This post is the next step in my cryptocurrency day trading journey. If you are new to this, you can start with the introduction listed here

In the previous post, I mentioned I will utilize some of my past experience from day trading the fx market. Below is a list of more specific elements I have learned in the past, that I will apply when trading cryptocurrencies. While this list isn’t exhaustive, it does cover some of the most crucial lessons I have learned. 

Careful with external trade ideas andmarket buzz

Inspiration is good and can come in handy. But gambling with money based on someone else’s ideas is a bad approach. I did this and nothing good came from it.  Once you start trading, you will probably begin to read about the instruments you trade. The thing is, there is an endless stream of different opinions on what will happen next. It is very easy to get distracted and form a bias based on external information and pay less attention to your personal trading knowledge and know-how. 

Shiny object syndrome

Abstract shiny background. EPS 10.

It easy to get caught up in this. There are lots of free as well as commercial products and services in the trading environment; books, courses, platforms, algos, indicators, strategies, signals, membership forums, etc. Some free, some paid, some are good, some are bad and some are direct scams. It can be difficult to navigate in this space, as you need to start somewhere. A solid level of skepticism is required! Remember that if you sign up for say, a crypto signal service where bad trades are called, you will; 

  • Lose the funds you paid for the service
  • Potentially lose funds trading their signals
  • Lose time invested in learning about the service and time spent following signals

Plan your trade before execution

You need a plan for the trade before you execute it. You hear this all the time, and yet it is often disregarded. But why is it so important? Well if you do not have a plan, what is your plan? A trade will be closed at some point, either by you or by a lack of funds. 

Solid money management

As part of planning your trades, you need a solid money management strategy. How much are you willing to lose, per trade and how much do you expect to win. What drawdown are you ready to accept and so on. Keep in mind the complexity will increase if you trade on margin. 

 the psychological aspect is difficult to manage

I remember reading about before I started trading the first time and I didn’t pay much attention to it. This turned out to be a costly mistake. This is the most powerful distraction and it is immensely difficult to control when you are on a winning streak, but especially when you hit a losing one. A focus on this topic will be my absolute priority this time. 

do not overtrade

This comes in connection with the above-mentioned aspect. One losing trade will easily turn in to numerous losing trades. Based on experience, I can safely say that a short break after a losing trade is worth far more than another trade – both from a psychological perspective, as well as your account balance. 

no fomo

This is also connected to the psychological aspect, and ever since the recent surge in BTC value to 20K, this seems to be on everyone’s lips. FOMO is an abbreviation for Fear Of Missing Out, and a very common feeling to get when you observe a rapid price increase or decrease within a very short timespan. Trading based on FOMO is bound to be impulsive and done without attention to beforementioned rules and money management plans. Needless to say, this type of trading tends to produce losses rather than winning trades. 

use only funds you can afford to lose

Because if you don’t, you will potentially mess up a whole lot more, than just your account balance. 

careful with margin trading

Margin trading means you will have the option to trade for far more than what you account balance allows for. This is powerful, but also a dangerous path if you don’t know what you are doing. It sounds tempting when you hear about it because the potential for large profits is just around the corner, but do not forget that the opposite is just as possible and probably a more likely. 

use stop losses

If you do not apply a stop loss to your trade, the risk: reward ratio is your account balance: profit target (or in theory, the highest level the trade in question will ever reach). To make things even worse, you can actually lose more than your account balance and end up being in debt to your broker. Trading might fun, exciting and profitable. But there is no reason to risk everything and more. 

There are lots of other lessons I have learned over the years, but the above-mentioned ones are definitely some of the more important ones. I will continue to add more to this list here as I continue through this journey.  Everyone has their own trading style, and so do I. You may or may not agree with the ideas posted here. I have seen a lot of advice throughout the years, and many of which I do not agree with. I will be posting more about this in a future post.  With that being said, you should always make up your own mind, about any tips, tricks, rules, and guidelines, you read anywhere – including anything posted on this site. You will be trading with your own funds, so do not let other people tell you how to do it.  I’m I am currently in the process of getting things set up for my trading journey. In the next post, I will share more details on this very topic.