We are going to take a look at some mistakes that new Bitcoin traders often make when they have real money at stake.
How to stay in control as a new Bitcoin trader
Let’s take a look at the common mistakes made by inexperienced traders:
- Entering a trade without a plan in place could make you liquidate.
When you trade Bitcoin, you must have a set of rules that you stick to, with your planned entry, stops, and exit. You should stick to this plan, keep a log of your trades and results and not stray from it. Trading plans maximize your ability to make decisions without emotion and to get out without getting too greedy. They allow you to benefit statistically from the probabilities, because you only accept trades that meet your predetermined rules for a configuration.
FOMO stands for Fear Of Missing Out. FOMO can lead you to make terrible business decisions. New Bitcoin traders often see trading backwards and tend to buy during a price spike, then lose their money when the trend returns. Experienced traders buy the dive, when others are afraid, and sell at a much higher price during the bullish peak. Bitcoin markets are open 24/7, so you can always wait for the right time to place your transaction, the market is not going anywhere, don’t be FOMO.
- Don’t trade using too much leverage, don’t trade what you can’t afford to lose.
Trading is a way to make a lot of money in a short time, but you can lose it just as easily. Don’t use too much leverage if you don’t know exactly what you’re doing. Some exchanges offer up to 100 times margin trading, but if you are underfunded or trade more than you can afford to lose, you may find yourself in trouble very quickly. Your transactions should not represent more than 2 to 5% of your total account / bankroll, and you should not have more leverage 3x-5x if you are a new trader.
- Don’t let fear or greed lead you to make bad decisions
If you have overwhelming anxiety or greed about your position, it is a sign that you are probably trading in what you cannot afford to lose, and this heightened emotion could lead you to make irrational decisions of the moment. The reason we have a trading plan is that emotions don’t make us react negatively to unexpected price movements. If you feel scared or overly greedy, this should be a warning that you are doing something wrong.
- Watching the market 24/7 will make you stressed and not make you richer.
If you’re constantly glued to the computer screen looking at Bitcoin charts, you may be stressed out. Stress is not good for you or those around you. It also doesn’t give you an extra Satoshi for your problems. Go for a walk, get some fresh air, spend time with your loved ones, you should be able to relax if you’ve made stops, haven’t used too much leverage, sticked to your business plan and don’t not risk what you cannot afford to lose. Trade long-term macro price movements, not short-term trades where volatility can wipe you out.
- Be patient. “The purse is a means of transferring money from the impatient to the patient.” – Warren Buffett
Markets often enter areas without trade where lateral trends do not offer many opportunities for profitable trading. You can always sit back and wait for your time for the perfect setup or breakout before taking your next trade. Do not over-market and do not trade only for the sake of trading under sub-optimal market conditions. This could result in the death of a thousand paper clippings where many small, poorly synchronized trades will wind up your account little by little.
- Trade with the trend, not against it.
Many inexperienced traders do not realize that when the market is trending, trading against the trend is extremely risky. Experienced swing traders do not know how to time their exits and entries to scale the short term profits from price fluctuations, but new traders should not attempt this. Traders should identify whether the market is moving up, down or sideways and trade based on the momentum of the market. Tackling market momentum is a sure way to wind up.
What are your best tips for new Bitcoin traders? Let us know in the comments!
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