A Winning Approach to Trading in the Crypto Market
Many traders in the crypto market lose a lot of simply out of ignorance. They basically base their trades on guesses, news, or advices from networks, and do not define specific risk and profit objectives before placing trades.
Other traders have the merit of educating themselves however fall victims of their excitements. They hold on to losing positions anticipating they will turn into winners and sell winners by fear of losing a small gain. They overtrade to fulfil a need for action or by fear of missing out.
The consistent winners follow a winning approach:
- They have a plan to enter and exit trades
- They use effective money Management
- They take consistent movements, they follow a trading Strategy
- They keep good records so they can review their actions
- They avoid overtrading
- They have a winning outlook
A plan to enter and exit trades
You need to an effective plan to put the odds in your favour for each trade you take. Your tactic should be as objective as possible and include the following elements:
Entry: Proper settings required before you can enter a trade – may include technical analysis, fundamental analysis, or both.
Initial stop loss: Price at which you will close the total position if it does not move in your favour.
Initial price objective: Price at which you will take some or all profits if the trade moves in your favour.
Trade management: Set of rules that command your actions while a trade is opened. It may include trailing stops, closing position and so forth. For every action you take, the reason should be clearly described in your strategy.
Money management guidelines to keep losses slight
The aim of money management is to ensure your endurance by avoiding risks that could take you out of business. Your money management rules should include the following:
- Maximum amount at risk for each trade.
- The difference between your entry price and your initial stop loss is your risk per trade.
- Your maximum amount at risk for each trade determines its size.
Consistent actions with a trading plan
During your Learning phase, your goal should be to survive, not to make money. Start with low limits and raise them as you become a consistent winner otherwise you will simply go broke faster.
Good record keeping
While the process of attaining experience cannot be hurried, it can be made much more efficient by keeping good records of your actions. Good records will allow you to:
- Review your actions at the end of each day to make sure you followed you strategy, not your emotions.
- Learn from your losses; they cost you money, make sure you get the education in return.
- You should also keep a journal of your observations. A trading plan to keep emotions out of your decisions.
In the course of trading hours, emotions will turn smart people into idiots. Therefore you have to avoid having to make decisions during those hours. This requires a detailed trading plan that includes your strategy and your money management rules.
For each action you take in the course of trading hours, the reason should not be greed or panic. The reason should be because it is in the plan. With a good plan, your task becomes one of patience and discipline.
You have to follow the plan without excuses. Any valid reason for an exception – for example, correcting a mistake – should become part of the plan.
At times the finest thing to do is to do nothing. Stopping yourself from trading when days are unfavourable to you is considered to be a key thing to becoming a consistent winner; in some situations it is very tempting to overtrade:
- If you trade to fulfil a need for action, to relieve boredom
- If you fear you are missing out on a great trade or on a great market
- If you want to make up for losses (retaliation)
- If you trade to feel like you are working instead of sitting around.
Trading involves a lot of work other than the actual buying and selling.
You should not trade under the following conditions
- You are not following your trading plan
- You have reached your daily or weekly maximum loss
- You are sick or very tired
- You are very emotional (upset, pressured to make money, self-esteem exhausted)
- You are using new tools you are not completely familiar with
- You need time to work on your trading plan
You must treat trading as a probability game in which you don’t need to know what is going to happen next in order to make profits. All you need to know is that the probabilities are in your favour before you place a trade.
If you truly believe in your edge, which is you accept as true that the probabilities in your favour for each trade you go in, then you should have no expectation other than something will happen.
Your attitude will have an unswerving impact on your trading results.
- Take responsibility for all your actions and don’t blame the market.
- Don’t be influenced by the opinions of others. Believe in your own decisions and follow them.
- Never think that taking money from the market is easy and never assume that you know enough.
- Have no particular expectation when you place a trade because you know that anything can happen.
- Don’t try to guess the future crash; trading is a game of odds.
- Use your head and stay calm; don’t get excited or depressed
- Handle trading as a serious intellectual quest.
- Don’t count how much money you have made or lost while you are in a trade – only focus on good trading.
This information is for learning purposes only. We are indeed not financial mentors. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be the finest for your individual needs and risk tolerance.
Please do your own research.