Top 10 trading mistakes

In the last two years, due to the crypto boom, trading has become more popular than ever, attracting the interest of the masses.

Social media’s feed started to become flooded with technical analysis pics, dolled up by fancy indicators of any kind, advertising the most original and strange strategies. In particular, Twitter played a crucial role in making trading popular nowadays thanks to the “Twitter” plus “Crypto” combo.

It’s fantastic to observe such growth for what is still perceived as a field with a high barrier of entry, of which the direct expression at its finest is represented by many individuals asking for more trading-related educational content. However, CryptoTwitter’s feed is also overwhelmed with jokes, memes and exaggerations of any kind which may instil into the rookie trader a sense of hyper-excitement, overconfidence ending to lose touch with reality and the perceived risk, transforming trading more into a gaming session rather than a serious business. The fact that Cryptocurrencies, contrary to many other assets, lacks a physical counterpart makes this issue even worse because it’s harder to recognise to a digital token an actual value.

The risks and the difficulties of trading, however, are still there, no matter how ethereal the context of cryptocurrencies is, between a new dankest meme and the next Lambo giveaway of your favourite exchange. Even a single mistake can make you lose a good chunk of your capital in a matter of minutes.

After this brief introduction, let’s see what the most common errors of rookie traders are, and how to correct them:

After this brief introduction, let’s see what the most common errors of rookie traders are, and how to correct them:

Error n.1: considering cryptocurrencies trading as a solution to your financial problems.

Crypto markets are risky and -on the contrary to what it’s commonly perceived on Twitter- it’s not that easy to be profitable. You have to keep in mind that most of the people end up to lose money by trading. Rationality and emotional detaching are necessary traits to have in this field in order to be able to take the right decisions.

If there is not a finite line between your trading capital and the bank account that you use for your living necessities, your trades are going to be fully conditioned by your emotions detrimentally.

If you have financial problems, yet you are genuinely passionate about trading cryptos or any other asset, look for a 9/5 job and start saving money, spending the time that you would like to spend on trading to study new materials, practising with paper trading and backtesting strategies. Invest what you can afford to lose and be patient!

Error n.2: to blindly trusting Twitter calls, Telegram signals, YouTube shills, etc.

You are the only responsible for your trades. This business is about you against the market. You need to learn how to research good info related to what you’re investing in; be aware of your targets, considering the timeframe that you’re using for making your setup.

Social media can constitute a good source of information but keep in mind that it’s the same place where people try to spread info that it’s related to their interests. Like you, many other players are playing this “game”, and its nature is strictly competitive. So, no matter how successful someone looks, you have to rely on your chart, your technical analysis, be aware of future events and fundamentals. By doing so, you will manage your trades. Ultimately, you are the only one who is responsible for the outcome of your trades.

Error n.3: halting the learning process.

Similarly to many other areas of expertise (especially of technical or scientific nature), trading requires you to update your knowledge continuously, keeping up your studying efforts. When it comes about learning, there is no end point. The more you know, the more you will realise how much you still ignore, or in Socrates terms: “The only true wisdom is in knowing you know nothing.”

It’s important to understand that the ecosystem of Cryptocurrencies is fast-paced: It moves, changes and evolves very quickly! Brand new exchanges, new protocols, new security threats, new opportunities, new sub-market, if you don’t keep up you will be left behind.

Error n.4: not considering the FA events.

Even if traders mainly use to rely on Technical Analysis, having a proper understanding of the fundamentals can enhance the trader’s perspective. However, limiting to the strict fundamental analysis of the asset doesn’t suffice; It’s essential as well to monitor the events that could have an impact on your open trades and eventually re-evaluate the Risk/Reward accordingly. Here are some critical event categories that you should pay attention to:

• Token Airdrops;
• Token Unlock after the ICO
• Regulatory Events
• Forks.

Error n.5: falling in love with your bags.

It happened (and still happens, from time to time) to everyone. Diligent traders/investors do their own diligence (wink-wink, or at least they should), and then, eventually, they end up to find a project that is backed by a solid idea, a professional team and an ambitious yet realistic roadmap. Moreover, as the icing on the cake, a vibrant community that dispels any doubt related to the potential of the project and convinces us about all the virtues.

When emotions overtake your rational analysis and a sane degree of scepticism you have to be careful because you’re running the risk to become a community member by accident, or, in other words, a “bagholder”.

Error n.6: becoming arrogant and overconfident.

Don’t mix personal success with the bull trend: quite often, when a rookie manages to chain some successful trades in a row, a sense of overconfidence arises, ending up in an arrogant attitude which could very well lead to an underestimation of the actual risk of the potential future trades.

Trading is an individual and competitive skill. The outcomes of the trader’s gameplan boost his feelings either to euphoria when all clicks in optimally, or to depression when losses are taken; this is the heavyweight of successes and failure, with all the possible related consequences to the sustainability of the trader’s business.

That’s why it’s necessary to stay as much as possible in a rational and “cold” state of mind, applying proper risk management plans. Too much risk and over-exposition after a few winning trades is the main reason why people tend to burn the majority of their profits. The key trading principle here is consistency. The trader’s mood must not condition his strategies and exposure to risk.

Error n.7: not having a plan or betraying your original plan

Because you had a plan right? You didn’t FOMO’d (Fear of Missing Out) into the first setup that you saw on Telegram, didn’t you?

Nice! So after having designed your strategy, here comes the action, or the bold part so to speak: stick to your plan!

You want to be in control of every single move on the timing and price action of your trade, but things won’t go exactly as planned: some unpredicted swings can disappoint yourself, causing stress, planting the seed of doubt. It’s there when you show skin in the game, and you execute your plan: either accepting the failure by cutting the loss or enjoying the victory by taking profits before its too late.

Here are some additional suggestions that may be of use in your journey to becoming a better trader as well to prevent the insurgence of bad habits:

• Share your trading ideas with mates

As in almost every discipline, sharing and compare your ideas with third parties is a good habit. However, it’s necessary to keep in mind a key point: it’s always better to do it in a restricted group of friends that you can trust. This way you will be able to cut the noise of the crowd, bad intentions and uneducated charting.

It’s essential to keep this simple concept in mind because many people tend to back their analysis by checking “cashtags” on Twitter, which are not to be intended as reliable sources of information.

A solid group of friends, on the other hand, will help you to check the latest info and analyse with a presence of mind, while being able to chat, explain, critique and confront those details and thoughts that constitute the foundation of every chart.

• Breathe, walk, read, travel

In my experience, the classic “hard worker” perspective of being obsessed with working dozens of hours non-stop is dead. It’s already scientifically proven that our index of attention and performance drops significantly after 45 minutes, so when it comes to attention span, we humans are more similar to sprinters rather than marathoners. We tend to perform at our best by taking short breaks between small sessions of “focused” work (Source 1,Source 2, Source 3). It’s just not efficient to keep trading while your attention is not at the top (A Game). That’s why I always recommend mixing trading sessions with other tasks.

Sometimes I dedicate separate chunks of time researching side investments like ETF’s, Index Funds, business plans to fund local companies…etc.

Alternatively, if I want to disconnect and get rid of any pressure entirely, I enjoy playing some tennis, paddle, read books or research papers. Philosophy material has always been a mindscape of mine. Here is the last book I’ve been reading (for the second time already), and I wholeheartedly recommend it: “Justice: What’s the Right Thing to Do?”

Also, with the perspective of a more significant timeframe, I recommended to take a break and entirely disconnect during a few days now and then. During these periods, I enjoy travelling and testing restaurants around the world.

Until now I have visited around thirty-six countries, and I’m not willing to stop. Travelling is one of the bests investments that you can ever do, for the enrichment of both the mind and soul.

• I will keep this last point simple:

“Men who reject the responsibility of thought and reason can only exist as parasites on the thinking of others.”

Ayn Rand, The Virtue of Selfishness: A New Concept of Egoism

If you want to avoid these mistakes, my team of experienced traders can help you out: https://t.co/WV7FKTZRa0

Originally written by CryptoRand, revised and edited by L4z0r.

Thanks for your time

See you at Twitter

CR