LordToken - Articles

5 Tips For Crypto Newbies

Ace Crypto Trading As A Beginner

Cryptocurrencies have been around for a while and have given exponential returns to users over the past few years.

In this guide, we'll be talking about how you can start your journey as a crypto trader and make some decent profits.

Trading has always been seen as an activity for experts, but with the advancements in technology, investing and trading are now much easier.

All you have to do is follow certain guidelines while putting your money at work.

But before we dive into what things you need to keep in mind while trading, it is essential to differentiate between crypto trading and investing.

Crypto investing refers to investing a particular amount for a medium to a long time, whereas trading involves putting the money in for a short to medium period.

The aim of traders and investors is the same – Making a profit.

Now let's discuss the rules which will make your trading journey more manageable.

1. Have a plan and follow it

It is crucial to have a clear plan in mind before trading.

A plan includes:

  • a list of coins that you wish to trade
  • your trading goals
  • your attitude towards the market
  • Your entry price
  • Your target price
  • On what setup will you be trading?
  • Your risk to reward ratio
  • assessing your trades

Trading is like any other business, and every business needs a plan to run successfully and generate revenue.

A good trading plan minimizes stress throughout your trading day, missing fewer trades, and being more aware of your trading habit, which helps you build highly targeted progress and treat trading seriously.

Justify your trading strategy and ensure that you have solid grounds for entering a trade.

Make sure you take advantage of a solid setup rather than acting rashly on the desire to make a trade.

By carefully self-monitoring your trading plan, you can reduce the risk of overtrading and the potential harm it may bring to your trading account.

Limiting your trades will not only boost your chances of profit, but it will also provide you with the psychological stability that comes with regularly winning trades.

2. Allocate a small percentage of capital to manage risk

The ability to handle risk is essential for being a successful trader.

When you are just learning how to trade and get hands-on experience in the market, investing a tiny portion of your capital into the live market is best.

The main reason behind this is to avoid unnecessary and big losses. You aim to learn the markets in the initial stage and not earn money.

Have a learning mindset rather than having a money mindset.

Let's look at an example to help you understand:

Suppose you had a capital of $5,000: you start trading, and as you are still in the initial phase, you make a 10% loss of $500.

In the same situation, if you would have traded with a small capital of $500 or $1,000, then this same 10% risk would've been between $50 and $100, which is way less than a loss of $500.

The main goal is to survive in this highly volatile and unregulated market. The more time you spend in the market, the better it'll be for you in the long run.

3. Do not trade with your emotions

A very famous saying among traders is that to be a good trader, you've to act like a robot, which means you need to cut emotions out of the process.

As humans, we naturally tend to attach ourselves to money, and this emotion affects a lot while you trade.

Trading solely on emotions can affect you in numerous ways.

It exposes you to unnecessary risk and results in trading that does not align with your objectives. It makes your trading experience unenjoyable and encourages you to do revenge trading.

As soon as you see your trade going against you, you'll automatically regret and repent that you entered.

To avoid this, you need to have a plan, as we discussed earlier, and trade according to the strategy/ plan, cut unnecessary market noises, and act on what you see on the charts and not on what you think.

It is the best way to cut emotions in trading. Crypto markets are highly volatile, and if you do not have control over your emotions, you are vulnerable to big losses and overtrading.

4. Don't put all your trust in influencers

Always Do Your Own Research (DYOR) before trading or investing your hard-earned money.

You can learn from the influencers, but you should never trade on their advice or try to copy their portfolio.

The logic behind this is that they have huge capital, and their risk management, attitude, and the way to trade are different from yours.

Another factor is that the influencer does not examine your risk profile (capacity and tolerance) before recommending a financial instrument.

You may end up with a trade that is not in line with your risk tolerance, does not fit into their strategy, or costs you money that you could not afford to lose in the first place.

It would be best to do your own research, have your own trading plan and act on that.

Never think of trading as a quick-rich scheme, this false impression has stopped many traders from becoming successful, and you definitely don't want to be an unsuccessful trader.

Ultimately, it's your money involved in the trade, and you should be responsible for every profit or loss.

5. Market psychology

Market psychology refers to the market movements based on the mental states of the participants.

For example, if most traders or investors are bullish on a particular asset, the price and the market will drive up.

But what is the psychology of a crypto market?

The psychology of cryptocurrency trading is centered on combating the basic emotional triggers of fear and greed.

The high amount of volatility connected with cryptocurrency trading creates an environment that can throw off the majority of market participants.

Cryptocurrency prices closely follow the global markets' general health (S&P500, Nasdaq, SGX Nifty, etc.)

The main issue with crypto traders is the Fear Of Missing Out (FOMO), and that is because of the high volatility of crypto.

Most traders buy high and sell low, whereas you've to do the opposite to excel in trading.

The legendary investor Warren Buffet says, "Be greedy when others are fearful and be fearful when the others are greedy."

People buy when the FOMO sets in, but you have to do the opposite.

If you would've noticed, most of the trading from retail traders is done after the big move has already happened, and then they face massive losses.

If you want to avoid all these things, you should have a strategy that tells you exactly what and when you have to do.

You need to have a strategy and preserve it until the end.

Conclusion

Traders should evaluate their performance regularly. In addition to analyzing their returns and particular positions, you should consider how they prepared for a trading session and how updated you are on the markets.

This regular evaluation can assist you in correcting mistakes, changing poor habits, and increasing total results.

You need to be adaptable and consider experimenting occasionally.

That's it for this quick guide; we hope that by now, you know how to master your trading psychology and be a successful trader.

Join LordToken and use our platform to promote projects that will impact our everyday life.


LordToken | Apr 28, 2022