There are certain rules and foundational principles that crypto traders must follow. It’s important not to go blindly into this industry, but rather take your time to learn the fundamentals.
Never fall for “Revenge Trade”
When trading, whether you’re making loss or profit, consistent behavior is the key to long-term success. After your trade is made, close the chart and do not open it for about 24 hours. This rule will prevent you from a “Revenge Trade”. What is Revenge Trade? Revenge trading happens after a trader suffers a significant loss. Instead of looking back at the strategy and making sensible decisions around the incident; people jump straight back in without using critical thinking. This rule is significant especially when trading Bitcoin with leverage. Also, remember to find platforms that best suit you, when choosing between BitMEX, Phemex or Deribit carefully read about their features and services.
Weekends are no crypto days
During weekends price actions in the crypto markets are usually changeable. They take place in low volume, which means harder to predict price action. Putting retail traders at a great disadvantage.
Friday is always Friday 13th when treading on Forex
Added volatility in Forex markets always occurs on Fridays. This is because professional traders take profit and close positions in order to skip working on weekends.
Have a trading schedule
The crypto market works 24/7 all year round. So, it means it would be impossible for a single person to follow the market trends. This rule seems quite simple but lots of people tend to take trading as a hobby. Instead, you should consider trading as a job.
Do not get attached to your assets
If you are trading and getting attached to your investment or asset, this will compromise your decision making. Traders must detach from emotions while trading and gain profit when everyone is losing money. Sympathy for specific altcoins, teams and even projects often cause the failure of a trader.
Do not overthink
Keep it simple: this rule applies to both beginners and professional traders. Do not use multiple indicators, news sources, and patterns to try to find the convergence of your trades. Because this may result in you freezing by overthinking and analyzing.
Make logical choices
Our mindset status has a protagonist role when we make decisions. So, it is of great importance that when we trade, we need to be positive and unemotional. In this way, we can guarantee the best analytical judgment.
The good old paper trade
Paper trade is a good method for testing new ideas and a reliable indicator. Especially when you want to be risk-averse and take very few real trades. Moreover, paper trade multiple Bitcoin positions each day, as well as several altcoins.
The “falling knife” theory
The meaning of “falling knife” is a colloquial term for a rapid drop in the price or value of a security. Which means “wait for the price to bottom out before buying it”. It usually happens when the trader tries to fix his loss caused by a large move. By hoping to average down at the lowest point and bring the assets up. Trading within a movement would involve fewer risks than trying to buy the bottom and sell the top.
Don’t take too much on your plate
Overtrading can be not productive, even when markets are providing different opportunities. The ideal would be to keep less than three active trades 24/7. It is difficult to manage risk with multiple positions, especially when every trade you make is going against your choices and the loss is becoming bigger.