Blow Your Bitcoin Trading With These 9 Mistakes

Let’s look into the most common mistakes that bitcoin traders make every day. Mistakes that are stopping us to become more profitable when trading the cryptocurrency market. There is a common sequence of events that most cryptocurrency traders go through during their development. We record some good trades with decent profits but then we have those days when everything goes wrong and every time some progress is being made, something happens that stops this progress.

If this is something that you can relate to, don’t worry, you are not alone. Spending time in this area to understand the mistakes we make are very important to our development as crypto traders. Before you take the next trade, consider these common mistakes you must avoid, as they are the main reasons new traders fail to increase their account sizes:

1. Putting your stop loss order to break even when in profit

The purpose of a stop is to protect you if your trade idea doesn’t work out and not to obtain a “risk-free” trade the moment the market moves in your favor. Your stop should be based on technical analysis, and not on the number of points you are in profit.

The market doesn’t care where you entered and where you’re break even. The moment you arbitrarily move your stop to be “safe” you also abandon a technical-based approach to your position. So, stick to your original trading plan and let the market prove to you that you’re wrong by hitting your original stop loss. Only move your stop loss when the technical analysis indicate so.

2. Trading without a stop loss

Trading without a stop loss is probably the biggest mistake traders make and almost every new trader does that. Many new traders hate the stop loss orders because very often after they are stopped out of a trade and the price soon comes back to a point where the trade could have exited with a profit. So, for the next trades they ignore the stop orders and set only take profit orders. This strategy could work, until one day when the price never comes back to manageable losses and just keeps going against them.

3. Trading too many cryptocurrencies

A big problem that inhibits many crypto traders’ success is that they are focusing on too many cryptocurrencies in addition to all the other trading variables they are overly-focused on. Just because you can trade all the crypto pairs doesn’t mean you should. Despite this obvious fact, many traders confuse and frustrate themselves everyday by trying to track and trade too many pairs.

The solution is to scale-back the amount of data you’re trying to make sense of as you analyze the cryptocurrency pairs. Putting the odds in your favor is not done by trying to keep track of 10 or 20 different cryptos and search them for signals each day. Your aim should be to become a specialist, who trades on fewer crypto pairs.

4. Buying and selling on unfounded tips or rumors

Everyone makes this mistake at one point or another in their trading or investing career. You may hear your friends or colleagues talking about a cryptocurrency that will skyrocket and you instantly join the crowd. Or you see an investment guru on social media who recommend a specific crypto token as a must-buy and you immediately follow the advice.

We’ve all made this type of mistake, of buying and selling on unfounded tips or rumors. The smart thing is to do your own homework. Make sure you research and analyze so that you know what you are buying or selling and why. Next time you’re tempted to buy based on a tip or a rumor, don’t do so until you’ve got all the facts and are comfortable with the information researched.

5. Trying to anticipate the news

Crypto is a global market with thousands of trading pairs. Many of these pairs rise or fall sharply in the wake of scheduled news related to the crypto network. Anticipating the direction the pair will move and taking a position before the news is out, seems like an easy way to make a profit. But, it isn’t.

Trading the news may seem easy, with a lot of potential to make easy profits but often the price will move in both directions sharply and quickly, before picking a sustained direction. That means you’ll likely be in a potential big losing crypto trade within seconds of the news release. You may be thinking it’s not so bad after all, with all that volatility, the price could swing back in your favor. Maybe it will, maybe it won’t. But there is another problem. In those initial moments, the spread between the bid and ask price is often much bigger than usual. You may not be able to find liquidity to get out of your position at the price you want. So, instead of anticipating the direction news will take the market, have a trading strategy that gets you into a trade after the news. You can profit from the volatility without all the unknown risks.

6. Believing that price cannot move any more higher or lower

“Oversold” and “overbought” are two overused terms thrown around by nearly everyone in the crypto trading world. When you are being taught on how to trade different trends, using certain indicators, one of the first lessons is to look for is overbought/oversold markets and search for entry signals other way around. The truth is that markets can always get more oversold and can stay oversold for extended periods. The same is true with up trends.

7. Changing indicators and trading strategy too often

Let me ask you something; how many times did you change your trading strategy or adjusted your indicator settings after you lost 3 or 4 trades in a row because you thought your strategy wasn’t working anymore? We all done this, it’s a common problem most traders face. It’s important that you stop evaluating your strategy based on 1, 2 or 5 trades and understand the implications of long-term thinking.

Never change your system after a few losing trades! If traders would stick to their strategies a little longer and not give up so quickly during times of adversity, we’d probably see a lot more profitable traders. You must consider this; losing and winning streaks are normal and no matter how good you are as a trader, they will happen. Don’t give up on your strategy too early.

8. Using too much margin or leverage

Leverage is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Beginner traders may get dazzled by the degree of leverage they possess, especially in bitcoin trading, but may soon discover that excessive leverage can destroy trading capital in a second.

In order to become a successful trader it is crucial that you understand both, the benefits and the pitfalls of trading with leverage. When leverage works it increases your gains substantially. But leverage can also work against you. If your trade moves in the opposite direction leverage will amplify your potential losses.

Remember; the more leverage you use, the less “breathing room” you have for the market to move before a margin call. Building a strategy and trading psychology are important. The biggest factor on whether you succeed as a trader is making sure you capitalize your account sufficiently and trade that capital with smart leverage.

9. Using too many indicators on charts

The debate about trading cryptocurrency market indicators and their usefulness is probably as old as trading itself. Nevertheless, there are numerous misconceptions when it comes to understanding and using indicators. Many traders arbitrarily add indicator after indicator to their charts because they believe that the more indicators they have the more efficient they can filter out “bad” and misleading trading signals.

This approach usually results in bad results when traders suddenly feel overwhelmed by the amount of information they have to process. Besides that, another major mistake is the fact that traders often combine indicators that essentially provide the same information. Furthermore, traders rely on trend-indicators when price is range-bound or try to use oscillators when markets are trending.

Remember, the difference between an amateur and a professional trader is not necessarily defined by the indicators they choose or which entry signals they follow but how they approach trading in general.

Qirat Ayaz

Passionate about robots and how the robotics is changing everything around us. Writes about startups in the blockchain space. Contact the editor at editor.startups@blockpublisher.com

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