Originally posted on lifestylemaniacs.com

My trading journey began 5 years ago when a friend showed me an app on his phone that he used to trade Forex. He told me it was easy money.

I heard about trading and the stock market years ago in movies like “Limitless” and the notorious “The Wolf of Wallstreet”, but never understood how they work.

Before starting to trade, I was wise enough to take some courses and get educated. I took the courses from XTB and got familiar with charts, patterns, and indicators.

Thus, I started trading in the demo account and made some profits, so I deposited money in a real account and started taking action. Everything went fine until I started losing money; lots of money.

“Why? Why can’t I make easy money as others do? Fuck trading! It is all a scheme.” That was my attitude towards trading until I realized my mistakes and started making profits.

These lessons cost me $5000 plus $1000 lost in Bitcoin, but I am sharing them with you for free, you lucky you. Ok, let’s see my mistakes.

Overexposed

I traded with the money I was not comfortable with losing. All my monthly savings were put into trading and it became like an addiction.

After losing money I put money again with the hope I can compensate for my losses. Sound like gambling to me, don’t you think?

I was constantly checking the trading app, very stressed and panic when seeing everything in red. I didn’t know what I was doing. This leads us to my second mistake.

No strategy & research

My strategy was to make money, that’s it. I never implemented a backtested strategy for all 3 possible scenarios of a trend (up, down, sideways). If the candle was green buy; otherwise sell. Cool right?

Well, lucky for you I have a good article on a simple, yet a profitable backtested strategy that you can apply on any market.

Before trading or investing, have a plan and make sure you understand what you are putting your money into. Technical analysis (trading) without fundamental analysis is bullshit in my opinion.

The reason is simple and I will give you Bitcoin as an example. All the charts and indicators indicate strong buy, but the bull market cycle is over or Elon Musk makes another tweet. The indicators are useless in this case.

Another example is buying Tesla just because the trend is going up and the oscillators say not overbought, but not considering the P/E ratio of 800 (extremely overpriced).

Not diversified enough

You know that saying: “Don’t put all your eggs in one basket”. I didn’t know that and put too much money into a single deal which was also not a well-researched deal in the first place.

There is no rule of thumb for diversification, but you can for sure over diversify. The main idea is to choose different markets (stocks, commodities, real estate, crypto, etc.) and buy different assets.

Now, the way I do it is by looking at the cycles and fundamental indicators. For instance, I am more invested in crypto and commodities, than stocks and real estate.

This is because I know hyperinflation is coming, I know we are in a crypto bull market, and I know real estate and stocks are overpriced. Again, I am not just a trader, but also an investor (technical & fundamental analysis).

Also, in crypto, I choose only the best from the top 10 on CoinMarketCap, and not buying tens of crypto assets. I did that and it is a wrong approach.

Ok, hope everything makes sense. Let’ move to the next big mistake I made.

Over-leveraged

I used leverage without understanding it fully. The problem with leverage is that in case the market moves in the opposite direction, you are at risk of liquidation. Not only that but not using a stop loss… haha… awful shit can happen as it did to me.

Leverage is the reason I lost so much money (for me, an average mortal). Leverage amplified my lack of knowledge, strategy, experience, and diversification.

If you don’t know what leverage is, let me explain it simply like this: your investment (or %price move) multiplied by a ratio. In other words, if a market has a leverage of 1:2 (2x), that means you are doubling the price change.

If the price goes up 5%, the leverage amplifies and you are winning a 10%. Same story if the price goes down. You are borrowing money for investing. $100 invested in a 1:2 leveraged asset, is equal to $200 invested.

The lesson is, if you are a beginner or don’t understand how to use leverage, do not ever use it. The risk is not worth it.

Emotions

The last mistake, but not the least is I let my emotions control my trading and investing decisions. Of course, no strategy, over-invested, not diversified, leverage, all these amplified my emotions.

Investing and trading must be 100% analytical; with no emotions and gut feelings. If you can automate your trading strategy, it is awesome. Otherwise, know your plan and stick to it no matter what.

Remember that no indicator, strategy, analysis, whatever are 100% guaranteed to offer you profits. It is a delusion most beginners like me had.

We are working with probabilities, and the idea is to increase the likelihood of ending up in profit.

A backtested strategy, with the right amount of investment, with enough diversification, without the risk of being liquidated, with patience, and no emotions will make you an unstoppable investor and trader.

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Disclaimer: I am not a financial adviser and don’t recommend investing in anything as nothing is guaranteed. Everything I write on the topic is for informational and educational purposes only. Always do your research.