1. There is no win-win situation in cryptocurrency trading
In the amusement park, there is a child sitting on each end of the seesaw, swinging up and down. Similarly, in the process of cryptocurrency transactions, it is quite difficult to maintain a balance of interests among all parties. Some people are happy and some are sad, that's how trading works. Sometimes, nothing happens and the whole process seems very peaceful. But every time a trader makes a profit, someone loses. If someone doubles, someone will be trapped. This is a simple truth. The question is: Why do you think you are better than your opponent?
2. Cryptocurrency is a war unto itself
In international wars, there is a term called "fog of war." The general cannot see the entire map, only the scene in front of him. He must make decisions based on incomplete information. This is how cryptocurrencies are traded. Individual traders are always at the disadvantage of information asymmetry; while so-called "whale traders" sit on a large amount of cryptocurrency and can change the price trend through trading operations. Only these "whales" know when price trends will change. If it's news (real or fake) that's driving prices, by the time we find out, it's usually too late. The ones who win in trading are often those who know the necessary information first.
3. >51% correct choice
It’s still a seesaw problem. Price trends have only one state: rising or falling. It's a 50/50 thing. No one is 100% right. No system can correctly predict the irrational and frequently manipulated market of cryptocurrency. The goal of every trader is to make at least 51% of the correct choices. The experience of failed trading is a necessary process to exercise frustration tolerance.
4. Blind faith is the source of misfortune
No matter how scientific the system, our obsession with luck and destiny has always been a stumbling block. Example: A coin is rallying to dizzying heights. Even though we knew it was a little late to get on the bus, we were still afraid of missing the opportunity. Or we have hallucinated and seen patterns that are not actually there. In psychology, this is called bias. No one is rational. Believing that you can stay rational in the market is a mistake in itself.
5. Don’t blame the market, it’s you who is wrong
The market is always right. If the market doesn't behave the way you calculated it, you're always wrong.
6. The 80/20 market rule and cryptocurrency rule
Good traders make money on 20% of their trades, and the remaining 80% are draws or losses. If these 20% of correct trades result in a 16% profit, then the average profit of the other bad trades may be - 4%. This ratio can be achieved with a stop loss. Therefore, we can calculate whether we make a profit in the sum.
7. Reasons why novices lose money in trading
① Invest too much money at one time.
② Starting to invest without studying and investigating is tantamount to playing the lottery.
③ No matter whether it rises or falls, hold on to a certain altcoin for a long time.
④ Invest in junk currencies with extremely small market capitalization.
⑤ There is no concept of stop profit and stop loss.
⑥ The operation is too frequent, chasing the rise and killing the fall.
8. Invest in projects you understand
Ask yourself this before buying a certain coin. What is this project doing? Does it make sense? Is the content of the product understandable? In the long run, the better the product, the sooner prices will rise. This advice also means that we'd better stay away from junk coins or funds.
9. Differences between cryptocurrencies and other markets
The cryptocurrency market never rests and is open 24 hours a day.
The cryptocurrency market is changing rapidly, and the cycle between joy and frustration has been shortened by N times. If the stock market is bearish, then you can take a break for a few weeks or even months. In the cryptocurrency market, another turn may come after a week.
Price Volatility: For smaller market cap cryptocurrencies, prices can rise and fall by up to 30% in a single day. The speed of traditional media simply cannot keep up with this pace. For example, if a certain altcoin drops by 30%, by the time a reporter reports on it and publishes this article, the situation may have completely changed.
Stock traders talk about the percentage increase or decrease; cryptocurrency traders talk about how many times it has doubled, or cut in half, and then cut in half again.
Illegal activities like insider trading exist in any market. In the unregulated world of cryptocurrencies, violations occur more frequently and with greater effect. The rewards of information superiority in the cryptocurrency market are staggering.
In the field of cryptocurrency, project price analysis is easy to operate because the market is small and many analysts are trying to investigate. If many people act on the same outcome, then expectations may arise.
It is best not to make large purchases or sales of cryptocurrencies outside the top 20 by market capitalization. Due to low trading volume, prices deteriorate very quickly when the market is bad.
10. Gain experience in wrong transactions
The only way to increase your chances of winning is real trading experience. Reading books is of no use. Also do not trade with simulated money. Only real real money trading can bring experience, insight and success (if you are lucky).
Start with a small transaction amount, and if things go well, you can gradually increase the amount. When the profit is greater but the risk is higher, you can withdraw your principal and use the profits to trade. The principle is that the money you invest does not make you restless. A nervous state of mind is detrimental to trading.
11. Don’t rely too much on technical analysis
Moving averages, stochastics, relative strength indicators, trend lines, up and down candlesticks, up and down channels, bullish flags, head and shoulders bottom patterns - there are definitely benefits to learning these technical analysis indicators, but don't get too attached to them.
The time scale of technical indicators can be zoomed in or out. The shorter the period you are looking at, the easier it is for the displayed pattern to go awry. When performing technical analysis, it is necessary to comprehensively consider the entire market environment, such as policy news, market sentiment, financial conditions and other factors to scientifically manage positions and achieve a measured advance and retreat.