5 CRYPTO TRADING ROOKIE MISTAKES
Dear reader, I would not exactly say none of the skills a person would possess in his lifetime is innate. Indeed, humans do little things such as crying or laughing without being taught in any way whatsoever. These skills are preset in us as most basic. Cryptocurrency trading and investing is most definitely not one of such skills. Believe me when I tell you that the crypto journey is a gradual process that requires a great deal of consistency, with a generous sprinkle of failures and losses here and there. With experience, the journey smoothens out into the golden sunset. Before then though, the rough days prove a rather stern test of one’s resolve. If you are a beginner, this could be a timely heads up for you. If you are one of the more experienced traders, odds are this piece will send you reminiscing about those times. Whichever way, the following are five crypto trading rookie mistakes you that really should be avoided for the sake of all things not erroneous.
1. NO STOP-LOSS: I tell you, not many would understand how essential stop-loss is to risk management from the initial stage. Stop-loss is a price point at which the trader believes a trade has failed. While trading on an exchange, stop-loss is set by placing a stop order which automatically exits you from the trade if the set price is hit. The first few trades are usually all about trying to cop as much as possible from the market, rather than striking a proper risk-reward balance. This is disastrous more often than not, as using stop-loss could be the difference between a small loss and a totally decimated portfolio. An absence of stop-loss can be particularly catastrophic when trading derivatives.
2. FOMO: Ah… Pretty much everybody suffered from this at some point. FOMO, an acronym for Fear Of Missing Out” is basically the situation where a trader buys into the market right in the middle of a pump, only for the market to dump on them. It is very natural for us to want to yank off our share of an asset’s purple patch. Seeing everybody except you making big bucks from a market move can frustrate you. Because of this, you go to buy it at a point where it has used up most of its momentum.
3. REVENGE TRADING: This is one of the most horrible things you could do in trading. You either win with the market, or lose in the market. However, it should never get to the point where you transfer your resentment from a loss to hatred against the market, influencing you to carry out ill-informed trades. Basically, revenge trading is when a trader impulsively enters into one or more improperly planned trades in a desperate bid to recover a loss. There are times when the gamble does pay off, but it does not for the most part. Very often, it so happens that the trader end up making even more losses. I will tell you eventually what,.
4. POSITION INCREMENT: This is very common in derivatives trading, especially futures. In those early trading days, it is one of the scariest things in the world to see your liquidation price approaching (it still is). What the do you do to ensure the liquidation price moves further? The rookie increases his position size to make the LP shift backwards. Bad idea. While this may be a genius strategy with much calculation and experience, indiscriminately doing so would only result in even more disastrous losses.
5. OVER-MILKING PROFITS: What is as certain as losses in trading is success in trading. They might even not be as frequent, but those days will come. Of course the trader is tracking the trade and watching the asset like a hawk. The trades have take-profits, where the trader believes the trade has been executed well enough and it is time to exist. A variety of orders can also be used go set an order like that on an exchange. However, yet another terrible move is continually shifting the TP indiscriminately to see how much more you can make. That way, you most probably end up losing all the gains you had accounted for, and also earned yourself a bucketful of tears.
So, we have come to the end of this piece. It might have evoked some laughter in you as you went down memory lane, or some apprehension for what is, or is to come. Regardless, these are mistakes rookies and even experts should run away from. These are not the only ones to exist, but they have proven to be the most appealing of them — deceptively so. Coming from a place of love once more, resist the temptation to indulge these mistakes!
