Radical truth about the behavior of an average trader.
Even though the Great Cryptocurrency Bear Market of 2018 is in its tenth month, there is still a lot of trading on the bitcoin and altcoin markets. There’s money to be made, but if it seems like you keep trading and your portfolio keeps swimming in red, it might be time to look at what’s going on with your trading decisions. Do you need to do something differently? Yes, and you don’t need to be into professional trading to be profitable, but the cryptocurrency market requires attention, discipline and systematic approach, especially when it comes to the lesser-known altcoins.
Ask yourself a question: “What’s my trading strategy?” If your answer is, “Strategy? Well, I just buy and hope, does that count?” we need to talk. If you don’t have a sound trading strategy, whether it’s based on technical indicators, or fundamental data on cryptoasset, or a technology-based one (algorithmic trading), you’re prone to a host of problems.
First, though, you need to better understand yourself and your own trading patterns. Digital assets are among the most volatile assets that traders can work with these days, but at the same time, the underlying blockchain technology creates opportunities to unlock wealth over a slower, longer-term horizon.
Moreover, if you don’t have a sound trading strategy, you may be undertrading or overtrading. Day-trading or swing-trading in crypto is the same as in equities or any other asset class — it takes a lot of watching for price movements and performing a bunch of fundamental and technical analysis to scalp opportunities. If you fail to do it right and yet not having any strategy, you could be undertrading and missing opportunities. Conversely, if you’re thinking that a position-oriented stake — “I must have the coin X in my portfolio because it’s going to disrupt the industry Z !” but then sell it off for the next must-have — then, you’re overtrading. A good strategy fits your personal traits offsetting greed or other dominant emotions— it is one that fits you as a trader and is one that you stick to.
Blind hope for a recovery or a bull run is something every trader has experienced at least once. It’s the reason why you’ll see over and over again in investment-industry documents something to the effect that, “Past performance is not to be taken as an indicator of future price movements.” Really — there’s a difference between technical or fundamental analysis and staring a screen and chanting “Bitcoin at 21,000” until it happens.
A more subtle problem is one that you tend to find in a bear market, and that is averaging on the downtrend — or, in other words, “good-dealing yourself to death.” Some altcoins might look like good deals, and might even be so, but stop and ask yourself why this is the case, or you’ll soon find yourself overextended with sinking or drifting altcoins. Building contrarian positions — buying when the market is selling — is a good way to buy low, but you also need to sell high, and you might have to watch the coin drop further before seeing any gains. An undervalued digital asset might stay that way — have you checked to look for drivers that will move the market? There’s a reason why they call this, “catching a falling knife”.
Not asking why an altcoin (or Bitcoin, even) will move leads us to the next reason why you’d lose money in the cryptocurrency bear market. If you’re not paying attention to risk management, you’re setting yourself up for a loss. Ask yourself what is my current average risk exposure by asset and by exchange? Will I have chances for the recovery if one of the coins gets delisted or the exchange will be hacked? If you don’t have concise answers to these questions — you’re probably walking in the minefield.
There’s more to risk management, though. For example, if you buy Bitcoin, you should be able to sell it relatively easily, but what about altcoins that are trading more thinly? If a part of your portfolio jumps, can you actually sell what you’re holding? This is known as volatility exposure and it’s something you also must pay attention to. Knowing how to react to the market — as in understanding the processes you need to take — is an important part of being a trader as well.
The last reason is probably the most important. Almost everyone at one time or another has stared at the screen and begged an investment to rise, or kept buying a sinking cryptoasset that never recovered. But they learned. If you’re making mistakes in this bear market, then pay attention to them. It’s the cost of an education, and ZERO fun, but not learning from your mistakes, especially due to excessive hope and limited knowledge, will set you up for further losses.
Kattana is a professional trading terminal for blockchain assets, created by traders for traders to bring individual cryptocurrency trading to a pro level. Trade on multiple crypto-exchanges with the whole range of pro tools, from market analysis to measuring trading performance, available in one place.
Let us know how you cope with bear market by sharing your trading experiences in the comments!
The Kattana Team