Most of the new traders that enter the world of Crypto do so on the promise that they are going to make a ton of money so they can escape from a so-called rat race.
The problem is because new traders are expecting that earning “thousands” every day or week is a simple process.
I`m not saying that you cannot become successful in trading crypto. However, if you think that this will be a simple process and that you will become a profitable trader in a month, then you are setting your account to be blown faster than you can imagine.
The majority of new traders are victims to all the get rich quick schemes.
They wanted to make a million yesterday. But soon realize that this is not the way to approach trading.
There are two kinds of traders:
1. Those who are humble.
2. Those who are going to be humbled.
What you shouldn’t do when you start trading is:
- Blindly follow any signals
- Start trading without risk management in place
- Start using three or more different indicators for Technical Analysis
- Open position without calculating the correct position size
- Don`t cut your loss and hope it will come back
- Don`t plan your entry and exit before you make a trade
- Trade randomly with no defined trading edge.
- Focus only on potential profits and not on potential losses
Follow these steps, and your account will be at zero in no time!
The worse thing that can happen to a new trader is they open an account, deposit a minimal amount of money, say $300.
Then they enter a market with the mindset “it`s only $300, I will just play around”.
Now two things can happen: 1) They blow their account and think, “well, it`s only $300” 2) they triple their account and become euphoric, they have mastered the game from the beginning, and they will now put more money in.
After they put in more money and make more trades, they eventually lose all of their capital.
They can do two things now, quit or realize that trading is far more complicated and requires serious attention. Something many new traders are ignorant to consider.
I will admit it, and I`m not ashamed to say that I have blown my trading account many times. So many in fact that I was not able to pay back my friend from which I have borrowed money after I had blown all of mine because I had expected that I would somehow recover.
Become aware and mindful. The above scenarios happen to most new traders and many times creep up on experienced traders also.
The only way to avoid blowing your money is simple. It would be best if you completely change the way you perceive the market.
- Don`t expect that you will master the game in a few months; it takes a lot of discipline and practice to become a consistently profitable trader.
- Find a mentor and join a real trading community. Learn from one or two people and master all their content. Only then go on and find a new mentor on a higher level.
- Learn how to protect your capital before opening any positions.
- Always calculate your position size. This is a great way to avoid huge losses because you must have defined stop loss and entry price to calculate position size. We have made a Free Position Size Calculator you can use.
- Never take for granted the importance of dedication and hard work that is required to master this game.
- Consider that 95% of all traders lose money and eventually quit. You must work very hard and be very disciplined to be in the top 5%
- Journal your every trade. Only where performance is measured, performance improves.
- Build a trading plan and stick to it.
Avoid falling for the story that you can make huge sums of money in an instant. There are some traders who do, however, they have trained their minds to manage the novelty of uncertainty and apply their trading in an objective and systematic way.