10 Most common crypto trading mistakes that beginners make

December 12, 2019

Making mistakes is only human. Famous UK film composer, John Powell, once said that “the only real mistake is the one from which we learn nothing.'' So, making mistakes is fine as long as we learn from them and not repeat them in the future. 

Similarly, making mistakes in crypto trading happens on a regular basis. In this blog post we take a look at the ten most common mistakes beginner crypto traders make. 

1. Trading inexperienced

Many enter crypto trading without proper education or training and start trading immediately. As with anything else, crypto trading requires a level of skill. Take some online courses such as DEX Masterclass to get familiar with how the market operates, as well as some of the basic techniques and indicators you can use on a daily basis.

But it doesn’t stop there. Always learn new things and take your crypto trading game to the next level. Read market analyses by different analysts to learn the art of reading charts and market movements ahead of time. Check out our highlights of crypto analysts getting busy on Crypto Twitter to learn more.

Subscribe to Trading Tuesday to have a dense and compact weekly email filled with analyses, tricks of the trade and curated posts from the best of Crypto Twitter.

2. Lack of preparation

Inexperience is closely connected with the lack of trading routine and preparation. It is crucial to dedicate some time for preparation of the trading plan and the day ahead. In this regard, it is advised to read daily reports to get more familiar with the trading day ahead. 

In the end, in order to survive in a very volatile crypto market, you need to have an edge. Decent preparation will help you, not just to survive in the crypto market, but also to be more competitive and focused. 

3. Trading plan

Having a well-defined and concise trading plan is closely connected with the aforementioned lack of preparation. Experienced traders will always advise you to prepare a detailed trading plan. Even more important than drafting a trading plan is sticking to it. 

Markets sometimes move in seconds and making trades based on emotions and sentiment is not advised. So, try to sit down and do your homework before exposing yourself and the capital to volatile markets. 

4. Trading diary 

Once you have developed a trading plan and implemented it during the course of the day if you’re day trading, consider tracking trades and keeping a trading diary. It is advised to keep a record of an entry, targeted and realised stop loss and take profit orders, as well as profit/loss recorded. You can also add a comment section to explain why you deviated from the original plan (in case that happened).

In the end, a trading diary should be used as a baseline for developing a plan for the next day and a trading style over time.

5. Anticipate the news

Markets move based on the fundamental or external developments. For instance, certain events or news can have an impact on Bitcoin’s price. As our aim is to capitalise on market movements, traders tend to anticipate the news and the direction in which the asset may go. 

A lesson to be learned in this case is that there is no guarantee as to how the market will actually react to the news. The desired approach is “wait and see”, and then make a trade once you have collected more information. 

6. Chasing profits

Some traders tend to look at markets that move and get emotional since they “missed out on great returns”. This mistake is closely connected to “emotional trading”, which is arguably the biggest mistake you can make in the trading process. 

Markets are moving every second. If you missed a move today or yesterday, there will be new opportunities presented to you in the coming hours/days. We are not trading just for the sake of making random trades, hence you don’t “have” to ride every trend.

7. Trading without stop loss

Always having stop loss orders will help you control risk. Here, it's essential not to move your stop loss further away in order to avoid closing a losing trade. 

Avoid having “mental” stop losses as emotions may push you towards moving your stop loss order away. Stop loss order should be seen as an invalidation level i.e. if the BTC price reaches point A, our initial trade idea is invalidated.

8. Emotional trading

As we mentioned earlier, being emotional when trading is arguably the worst mistake you can make. Try to be more patient and less emotional when preparing and executing trades. Trading with emotions is also closely connected to modifying stop-loss orders. For this reason, one of the greatest advantages of automated trading is non-existence of emotions. 

Experienced traders advise to avoid trading bigger trade sizes to be less emotionally charged as the emotional distress often comes with losing larger amounts of capital.

9. Micro management

If you look at courses and trainings on trading, each of them contains a specific part on trade management. While preparation is very important, how you manage the opened trade will decide whether you end in green or red

For this reason, traders tend to become very much hands-on, which results in trade modification, early close, early exit etc. For this reason, usually doing nothing is the best thing you can do. One of the best ways to do this is to adopt a “set and forget” approach where you  determine and set stop loss and profit orders at the very moment that you enter the position.

10. Poor risk-reward ratio 

Before you start trading markets, you should define what kind of trader you want to become. A scalper, a day trader, a swing trader, or trading markets long-term. This will help you calculate your risk-reward ratio (R/R) and apply it in all trades. This way, you define how much you can earn with every dollar you invest. Experienced traders usually advise R/R to be from 1:2 to 1:3 i.e. risk $1 to earn $2.

Alternatively, you can look into profiting from arbitrage opportunities as it involves calculation more than speculation.


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