image courtesy Andre-Francois-Mckenzie-Unsplash

Author's note:  People new to trading enter the crypto-market constantly, and the amount of information they must digest to make sound and informed decisions can be overwhelming. 

Here is the second in a series of articles based upon my own experiences and study to help the inexperienced and under-educated get off to a good start trading/investing in crypto-currencies. 

Disclaimer: Nothing I write in any of these articles is financial advice of any type. Be sure to do your own research and thoroughly understand the assets you're investing in and how various trading mechanisms operate before deploying any capital.

Anytime someone is new to trading and lacks knowledge of markets and how they operate, it is not unusual for them to have erroneous notions that can lead to often costly errors. Very often, those mistakes involve failure to address an area of trading vital to success. Failing to develop their trading skills to a high enough level, failing to execute trades correctly, and failing to use sound risk management practices are only a few of these.  Near or on top of that rather long list of errors by failure has to be the failure to treat their crypto trading as a business.

I'll make the case for treating crypto-trading as a business in a few concise words. Any for-profit venture is a business enterprise or speculation in which the business owner or the trader risks something of value in the hope of gain. A trader uses capital to purchase assets that they plan on selling at a future point for profit. Anyone who chooses to ignore the business aspects of crypto-trading runs the risk of going out of business. It's one reason many people new to trading either don't attain the profits they could or give up entirely. To succeed over the long haul, one must take care of business first.

This article intends not to be exhaustive on the process of starting a business; that would require writing a book. Here, I'll provide the reader with enough information to begin creating their own crypto-trading business, and where the path takes them from there is mostly a matter for the trader to decide.

Where To Start?

The place to begin is with yourself. One should spend some time to develop clear reasons as to why they are starting this venture and what they hope to gain from it. The process includes more than just thinking about these issues; this process needs to involve writing one's thoughts, motives, and goals down on paper or in digital format. The work one does in creating a document can be very beneficial in promoting clear and concise thinking while allowing for refinement and revisions as the project moves forward.

The self-assessment should move beyond the level of: " because I want to be filthy rich, my goal is to make huge profits trading cryptos" (by the way, there's nothing wrong with that as a goal) to the development of a full-fledged business plan. Taking stock of both the trader's financial resources and skillset is vital. How much capital one has to work with and how sophisticated their trading skill level is will be key factors in how quickly one can attain their goals. While beginning with limited capital and knowledge doesn't preclude one's success at trading, it is reasonable to think it may take longer to reach their goals. I will address methods for increasing both the trader's capital and skill level in greater detail elsewhere; for now, though, bear in mind: both of these areas are critical to the timeline of success.

Assessing the amount of time that one can reasonably expect to devote to their crypto-trading venture on an on-going basis is another crucial issue and can easily be misjudged. The time one can devote will almost certainly be different from the amount of time the trading student would like to dedicate, forcing one to add time management to the myriad of skills needed for success. Family, the need to work a full-time job (if that's the case), and daily living activities, including rest, occupy a person's time and attention, limiting what is left over to spend on trading. Now we are at the next aspect of self-assessment to examine: do you have or can you develop what it takes in terms of personal qualities such as persistence and patience to allow you to succeed?

You Gotta Wanna

After I had been in crypto for a short time, it became apparent that I needed to learn a lot more about what I was trying to do. I began researching various trading aspects, including candlestick charts & T/A, sound risk management practices, and trading psychology. When I wasn't occupied with another activity, I essentially used every waking moment to study crypto-trading. After a few months of this, The Mrs. began referring to cryptocurrency as: "your obsession." It certainly was and has remained an area of single-minded focus in my life. I credit that level of focus for the increase in both the knowledge and skill I have earned. Still, there is something here to be remembered: unless one is genuinely passionate about doing the work of learning, studying any subject will only be drudgery. If your learning is tough going, you're less likely to stick with it.

If you cannot honestly enjoy spending endless hours researching and drawing charts, watching videos, reading books, researching altcoins and exchanges, and following crypto-news, learning crypto-trading will be challenging work indeed. I'm fortunate that I love to explore new topics of interest; studying trading is a much easier process. The fact remains that learning trading has required persistence and patience on my part, and here we find the next item to examine: do you have what it takes in terms of self-discipline to push yourself for as long as it is required to see your studies through? If not, you will need to be able to develop that quality. There will be times when you will have to choose between studying crypto-trading and another more immediately gratifying activity. There will be days where you might prefer to remain in your soft, warm bed instead of getting up and sitting in front of your computer. What choice do you make? Will you push yourself to get up and get back at it? I would never advise anyone to neglect family responsibilities or other commitments but ask yourself: will crypto-trading be a high enough personal priority that you will make regular study or trading a part of your daily routine? Yes, I said daily routine. Even only a few minutes spent daily will provide better returns than trying to study for eight hours straight one day a week. Mentioning routine brings me to another aspect of running your own business that requires discussion: the need to keep as regular hours as possible.

Establish Your Routine

I understand full well the challenge of keeping your schedule focused on a business venture while working a full-time job with somewhat irregular hours. Add family commitments to the mix, and one's "free" time that's devoted to where their heart is can disappear very quickly. It hasn't always been easy, but I've managed to create the blocks of time needed throughout the week to regularly devote to studying or writing. Don't be afraid to set that alarm clock and get up when you told yourself you would. Push yourself to get up and get at it. Remember: the most productive people focus their days in minutes, not hours & only a few minutes of well-focused energy applied consistently can yield great results. Keeping regular hours gives one a different mindset, reinforcing the idea that crypto-trading is, in fact, a business and that you are treating it as such.  

Along with your work routine, give serious attention to your work-out/rest & relaxation routine also. I know for many of us, crypto is R & R, but even so, shutting off the gadgets and getting out of the house for fresh air and a change of scenery is vital to your overall well-being and benefits you in the long run. If hitting the gym is what you like or walking, playing tennis, or golf, whatever it is, making time for that part of your life will gain you rewards as a trader. The improved mental focus from a more active lifestyle alone is reason enough to lace up those old waffle-stompers & hit a hiking trail or spend some time on the water fishing or boating.

Tools Of The Trade

A further aspect of operating your trading business is assessing the equipment you will need and the available space for work. Everyone's living situation is different, but one thing is constant: you will need a dedicated work area with the equipment and other resources required for work that you can access as needed and provides you with a minimum of distractions, including quiet. Don't think that you have to have a half dozen monitors and the very latest in computer tech to get started. Some people begin their trading ventures by using their phones. If taking your laptop to the beach to study or trade works for you, great! Here is one area of your business you can grow as your trading sophistication increases, and you begin to earn profits with your efforts. If learning the trading ropes is where you are, focusing on investing in yourself by the rigorous study of trading will be of much greater value than owning the latest high-tech gadgets. For a home office set-up, there is one piece of equipment I recommend you select carefully and be ready to spend capital on, and that's a high-quality chair. Owning a good chair isn't solely a matter of comfort; it's also a matter of productivity. You will concentrate better and accomplish more work if what you're seated on agrees with you. You will be spending extended periods sitting in it; you deserve to have the best chair you can afford.

Failing To Plan Is Planning To Fail

Any small business owner will tell you that the necessary evil of their existence is record-keeping. The most successful ones are those that not only excel at recording the activity related to their venture; they know how to get the most out of doing so. The data they compile is used for planning and evaluation purposes to assess better where the trader's business has been and decide where to go next.   

One of the most important records that a trader can keep is a written business plan for the trading business. A business plan gives the trader a guide to follow to achieve their overall goals. The topic of creating a business plan would easily consume this entire article, but here we will settle for discussing the why of doing so.   

A lot of mistakes are made by new traders who rush into things without pondering the business aspects of what they are doing. Creating a business plan will force one to slow down and think through some details otherwise easy to miss. It is also true that ideas are only concepts until one has committed them to written form. That is when one's thoughts form a plan that can be worked with and altered as circumstances warrant. Learning to trade successfully is anything but a get-rich-quick scheme; the more thought and planning one puts into it, the better their odds are for success. 

Along with a self-assessment and business plan, another document one should learn how to create is a written trade plan for every position they intend to open. For someone just learning how to trade, failing to develop a written trade plan is akin to planning a several thousand mile-long trip to a destination one has never seen by asking the local gas station clerk for directions. Following this one step in trading alone will help achieve a goal every novice should have on their list: separating oneself from The Herd. The basics of developing a written trade plan are a subject that we'll cover in greater detail in a future article.

Being a citizen of a jurisdiction where your crypto activities may be subject to taxation is another good reason to keep meticulous records. I'm not going to enter into any debate about one's moral obligation to follow (or not) what is an unjust law. My personal view has always been and remains that taxation is theft. As a US citizen, I also pay up when the tax bill is due. Everyone gets to make their own choices; I recommend that if The G says you owe taxes, you pay them, regardless of whether they constitute extortion or not. The legal headaches of failing to do so are not worth it. In the end, it's a cost of doing business.

Learning the skills needed to be a successful trader are many, varied, and requires dedication from the student. By now, you have some idea of what it takes to get a good start on mastering the business aspects of running a trading operation. Ignoring the necessity for doing so runs the risk of undercutting one's ability to get the very most from their efforts and damages the chances for success.  

It's a fact: if trading were easy, everyone would do it.

As I continue producing these articles, I hope you will come back for more.  Up next: Part 3: You Want Profits? You Need To Have An Edge