You started to invest? 5 tips how to not lose all your money in the crypto rush
The crypto market is young and crazy. It is a great chance to all those who come early but you have to be aware of mistakes and traps.
*this article is not an investment advice
“That is why you fail”
Yoda’s words to Luke Skywalker in “The Empire Strikes Back” after raising an X-wing from the Dagobah swamp to demonstrate him the force.
As a co-founder of Midas, I feel the responsibility to speak some words to all those investors who enter financial markets with little or zero knowledge but full of hope to learn and eventually become consistently profitable. I am not claiming that I have the wisdom of Master Yoda, but my long career as a professional day trader has taught me several things that I would like to share with you.
These are simple tips that I consider important for you to have in mind when it comes to investing, but especially trading, in a so complex financial world:
1- Do not get trapped in the technical indicators’ fallacy
If you think you can make money consistently over time, just by following some technical indicators that you don’t even understand, you are out of the game before even starting. People tend to use as many indicators as possible until their chart looks like a plate of spaghetti, convinced that this would improve the way they process the information flowing from the market. However, the opposite is the case: the less you use the better. In fact, when you reach mastery you do not use them at all. The majority of indicators measure historical data from different time lapses to help you predicting the future price, but the reality is that the market is completely random at any given moment and it moves based of supply and demand, or in other words according to the action and behavior of the people buying and selling. This explains irrational moves occurring very often especially with regard to crypto assets. Technical indicators can only help you to determine where odds could be in your favor, without meaning that the price will follow those odds.
Focus on the price action itself, on identifying high probable events based on different candlesticks and repeat the action like a sniper over and over. If you have to, just use one or two indicators and try that for a while. And be aware the market is a constant flow of information, it does not have interruptions or frames. We humans currently like to visualize this information in a candlestick chart in different timeframes, but back in the days before the existence of charts traders used to read a fluid river of information from the tape or now called time & sale. I clarify this because another mistake is to get lost in many different timeframes as if by changing them the market would change.
2- Control your emotions, trade in the zone
Another big mistake people usually commit is to be affected in a particular trade by the output or result obtained by a previous one. From an objective perspective, every trade you take is independent from any other trade you have taken or will take and it always has 50% chance of going into your direction, as the price can go up or down. These trades are only connected in your mind but the connection is not real, the market does not have a life and only reflects the behavior of its participants, so do not take it personal when you lose. You can only become consistently profitable when you learn how to take your financial decisions only based on objective information given by the market, and when you can ignore your fears, desires and subjective opinions.
If you want to dig more into this topic, I would highly suggest you to read the book “Trading in the Zone”, written by Mark Douglas. It will change you forever.
3- Do not trust gurus
Nobody can read or predict the future, not even one minute from the present. Those who claim they can do it are charlatans or scammers and they probably need you to cover their positions.
To understand this, let’s use our head for a moment and do a mental exercise. If you are a trader and you have a big position either long or short in a particular asset, you might want to have the demand of those assets (if you are long) or the supply (if you are short) to be able to cover at the best price without extra costs. Now, if you can create such demand or supply by giving recommendations to unknown people, that would be awesome. Moreover, if you can do it in an unregulated market like the crypto without any legal consequences, well that’s the paradise.
With enough buying power, it is a baby game for big players to pump and dump assets and trap novice players. That explains a lot of things in CMC isn’t it? That’s the beauty of Midas. You don’t have to believe them, you only have to see and compare their reputations which come from actual gains or loses and invest.
4- Do not follow buy or sell recommendations of the media
Similar case but at a higher scale, eventually big funds need to sell their assets to somebody. As they cannot just come into the market and sell them without plunging the price, they need to create their exit. Believe it or not, this happens everywhere: with stocks, bonds, derivatives, crypto and so on.
So next time you see a big guy in a suit on your TV claiming how his well managed fund has made a lot of money in a particular asset, the smartest thing you can do is to short it because guess what: he is trying to sell it to you!
5- Enjoy your life, do not become addicted.
I know how addictive the market can become, especially a hot one like digital assets. Once you get in, it’s poisoning: you want to get more. But do not let this to change your life, enjoy your free time with friends and family and most important: never risk more that you can’t afford to lose. Be responsible, be smart.
More info about my project: Midas, the investment app for retail investors:
You thought investment funds are for the rich guys? Actually they are for you!
PS: Midas just launched a Beta signup with Airdrop — sign up here: http://midas.social/beta-en
