rule that when bitcoin’s price is rising, all other currencies will be in red numbers. And when bitcoin’s price decreases, alts will be back in green. There are exceptions where you will profit from both bitcoin and altcoin going up, but don’t get caught in the opposite scenario where you’ll get slammed. When you’re not sure what to expect, trade with the good old altcoin/fiat currency pair. The only downside is that there are not as many options on the table.
2. Volatility has to work for you, not against you
This market is so volatile that sometimes you’ll get shivers from it. It is caused by big whales’ moves, pump & dump and FOMO events. The volatility works both ways. It can make you rich or it can leave you penniless if you are foolish. It’s worth mentioning also that some exchanges offer margin trading as well. I strongly recommend you stay away from it if you are new to trading. Keep in mind that things can change very quickly.
3. Practice with small trading position size and master the exchange
If you just started trading, your position size should be small. Why? Well because you have to be 100% sure of what you are doing when you want to execute a specific order. You have to know your way around the exchange you are trading on. Write things down if needed. When the time comes for you to place orders, you will have to act quickly. There will be no room for errors. Place tiny buy and sell orders, stop-loss orders and practice as much as needed. If you master one exchange it doesn’t mean you know them all. When you trade on five or more exchanges you will notice they differ in many ways. Before choosing an exchange, always check the following characteristics: liquidity, fees, security, option for short/option for margin trading and other features.
4. Enter a trade only when you have a clear strategy
I mentioned a few things already, but going in a trade blind is a no-go. Maybe you’ll get lucky a couple of times but in the long run, you don’t stand a chance. In order to achieve success, you have to combine fundamental and technical analysis. You have to stick to your strategy no matter what. Once you enter a trade with calculated position size, you will know how much risk are you willing to take and where you will take your profit.
5. Adapt, analyze trades and learn from your mistakes
Traders who don’t analyze their trading performance are more prone to make repetitive mistakes. As a trader, you must constantly improve in order to survive and thrive in this fast paced market. This is a vital part of trading. There’s lots of room for improvement even if you are an experienced trader. Try to be on top of all major global cryptocurrency market events. Adapt from them and avoid unnecessary risks or take advantage of them and secure easy profits.
6. Have your own opinion
Unfortunately, the unregulated environment of cryptocurrencies has attracted the attention of scammers ever since it was created. Do your own research. Don’t trust the guy with a free ticket to the moon in the forum. Check different social channels, blogs, forums, news and review sites and see for yourself if the project that you are about to invest in is credible. This is especially relevant for ICO’s and early adoption investment trading strategies. In the end it is you who sends the money away. Ask yourself can I afford to lose this money? I recommend you to evaluate the situation carefully before jumping into uncharted waters.
7. Control your emotions
Easier said than done. Emotions are a constantly unwanted companion in trading. It’s easy to get carried away by greed, fear, hope or excitement, among others. Different situations will bring different emotions and it is up to you how you will handle them. When you have a bad trade, the negativity surrounding the outcome can carry over into the next trade. It may happen that you won’t enter your next trade due to the fear of losing. On the contrary, when you have a winning streak you might think you’re invincible and push trades into the market at the wrong time. Boredom or the need to trade can easily cloud your judgment and cause you to enter a trade when you shouldn’t. Before entering a trade, it always helps to ask yourself for the reasons behind the actions that you’re about to take. Practice resilience. Rather than letting the fear of losing, greed, failure and stress overwhelm you; use them as learning experiences and steppingstones to becoming a better trader.