Mistake in trading: chasing after high profits, buying high and selling low.
The basic principle in the cryptocurrency market is to prefer missing out rather than making a mistake. New investors often find it hard to control their emotions; when they see prices rising, they immediately go long. Bitcoin rises rapidly, and investors are likely to chase in during a brief pause, often at the highest point; conversely, going short can easily lead to chasing at the lowest point. Successful investments, much like a successful life, depend on how well we control our losses, not on how well we avoid them. If you truly want to become a savvy trader, learn how to manage losses professionally; that is the key.
Mistake in trading: excessive confidence leads to missed stop-loss opportunities.
In cryptocurrency trading, many people overlook the importance of stop-loss. They become complacent after making a small profit, thinking they are "gurus." However, failing to set timely stop-losses after a gain can lead to dire situations when the market unexpectedly reverses.
Mistake in trading: fear of loss.
Once a loss trend is detected, it is best to take a break, stop trading, and patiently wait for opportunities. When a wrong direction leads to a loss, it can affect your mood, making you want to earn it back immediately. Decisions made at this time are often impulsive, and trading strategies can be swayed by emotions, leading to poor entry prices.
Mistake in trading: taking chances and relying on the market.
If you don't have an accurate understanding of the profit potential before placing an order, you might be caught off guard by unexpected situations. When facing losses, you can't stop losses in time and instead hope for external factors like the market to save you. The crucial reason is the existence of a gambler's mentality.
Investing carries risks; when trading, do not harbor lucky thoughts. Investing with a mentality of taking chances may bring you luck a couple of times, allowing you to taste a little success, but the greater likelihood is that you will lose everything. Investors who cling to hope and a gambler's mentality are likely on the verge of liquidation and bankruptcy.
Mistake in trading: lack of professional industry knowledge.
Herd mentality: seeing friends around you making money leads to the belief that there are abundant profit opportunities in the market. Without sufficient learning and understanding, one blindly enters the market, ignoring risks, and even lacking knowledge of trading rules and software usage. Starting off without understanding your own resources makes it hard to avoid losses. Or you might act counterproductively; did you stop-loss? Are you deeply trapped? Have you locked your positions? Why is this happening? Knowing that the market is surging, why do you keep doubling down? If you lose, you lose; why are you so reluctant to cut losses?
Today, I want to emphasize the four cardinal rules of stop-loss once again.
1. Plan your investment route.
To some novices who do not understand trading, it seems that opportunities in the market are everywhere, and every trend can be seized, as if every trend belongs to them. However, this is not the case. The market is always fluctuating, and we cannot grasp every trend. For traders new to the cryptocurrency space, the first step is to pinpoint their own positioning and understand what they want. Some traders, regardless of what trend they see or which coin is rising, try to grab them all, but in the end, they catch nothing and suffer significant losses.
Secondly, every transaction must be taken seriously. In the market, there will always be people who become complacent after tasting a bit of success, thinking they can handle it on their own. However, once they experience a trading low, they may start to give up on themselves and blame others instead of analyzing and reflecting on the reasons for their profits and losses. Such individuals often fail to recognize the market's rules, thus cannot see their own problems, and instead blame the market. It is important to understand that the market is fair. Only when traders take every transaction seriously will the market reward them with a big hug; otherwise, they may be abandoned by the market. Therefore, whether in profit or loss, we must take responsibility for every transaction we make.
2. Manage funds well and control risks.
Some traders find the right entry point in their trades but fail to grasp the exit point, resulting in no profits or even significant losses. At this moment, when reflecting on the recent trade, you may blame yourself for not exiting in time or not setting stop-losses promptly, but the fundamental issue is the lack of awareness of the importance of money management and risk control. In the face of ever-changing market conditions, it becomes particularly important for traders to steadily seize an opportunity while managing risks effectively. Preparing for money management in advance and strengthening risk control is key to maintaining a balanced approach, thereby better capturing the constantly emerging opportunities in the market.
3. Analyze calmly and avoid impulsive trades.
Blind trading is when one attempts to seize opportunities without considering the trading value and profit-loss ratio. Such traders often lack their own trading methods and tend to follow their instincts, rushing into trades as soon as they sense a potential profit, neglecting the inherent risks. The market does not always present valuable trading opportunities, and while trends are constantly fluctuating, not every fluctuation can yield profits.
Sometimes, a trade may start off profitably, but when we exit, we end up losing badly or even face liquidation. A significant reason for this is our own blind mentality. Traders should focus on trends that they can see and have a fair chance of holding. Therefore, careful consideration before trading is necessary, including finding entry points and setting take-profit and stop-loss levels; avoid blind trading.
4. Develop a trading plan and adhere to discipline.
Creating a trading plan can reduce the randomness and blindness of trading to a certain extent. Many veterans in the trading community emphasize the importance of planning. Developing a trading plan not only helps traders analyze the market seriously and understand it better but also aids in refining their trading systems. When encountering suitable market conditions, traders can set their entry and exit points, as well as stop-loss and take-profit levels in advance based on their trading plans. This way, if a significant market fluctuation occurs, traders will not be at a loss.
"Plan your trade, trade your plan". When traders achieve success in trading, they gradually understand the meaning of this phrase. The market is full of temptations, and one careless move can lead to a fall from the peak to the valley. What you need to do is control your mindset and strictly adhere to your trading plan. When investing, it is essential to first establish the correct investment philosophy, as this is the root of everything. Next, manage your position and funds effectively, and importantly, maintain a good mindset: don't be arrogant when you profit, and don't be discouraged when you lose. Invest with solid technical skills under the right guidance.
In the cryptocurrency world, it's essentially a battle between retail investors and institutional players. If you don't have cutting-edge news or first-hand information, you can only be exploited! If you want to work together to strategize and reap profits from the institutional players, feel free to join.