COMMON MISTAKES OF A TRADER PART 1: $80, 000 IN A SINGLE NIGHT
This MISTAKE, once you've conquered, will CHANGE your entire trading life.
We have all been there. No one can escape the fact that there are miscalculations that can occur not only in the market but as well as our lives. It's easy to say the times we've won but hard to admit the times when we've lost. Trading mistakes can happen, even when you've already prepared yourself countless of times and thus, making admitting such mistakes and accepting it will be essential to trading success.
To clearly understand what we mean, here's an example. Reading this will change the way you view your trading perspective.
Trader A wants to open a long position on a highly surging token, more specifically a token that has already increased 80%-200% or more. Without checking for any possible selloffs and pullbacks that could cause impulsive waves to happen, thus, once he opened his position, it immediately went negative after the impulsive wave. Now, he's entirely shocked and anxious, he wants to minimize the losses and he cut the loss. Right after, this happened, he noticed the token rising again, now he's entirely speechless. He opened another long position, this time, thinking it was the right decision. He became more positive with this decision and surely the token went up and looking at his trade he saw an increase in percentage. After some time, the token went up by another round of 40% increase. By this time, he was left with 2 decisions, either to take the profit happily or wait for it to grow more. The latter was chosen. By choosing the latter, the token went up by another 30% and by this time, he noticed that the token is becoming more and more aggressive as both sellers and buyers clash. This time, he had to choose any of these 2 decisions, either to take the profit happily or wait for it to grow more. This time, he still chose the 2nd option and with his decision, he was already tired and wants to take some rest. Without implementing any strategy such as breakeven or even setting his stop loss at the profit that he could've took even when the market reversed. After waking up, he noticed that the token has already went down by a remarkably high percentage, a whooping negative 200%. This made his jaw drop and he recalled every decision making he has done. This, in fact was regrettably a huge mistake. This made him lose $80, 000.
Surely reading this would've made you formulate possible better decision making in your head. Although, once you're in his position, you would either be like him or even worse. Thus, I'll help you formulate better decision making that I've kept within my mind, journal and other logs to keep me sane in this type of market.
- Trading without any plan could lead to a disaster. Hence, creating plans before initiating a trade is essential to mitigate the risks and as well as prevent any disaster from happening.
- Provide target key levels to accept the advantages you've already gained from the market without questioning it.
- Setting stop losses in case of strategy invalidation and other reversals in the market. Adjusting them could also help you in gaining no losses or even taking profit.
- Doing back tests or forward tests to ensure your strategy's validity. Counting how many invalidations and validations occurred is essential for your data gathering.
- Mastering controlling your patience even when the market seems to be going up forever.
- Stabilizing your mind even when the market isn't stable and is suffering from huge losses.
These posts are for educational purposes. To guide the people who might still be struggling within the crypto market, those who are new to the environment and volatility and everyone else who needs it.
Stay wise, trade cautiously.