The Bad Trader’s Guide To A Healthy Portfolio
A list of insights on being successful in the midst of trading failures.
Everyone’s trading journey is different, whether crypto or otherwise, but it’s very likely that all started in a similar fashion — failure. It’s not an easy thing to admit in the moment or even if you’ve have years of success. Most only talk about their trading failures (if they do at all) after said failures are long gone and claim to be gurus of 110% accuracy. The truth is very different however. People get trades wrong all the time. If they don’t, ask for proof. The ones that boast of handfuls of 100% successful trades are mostly lying. Even people with many trades in a row deal with prideful dilemmas once they fail or physiological mind games that they will fail (or statistically should fail any trade now).
My aim for that wasn’t to boast about great trades, for even a failed trade isn’t a bad trade per se — just one where the results didn’t work in your favor. This article is for those that either can’t take a loss or for those that think they always have failed trades. But if your always learning, then your never failing.
Are you losing a lot of trades?
Do you wonder how people are somehow making money no matter the trading conditions?
Do you feel that you would have done better by simply just staying out of the markets in the first place?
This article is for you.
Here are some ways to trade successfully without really being that good at all. The secret? No secret. Just the concept of market awareness. This article isn’t designed to make you money, but it is designed to help fertile the soil for your own personal harvest. Before anything can grow, you must weed out the thorns.
Here are some step by step thoughts. This is not investment advice, just considerations of the market.
Stop Trading & Start Learning
This could be interpreted in two different ways but both are correct. If you are absolutely bleeding money, then you need to stop trading altogether and hit the books. One of my biggest regrets in my two years of trading tech stocks and crypto is that I didn’t learn right away and prioritize it. I wanted to make money fast so I threw money on what I liked to see it try and multiply. I’m used to finding decent picks in fundamental analysis for stocks but that was a horrible strategy for altcoins — the crypto market doesn’t operate in the same manner. I should have learned more than I did and my learning experience had a very expensive pricetag.
If your losing too much, completely withdrawing to paper trade and use your funds for books could be worthwhile.
Alternatively, stop trading and start learning could also be explained by using your trades and learning experiences. A good paradox of trading is that it’s not about trading at all. One of the fundamental successes of trading is learning. Every trade brings about something to learn. Prioritize learning with everything your doing.
Trading Isn’t About Complete Accuracy
You may understand some concepts of trading and find positions to where you get profit on an asset. You may see people on Twitter boast about a high strike rate or some with a self-proclaimed (but rarely verifiable, especially over ten trades) streak of 100% accuracy. I want to tell you that if you see that, it’s very likely they are intentionally scamming you or have no idea what they are saying. It’s rare to have even a consistent 75% accuracy. You don’t always have to get trades correct but to instead focus on how much you lose versus how much you gain.
This also means that if you are in a trade, be prepared to meet your profit targets and your stop targets with the same confidence and fortitude. Taking profits early or stopping out early on a consistent basis is horrible for your portfolio, because you are letting your emotions effect the bottom line when ultimately the bottom line is how your setup effects your portfolio. Sticking to a disciplined setup is productive to your future trades.
Markets Have Probabilities & Statistics
It’s worth your while to understand why markets are the way they are, along with charts, news, price moments, and more. All the charts, candles, and oscillators have meaning — they are composed of behavior data of the markets for certain coins/tokens. They are not magic numbers or movements and they can be analyzed by math and logic. I say this for two reasons: 1) that although charts and markets have harsh conditions, it’s not like the price of Bitcoin moves the opposite way of your position on purpose. Don’t take on that self victimizing nature to trading. This is to show that there are reasons why things move a certain way. Also, 2) because things move a certain way, you can tame them according to how you learn the way things move. Use the charts to your advantage. (And most of the time the best trades are the most simple ones).
Risk Management is Key to Survival
Unless your some maverick getting 99% trading success for years on end, you will suffer bad trades and bad streaks of trades. Having a solid risk management plan will keep you going. Statistically you could nearly flip a coin and still have success trading as long as you have contingency plans for when you win and when you lose.
Trading Shouldn’t Be A Sweet Tooth
Addiction is a serious issue for many, whether that’s smoking, gambling, drugs, or anything that has control over you. Trading can very well do this to you as trading. Taking trades can be addictive and should be taken very seriously. Historically my worst trades by far are ones that I just felt I should take without reason, or because of fear of missing out or panic. Trading in a calm, cool, and collective matter when the trades present themselves will sort out a majority of fumbling trades and particularly those you’re too emotionally attached too.
Good Trades Can Be Your Worst Trades
If you make a speculator trade, write it as a win, add it to your portfolio, and move on to the next. Don’t give it to your pride. This will particularly have an effect if you have 5–6 or even 10 winning trades in a row. If that happens, just secure your profits and take a step back to humble yourself. Pride comes before a fall.
Emotions Destroy Investments
This has been mentioned in a couple points, but your emotions will most likely be one of your biggest setbacks because your trades will rely on your subjective feelings and not the objective data in the market. Thus you will perform based on your feelings which is just a small sample of the total behavioral data of the market. We have a normal physiological reasoning to avoid danger and we want to cancel a bad trade without realizing it could just be a small retrace. Work as much as possible on logic in setups.
Trading is Not Fundamental Marriage
If you see a random coin that might have a good setup, don’t stick around longer than you should. Not taking profits will likely result in less profits if your intention was to exit and it’s not a long term trade. Similarly, not exiting a failed trade makes you a community member and you are stuck with more loss that you wanted to bear. Take your trade and exit according to your predetermined plan. Don’t stick with a coin/token just because you like it, has a good name, have done very successful with it, etc. (if you are, make sure you realize that would be considered more investing than trading).
Trading Is A Marathon
Any stories you hear about getting rich quick are lies or definitely a rarity at most. Realize that you will win some and lose some. Realize that trading isn’t a sprint, trying to get max profits in a small amount of time. The most profitable traders typically have straight disciplines that last over a longer duration that you’re initially willing to invest in. That line between the sprint attitude and the marathon attitude is the line that determines the long term projection of what a trader could be.
Summary: Objective Discipline & Focus
I hope with was helpful in some way and a good reminder is that this list was purposefully in abstract to help determine the terrain of what a healthy portfolio could be. After laying the groundwork of discipline and focus, the real trading can begin.
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