Whether you’re a newbie or a seasoned Crypto trader, there are common mistakes that should be avoided at all costs.
This lesson will put more pounds in your pocket and more weight in your Crypto bankroll.
Before we get started, let it be known that professional traders are prone to making mistakes – not only novices.
The most important mistake to avoid is emotional trading. The only guaranteed outcome of sentiment-based trading is failure. Trade with your head, not your heart!
Another lesson that some traders never learn is the following: You can never control the Crypto market. It is bigger than every one of us, and always will be.
Not even Warren Buffett could shift the tide of bullish or bearish sentiment in a market this size. When you’re looking to expand your horizons as a Crypto trader, remember to keep things simple.
I strongly caution against adopting complex trading strategies that you don’t understand. The convoluted mathematical formulas that experts use are probably best avoided when you start trading Crypto.
Choose a currency pair that you understand such as the GBP/USD, and learn everything you can about it.
You will also want to keep a close eye on your reward/risk ratio. If your average winning trades are £70 and your average losing trades are £50, you have a reward/risk ratio of 1.4.
Crypto day traders will always want a reward/risk ratio higher than 1 since this is the breakeven point. Anything less than that is a mistake.
As always, you should use stop loss orders for every trade that you make. This is a risk minimization strategy that works and that’s why the best Crypto traders always use them.
Crypto trading is unpredictable at the best of times, so you will want to get out of a losing trade as quickly as possible.
Remember to place your stop loss at the time you initiate the trade. Profit maximization is just as important as loss minimization.
The most common mistake I see with eager Crypto traders is the following: They’ve lost several trades and they decide to make one big ‘bet’ on the next trade to recover their losses and end the day on a high. This is a no-no.
Don’t forget that risk management must be in effect at all times. Never allocate more than 1% or 2% of your capital to any one trade. Even if the markets are going your way, don’t break this rule.
If you decide to trade the news, be advised that there is often a nonlinear effect of breaking news on the Crypto markets. Often, expected decisions have already been priced into the currency market well ahead of time.
That means things may not go as you expect and you could end up losing a lot of money. The best method to adopt is one that formulates a strategy after the news has broken.
Let’s wrap things up with a few more important tips on what to avoid when trading Crypto. We spoke about emotion, now let’s talk about greed.
When you’re overconfident, you can become greedy and there is no greater leveller than the Crypto markets.
The markets don’t like hotheads, and they certainly have little patience for greedy traders. Trade with purpose and gumption and you’ll see your way clear.
While you’re at it, always check out the credentials of the Crypto broker. You don’t want to be caught short with an unregulated brokerage that manipulates the numbers and refuses to pay you out. Due diligence will serve you well.
I know it’s a lot to take in, but these tips are well important to you as a novice Crypto trader.
As always, feel free to get in touch with any questions you have. I’ll be more than happy to oblige. Happy trading!