Hello Crypto Friends!
Today i will cover the MOST important aspect of trading!!!
To be a successful trader you MUST have the ability to trade without emotion getting the better of you, and you MUST have a plan!
I cover these two topics together because they go hand in hand.
A plan/risk management can help you overcome your emotions, and a good mindset will make you keep to your plan.
Even the best trader with the best Technical Analysis will not profit on every trade. There will always be losses.
It is important to keep these losses to a minimal, and to let your profits ride. So cut your bad trades quickly and let your good trades run.
Psychology -
Anyone who has ever traded before knows that feeling. When you enter a trade and it instantly goes the wrong way........
So you exit the trade, and try going the other way.......... It does it again! You think to yourself "Someone must be playing with me!"
When you are soo confident that this trade can't lose, yet it does......... These type of incidents can lead to:
Frustration, Fear, Depression, Sadness, Doubt and Anger. These are your worst enemies in trading.
These emotions will cloud your judgement, they can lead to things like revenge trading, where you throw all your technical skills out the window, you forget your planning and risk management and you try to get back your losses.
Or you will be too afraid to enter a trade that you would normally jump at because you are to afraid you might lose again.
It's not just your losing trades either, also winning trades. If you just took a massive profit or you have had 10 profitable trades in a row. You feel invincible.
Greed, Excitement, Euphoria, Overconfidence. These are also your worst enemies in trading.
They can lead you to also forgetting your plan and risk management, these emotions can make you enter trades you would normally not throw a stick at!
Patience and Discipline, are two key factors here. If you manage to make 1000% profit on a trade, the best thing to do is to sit back, go and do something else. Forget about trading for a while and relax, spend some profits. The same goes for a loss.
If your mindset is not sound and the chemical balance in your brain is not normal, then i suggest you do not trade!
This all comes with experience though, any new trader will go through this learning curve. So long as you learn from these mistakes you should become a better trader!
Risk Management -
This is a key part of your trading. It can help you to overcome the psychological downfalls. If you are going to trade you must have a plan and stick to it!
Things like:
- Only trade when i am sober.
- Only ever risk 5% of my trading account.
- Only ever use 25% of my assets in my trading account.
- Only enter a trade if it ticks all my boxes on my trading plan
- Only ever trade 3 times in one day
ETC ETC.........
You must come up with your own plans, and keep to them.
I have covered a very important trick/tip in this post - Stop loss calculation
This calculation can be used for any leverage.
Also the Long position/Short position tool is very useful!! You can find it on TradingView here -
This will help you decide if the trade is worth it. You should normally try to have a minimum of 2:1 Risk Reward, otherwise your profitable trades will not outweigh your losses!
I hope this wasn't too much information in one post, and i hope it helps you to become a successful trader!
If there are any other aspects or particular Crypto coins you would like me to look at, please feel free to make a suggestion in the comments below!
Happy Trading!!!
