Today we’re going to talk about Most common mistakes in Crypto Trading part 2. If you remember this mantra, it will help you not only understand these crypto trading mistakes but avoid making blunders like all beginners.
1.Not Maintaining a Trading Journal
This is perhaps the biggest mistake many beginner crypto traders commit. Writing down why you are taking a trade and analyzing them at a later stage helps you answer the following:
- Why specific trades are giving excellent results?
- Why you are losing some trades?
- Maintaining a trading journal will help you to improve your trading strategy with time.
You can always use excel or a paper journal. It is something that has proven to graduate a beginner to the next level of mastering crypto trading.
2. No Trading Plan
“Failing to plan is planning to fail”
You must have a plan before getting into any trade. It means that you need to know your entry and exit plan, principal investment amount, and the maximum loss you are willing to take.
Beginner traders usually don’t have a trading plan and they are ok staying in a loss-making trade for a long time. Having a trading plan before execution will save you from making novice trader mistakes.
9. Revenge Trade
In trading, losses are inevitable.
Not many users have built the muscle to accept losses and they end up getting into the revenge trade. Such tradings are based on fear and frustration and are highly toxic for your trading journey. Often, such traders attempt to take riskier trade to cut down the losses. It is known as revenge trading.
You must be mindful after losing any trade. Know that nobody ever won 100% of trade. With a proper risk-reward ratio, even winning 40% of the time can keep your crypto portfolio positive.
3. Not Calculating Risk Reward
how much profit do you want to make? How much loss you are willing to take?
In nutshell, this is the risk-reward ratio.
For every USD 50 you risk, you should aim to gain a minimum of USD 100 (reward).
You should have the following:
50:100 = 1:2 (Risk reward ratio)
Advanced traders usually recommend a 1:3 or 1:5 risk-reward ratio.
Either way, having a clearly defined risk-reward ratio helps you to avoid getting into risky trades. Even if you are losing multiple trades in a row, your overall portfolio will not be affected in the long run.
4. Using Margin Trading Too Soon
Margin trading is borrowing money (that you don’t own) from exchange to get into the trade. The benefit is that you will end up making a big profit (with the same money) if you play your cards right. However, you can also face big losses if your trade goes south.
Unless you have perfected your spot trading or paper trading, do not get into margin trading.
5. Trading Multiple Pairs
Trading multiple pairs initially will only leave you confused, hampering your skill development process. My mentor taught me to stick with one pair for the initial 100 trades.
Trading is a marathon, not a sprint. You are better off honing your skills rather than trading like there is no tomorrow.
6. Not Following Your Style: Avoid Herd Mentality
Everyone has a unique style of trading and so do you.
For a beginner, it is common to have a herd mentality and belief that everyone trades the same way. However, it is not true. You should start creating your style with maybe hit and trial method or by taking expert advice.
- Final thought
If you like these tips of “ Most Common Mistakes of Crypto Trading part 2”, consider sharing them with your friends who have recently started crypto trading or plan to do so.
