I still remember when I started getting serious about trading cryptocurrencies in 2014.
Although I had some working knowledge of the crypto market, the truth is that I had no idea what I was doing.
Previously, I had monkeyed around with Forex trading so I did have some trading experience but definitely not enough to seamlessly create a winning coin portfolio and execute a complex trading strategy.
And overall my journey went pretty well. Sure, I made mistakes, did few stupid things and spent a lot of time and money figuring out stuff that now seems totally rudimentary, but I was also able to build a trading business that helped me inch closer towards financial freedom.
I often think about how much time I could’ve saved and stress I could’ve avoided if only someone had sat me down at the beginning and taught me the big lessons I had to discover on my own.
With this article, I want to lend a hand to those who are looking to start trading cryptocurrencies in 2019. Here are the five big lessons I wish I knew before I built my crypto trading business ground up —the ones that will save you a lot of time, frustration and money.
LESSON #1: ANALYZE YOUR OWN TRADES AS OFTEN AS YOU CAN
As a trader, you’re bound to make mistakes. You shouldn’t try to save yourself from making mistakes. Instead, you should make mistakes and learn from them as early in your trading career as possible. This will allow you to grow exponentially as you’ll stop yourself from repeating the same mistakes later in your career.
I put off keeping a journal for a long time before I realized that that was the easiest way for me to grow.
Chess players often replay their games to find out better moves and improve their gameplay.
I feel that trading cryptocurrencies is similar to playing chess and traders should religiously analyze their “moves”.
By analyzing my trades, I can gauge how the crypto market is operating at a given moment in time and how my near-future trades might fare. It also helps me understand my own mental state. If I uncover that I’m getting anxious and making sloppy trades, I pause and take a mental vacation from the trading game.
It has also helped me identify my style of trading. Apparently, the numbers show that I’m a good ICO trader and an average Ethereum trader. I’m better able to research the longevity and future applications of new coins than judge how the market will react to some news about Ethereum. So I’ve decided to focus exclusively on ICOs in 2019 and align my trading strategy with my innate style.
LESSON #2: IN THE BEGINNING, KEEP YOUR TRADING SIMPLE AND TRADE SMALLER AMOUNTS
When I started trading cryptocurrencies, I had a trading plan but it was too complex for my own good.
Ideally, you want a trading plan when you start out. A trading plan will help you improve over time as a trader and keep you on track. It’ll prevent you from making trades that don’t go with your trading style or buy impulsively.
But you don’t want to make it super complicated. That will actually paralyze you and prevent you from putting your knowledge into action.
I realize now that at the time I was complicating the trading plan every week as an act of procrastination. I was afraid of entering the crypto trading arena and I would delay my entry by trying to account for everything.
A good trading plan is necessary for risk management and to keep the profit you make from your trades.
Start with a rudimentary plan that you can improve over time as you learn more about the market and yourself as a trader.
During this time, you’ll be experimenting a lot. But that doesn’t mean you should be throwing around serious money during this learning phase.
Trade small, test out your ideas, optimize your trading plan, and outline your approach to risk management. Once you have a good feel for trading cryptocurrencies, you can start adding more risk capital to your trades.
Complexity isn’t your friend. I remember a co-worker telling me that she was using 5-6 indicators on her charts to get a “more accurate” trend prediction. She would later complain of analysis paralysis that stunted her growth as a competent trader.
LESSON #3: GET A MENTOR EARLY ON
After graduation, I became somewhat of a lone wolf. I went on several solo trips to places that I always wanted to visit and became too sure of myself.
At first glance, crypto trading seemed like an activity for lone wolves like me. For those who sat in a room all day and stared at charts for hours on end.
Stepping into the trading game with this attitude almost proved to be fatal for me. I remember making a bunch of losing trades that cost me around $7,800. It could’ve been prevented if I had someone to give the trades a second look.
When you’re trading alone, you don’t have the option of bouncing trading questions and market research off someone.
Being open to other opinions is vital to not getting stuck in your own bias. There’s nothing wrong with getting some new information and redoing your trading plan. Maybe your trade wasn’t right but at least your capital is safe.
If I could go back, I would rather pay $7,800 to a mentor to help me get over the initial learning phase. Seeking out advice and knowledge from an experienced and successful trader is better than trading time and money for the same lessons.
With a mentor helping you along the way, you get the best, distilled information on trading cryptocurrencies properly and also automatically inherit their own learnings from the mistakes they made.
The key is to not be timid when asking for help and be open to market advice from a different perspective.
LESSON #4: DON’T RELY 100% ON TECHNICAL ANALYSIS
I like technical analysis a lot.
But I don’t believe it to be some sort of Holy Grail that once mastered will unleash sizable profits anymore. And neither should you.
A simple Google search for cryptocurrency technical analysis courses will return 33 million results, all of which will promise trading success.
Technical analysis is only a tool, only one piece of the puzzle. Continued success in cryptocurrency trading requires in-depth learning, good trading practices, a strong grasp on risk management and money management principles, and trading discipline.
There are no shortcuts. Trading cryptocurrencies requires dedicated time, patience, and attention.
Beginner traders often believe that technical analysis software packages can help them make quick money. Unfortunately, this is not true. Less-experienced traders sometimes confuse technical analysis tools in crypto exchanges for trading models that will guarantee a profit.
Though technical analysis software provides insights, that alone cannot guarantee profits. It’s up to you to correctly interpret trends and data.
LESSON #5: BITCOIN IS VERY IMPORTANT TO THE TRADING SCEN
There is a strong correlation between the prices of Bitcoin and altcoins.
Bitcoin is, as you know, the first and most popular cryptocurrency of them all. It also enjoys the largest market capitalization of all cryptocurrencies. As the cryptocurrency market is in its nascent stage, it gives a lot of weightage to Bitcoin because of its capitalization and popularity.
Most altcoins are pegged to Bitcoin and how it behaves in the market:
- If the price of Bitcoin goes up, the prices of altcoins will fall across the board as people rush to trade their altcoins for Bitcoin.
- If the price of Bitcoin goes down, it causes panic across the board as everyone loses trust in cryptocurrencies and trade in theirs for fiat currencies like USD.
Only when the price of Bitcoin remains stable can the price of altcoins rise.
Keep an eye on Bitcoin as it continues to make splashes in the crypto market in 2019.
Stepping into crypto trading is both incredibly fun and incredibly overwhelming. Truth be told there’s no magic bullet that will make you get it 100% right the first time around, but if you keep these lessons in mind you’ll be well on your way to financial freedom.
Now we’d love to hear from you: what’s one thing you wish someone had told you before you built your crypto trading plan (or before you started out as a crypto trader)?