Episode 3 - Top 10 Mistakes New Traders & Investors Make In Cryptocurrencies - Part 2

Aug 28, 2021

The Podcast is available in audio, video and text. Please click on the episode you are interested in.

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This is part 2 of the Top 10 Mistakes New Traders & Investors Make In Cryptocurrencies

6. Overtrading: This is by far the most common mistake new traders and investors make. Hey even those who are very experienced at times may have this problem too. Overtrading means that you are trading more than you should on any given day. For example, if you come up with a plan and you make say 300 or 3000 in one day or lose that much in a day, It will be tempting to double down and find more opportunities to trade. I’ve had situation in which my system generated 2 trades in a day. Once those two trades were taken and closed out, win lose or draw, technically I was done for the day. BUT, I was looking for more opportunities to trade and so I would tweak my plan to accommodate trades I shouldn’t have been taking. You may have  guessed, those trades turned out to be losers. I pretty much erased all the gains I made form the two trades I took earlier in the day. This is such a common mistake. It’s a very emotional thing because it is this need for movement, but it is also impulsive. Overtrading is fully emotionally and should be kept in check. If you are new to trading, please keep this in mind.  If you tend to me more on the compulsive side just like I was when I first started, turn off the computer or your phone and go for walk or watch a movie or something. Shift your mental state so that compulsion for trading will dissipate.  

7. Not Putting Your Plan and Progress to Paper: One of the common mistakes new traders and investors make is not making their trading plans real. Meaning, they don’t write it down or make note of why they buy or sell a give cryptocurrency. They just jump in or out without a plan. BUT even more importantly, they don’t log their trades. Logging winning and losing trades is very important because when you lose or if you go on a losing streak, you can learn from your mistakes. If you don’t learn from your mistakes, you cant improve. For me personally, there are 2 things that usually lead to loses for me.

 

  1. I deviate from my trading: Yes, even I do from time to time, but it’s VERY VERY rare, but it does happen. I am human 😊 
  2. Unexpected news. This is something I cant control , no one can. Sometimes news hits the market, and it will cause a movement against you. Even when these happen, I write it down. This way I know that the loss on the trade was not from a mistake I made, but by unforeseen events. I learn from it all.

I suggest either having a journal and writing the trades down, or putting it in a notepad on the computer or phone. You can record yourself too. But be sure to specify the day the trades occur, the investment you chose, whether you bought or sold , time of day too. These are all important because if you ever want to look back , you’ll have the exact date and you can see how the markets looked now that you have some distance from it.  ALL very important.

8. Trading When Sick, Having A Bad Day Or Altered: Some people use the rush of trading as a kind of remedy for their ills. It gives them energy when they feel nervous or down. This is a mistake. Trading and investing is not therapy, it is not medicine. Trading while sick or when you are having a bad day clouds your judgment. If you are altered in anyway that your judgment might be impaired is the LAST thing you want when trading. I recall trading once when I got back from a party late at night. To be honest, I was staggeringly drunk, I mean the only way I could see was to close one This was a long time ago. But that night, I was like, “this looks really good, let me by a gazillion of them.” Suffice it to say, I woke up the next morning and I faced a $5000 loss. Certain it wasn’t my biggest loss in my life, but damn that hurt and why I got in was completely fuzzy to me. So please, trade only when you are feeling good, and your head is clear. Don't worry, there will always be trading opportunities.

9. Thinking Paper Trading Is Just As Good As Live Trading: I am one of the few investors out there that thinks paper trading is deceptive. For those who don’t know what that is. paper trading is when you stimulate the trades so you get a feel for the market. Instead of trading with real money, you simply simulate the trading. This isn’t bad when you are creating a trading plan and you want to see how it works without losing our shirt. I get it, that is great, I see the value in that. BUT, the biggest mistake new traders and investors make is to think that their success in paper trading will port over to live trading. On the surface this seems odd of me to say. If the trading plan works on paper it should work live. YES, technically this is true, but there is one thing missing in paper trading, and that is your mental state. When you paper trade and the market goes against you, you don’t feel that emotion you feel when you lose money. Why is this important? Well, if you are trading on paper and the market is against you, you are likely to stay in the bad trade until it moves in your favor because you don’t REALLY have money in it. But when real money is on the line it is NOT easy to let a losing trade ride like that. Chances are, if the market moves even slightly against you, you will panic. That panic wont be there in paper trading, but it will be there during live trading and the mental involvement will make all the difference. So, if your system works well on paper, be sure you treat the paper trading like you would if real money was on the line, otherwise it becomes an exercise in futility.

10. Increasing Your Trade Size Prematurely: I’ve made this mistake so many times. When you are on a roll and making money say, trading a $1000 a time and making say $200 a day or even a week, it will be tempting to say to yourself “ if I am making $200 a day or $200 extra a week, let me put $2000 in so Ill make $400 a day or a week.” This is a big mistake. You are taking on more risk because of a few successes. The root of this is greed. My rule of thumb is if your usual trade size is $1000 don’t even think about doubling it until your account is at least $4000. Now, again I am not a financial advisor this is purely my opinion, but it makes sense doesn’t it? You need to earn the right to increase your trade size. Raising it prematurely increases your risk when you can least afford it and if a bad trading day occurs, you could wipe out your account. Remember with increased trade sizes, yes increases in potential profits but also potential risk as well. It goes both ways. So think of a good threshold and then once you reach it, then you can think about adding to your trade size.

 

So there you have it, 10 of the biggest mistakes new investors and traders in Crypto make. Many of these mistakes aren’t covered in other videos but I think they are super important.

I hope you enjoy the last video and this video on the subject. I will see you in the next Episode of The Blockchain Immersive Podcast.

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