Key Strategies for Trading Cryptocurrencies Successfully

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When it comes to crypto trading, gaining experience is crucial for success. Here are 12 golden rules that every crypto trader should follow:

  1. There are no win-win situations in crypto trading.
  2. Crypto trading is like a “war”.
  3. It’s a 50/50 chance.
  4. Belief plays a significant role.
  5. Mistakes are inevitable.
  6. Follow the 80/20 rule.

Beginners often lose in crypto trading because they:

– Invest in things they don’t understand

– Fail to differentiate between cryptocurrencies and other markets

– Make numerous bad trades quickly

– Rely less on technical analysis (TA)

– Let emotions control their decisions instead of using Dollar Cost Averaging (DCA)

These golden rules have been compiled from various trading books and analyzed to provide valuable insights. Let’s delve deeper into each rule:

  1. There are no win-win situations in crypto trading.

Think of a swing in a schoolyard where two children go up and down. The swing can’t go up on both sides simultaneously; it’s a matter of physics. Similarly, in crypto trading, when one trader makes a profit, another trader suffers a loss. So, why do you believe you are better than the other trader?

  1. Crypto trading is like a “war”.

Just like a general in a battle who cannot see the entire battlefield, crypto traders have limited information. Whale traders, who possess significant amounts of cryptocurrencies, can influence prices, but even they don’t have perfect foresight. The winners in trading are those who have reliable information before others.

  1. It’s a 50/50 chance.

Crypto trading offers two possibilities: the price can go up or down. No system can predict the market with 100% accuracy. Experienced traders aim to be right at least 51% of the time and accept the possibility of losing money in some trades.

  1. Belief plays a significant role.

Regardless of how mathematical a trading system may seem, our belief in magical thinking and biases can impact our decisions. For example, fear of missing out (FOMO) can lead us to enter trades late. It’s important to acknowledge that rationality doesn’t always prevail in the market.

  1. Mistakes are inevitable.

The market is always right, and if your predictions about its behavior are incorrect, you are in the wrong. Accepting mistakes is crucial for growth.

  1. Follow the 80/20 rule.

Successful crypto traders make profits on around 20% of their trades. The remaining trades may result in losses or break-even outcomes. Using stop-loss orders can help maintain a positive ratio. It’s essential to recognize that a 3% profit is not a significant win.

  1. Beginners often lose in crypto trading because they:

– Risk too much money

– Fear losing money

– Lack knowledge and trade impulsively

– Buy at high prices and sell at low prices

– Hold positions for too long

– Trade low-value coins

– Gamble with others’ money

– Fail to cash out their winnings

– Trade too frequently, leading to poor decisions

  1. Invest in what you know.

Educate yourself about a coin before investing, understand its purpose, and evaluate its potential. Quality projects are more likely to have long-term price increases. Avoid trading unfamiliar currencies based solely on automation or recommendations.

  1. Differentiate between cryptocurrencies and other markets.

– Cryptocurrency markets are open 24/7, unlike traditional markets.

– Cryptocurrency markets experience higher volatility and faster cycles.

– Cryptocurrency traders often measure gains in multiples rather than percentages.

– Unregulated spaces like crypto attract illegal activities, necessitating a knowledge advantage.

– Technical price analysis can be effective due to a smaller market and a herd mentality.

– Investing in smaller market cap coins may increase chances of being top performers.

  1. Make 100 failed trades quickly.

Gaining real experience through actual trading is the best way to increase your chances of success. Reading books and using practice accounts are not sufficient. Start with small amounts of money and gradually increase your investments as you gain confidence.

  1. Less technical analysis (TA) is better.

Learn the basics of technical analysis, but avoid overcomplicating your strategies. Use longer timeframes for more reliable patterns and avoid excessive reliance on minute-to-minute analysis.

  1. Emotions are not your friend, but Dollar Cost Averaging (DCA) is!

Avoid being swayed by emotions during winning or losing streaks. Maintaining discipline and focus are crucial for success. Additionally, consider investing small amounts regularly rather than making impulsive decisions.

By following these golden rules, you can improve your chances of becoming a successful crypto trader. Remember to stay humble, cautious, and keep emotions in check.