The cryptocurrency market has extremely low barriers to entry, so anyone with an internet connection a smartphone or computer and a bit of start-up capital can become a cryptocurrency trader. Unfortunately, most beginners go through harsh lessons and go broke.
Consider 10 common mistakes made by novice traders, which should be avoided at all costs.
Start bidding with real money, not on paper
A novice trader has no good reason to use real money, especially when there are a large number of resources and platforms for trading on paper.
Anyone interested in becoming a professionala trader, must first develop a system based on a simple set of recommendations for inputs, outputs and risk management. And this should not be done with real money. The absence of real risks will not deprive you of composure and the opportunity to learn a lesson in a quality manner.
Trading without stop loss
Novice traders tend to trade emotionally, which is manifested in the refusal to quickly accept losses.
The most important skill you should havetrader - the ability to recognize a loss and move on to the next trade. Failure to do this is the main reason for losing money. Set a stop loss and do not move it, even if the deal goes against your plan.
Inability to maintain balance
Successful traders maintain balancedportfolio. It is quite reasonable if 10% of the funds are concentrated in cryptocurrency, and 70% of the crypto portfolio is a long-term investment (mostly in bitcoins), with 15% cash and 15% for trading. Bidding is advisable to carry out 15% of the portfolio.
Rebalancing is the process of returning yourportfolio to the target distribution of assets in accordance with your investment plan. This is difficult to do because it involves selling an asset that works well and buying assets with weaker results. This action is especially difficult for many novice investors.
It should be noted that most novice inexperienced traders merge their deposits precisely because of the unconscious following of the averaging strategy.
It happens like this. A trader opens a position that begins to bring him loss, however, hoping that the price will sooner or later go in the direction he has predicted, he opens another position in the same direction. And so, time after time, the stubborn price that does not want to turn around does not eat up its entire deposit.
Inability to keep a trade journal
Successful traders have a plan for which theytake responsibility. The only way to do this is to record transaction details for further analysis. This is the best way to learn and avoid repeating trading mistakes.
Keep a diary and study it. Record your thoughts, emotional state, and trading results. This will help a lot in the future.
Risk in excess of the allowable amount of losses
In the crypto space, people are fascinated by the idea of making money that completely changes your life, just finding yourself in the right place at the right time.
As a result, they go all-in, risking everything, hoping for a happy lottery ticket. At the same time, for some reason they think that here the probability of winning is higher.
To earn money you need starting money. Many novice traders are blinded by the idea of making tons of money without leaving their couch. This is a false idea, especially in the absence of sufficient capital for bidding.
A trader who wants to become a professionalyou must be able to support your whole life with trade - this means that his profit should cover living expenses without additional investments. In most countries of the world, trade requires at least $ 50,000-100,000 and a stable profit of 10% per month.
This is actually very difficult to achieve. As a result, many novice traders find themselves under great stress when their expected profit from trading does not match the actual results.
Do not do this!!! As you know, leverage is a double-edged sword that can both increase the return on profitable transactions and exacerbate losses in losing transactions.
Leverage should be used only by experienced traders who have been constantly making profit for years.
Using trading models and indicators that are incomprehensible
Beginner traders are poorly technical savvyanalysis. They should develop very simple trading systems and avoid making decisions on models or indicators, the meaning of which they do not fully understand. Take, for example, moving averages.
Follow general behavior
Another common mistake they makenewcomers, is that they blindly follow others. Experienced traders are accustomed to exit trades when they are too crowded, and inexperienced can remain in the transaction long after leaving a strong hand. More often than not, beginners lack the confidence to go against the trend.
There is another important point: most crypto traders blindly trust signals from little-known people on Twitter. There is no more reliable way to a financial collapse than to spend your hard-earned money on the advice of even specialists who are more likely to manipulate you for their own profit.