2020 is coming to an end, typically, the end of the year is a good time to reflect on the things that could’ve gone better or different. For me, this includes reflecting on my trading strategies and results.
(note: there’s big differences between trading and investing)
I’ve traded cryptocurrency and stocks since early 2017, in these years I’ve made a lot of mistakes, both rookie mistakes and more advanced mistakes. Looking at my trading journal, here’s a list of common mistakes I’ve made in the past trading/investing cryptocurrency.
- Trading without a plan. The trades I took with a clear game plan have performed significantly better than the trades I simply just opened. This plan includes proper risk management such as: position size based on the total portfolio and stop-loss level, take-profit targets set in advance based on previous resistance points. By doing so, not only do you apply proper risk management, you also take away emotions from trading which is point 2. By having a plan and setting orders in advance, you’re also able to do other things than just trading.
- Emotional trading. Don’t get attached to a position, people tend to hold onto losing positions longer than winning positions. Whereas this could lead towards extreme (unnecessary) losses. Trading out of boredom is also not recommended. Sometimes it’s better to not trade at all, take a step back, and wait for a solid opportunity to appear.
- Overcomplicating things. Like many others, I’m a fairly busy person and don’t have the time to watch the charts 24/7. Nor do I have time to become the perfect trader who’s able to use all kinds of metrics. That said, I like to keep my charts simple and trade based on previous support and resistance levels (4-hour or daily or weekly timeframe).
- Chasing green candles, or catching falling knives too early. This might have been one of my most frequent mistakes where emotions took over and I decided to jump on a ship that had already long sailed. Chasing green candles (cryptocurrency that has increased in value a lot in a short time period) the risk/reward is way out of place, often leading to unnecessary losses. As for falling knives, sometimes it’s better to wait for an altcoin to show clear recovery instead of trying to time the perfect bottom.
- Not paying attention to token metrics. Just because a token/coin is <$1 doesn’t mean it has potential to go up to BTC’s $20,000+ value. The price of a cryptocurrency doesn’t tell you much, it’s important to pay attention to the market cap and supply, as well as listed exchanges (as there’s plenty of exchanges with fake volume. There also needs to be sufficient liquidity to actually be able to enter and exit a trade).
- Copying influencers/traders & trying out different trading bots. I’ve tried out many VIP groups, followed plenty of influencers promoting projects and have also tried out various trading bots. I’ve only experienced two good VIP groups the past few years, following influencers has only resulted in losses and trading bots have also only resulted in losses (except for a privately developed bot). Realistically, very profitable bots are not made available to the public - as they’d scale it for their own profits. Therefore, if something seems too good to be true, it usually is.
That said, know what kind of trader you are. Are you interested in short-term (day) trading, holding positions for 1–4 weeks, or is trading simply not for you and are you better of investing based on fundamental analysis?
Think these options through for yourself, make a plan, so that you’re able to make educated decisions. This will enable you to increase your profits, decrease your losses and keep a calm mind.
This post is for informative purposes only, I’m not a financial advisor and I currently do have a position in BTC and Altcoins. I have not been paid for this post, this post is out of personal interest.