Three factors in crypto trading always come together that when we remove one, it will cause failure to any trader. These are Psychology, Trading tactics and Money management. Many traders focus only on a trading strategy and ignore the importance of money management and psychology. It is just surprising that they wonder why they are losing. These traders tend to look for different strategies that they can find on YouTube, books, Facebook and Twitter of fellow traders.
These three factors are only effective if they work together as it forms a system or strategy. Not knowing all of these factors deliver someone to a pitfall.
The first is Psychology. It is the most underrated of the three, but it is the most common cause of failure for traders, map beginners, or seasonal traders. They fall victim to their emotions over and over again. It is challenging to control one’s emotions, especially when it comes to money. The higher the risk factor of trade, the greater its emotional impact on a trader. Traders tend to, as a BBC report puts it, rogue traders.
There is a study conducted within a group of traders. The group consists of winners and loser traders. What is surprising is that all these traders follow only one system, one strategy, and money management, but different results prevailed at the end of the test. Why is it that there are traders who can generate millions on their trades? And why do others keep on losing? What could be the reason? Human Psychology affects decision making. So, a trader needs to know how to handle his emotions. It is easy to tell your partner you are in control of your emotions. But it is hard to do because it takes time. It is a long process, and it needs to be experienced by a trader repeatedly until he can handle his emotions.
The second is trading tactics which is the favourite of everyone. There are so many strategies spread on the internet, but not all are true. Success in trading still depends on the skills developed by the trader along the way. However, it is safe to say that a functional system can make you a successful trader in the long run. There are different strategies that every trader uses. Some traders prefer the moving average rather than accumulation/distribution for trend-following indicators. They accompany it with oscillators for possible trend turning points such as the MACD histogram or RSI. Others set support and resistance for entry and target profit, stop loss, and minimal chart patterns as their sole indicator. Investopedia explains more about these terms, which are called technical analysis.
It is better to have a trading system that fits your personality. A strategic trader does not just focus on one system. They know that the market is ever-changing, and different systems apply to it. The profitable system you are using now may not work in the future, so you need to adjust it because the market will not do it for you.
Last is money management. Successful traders place more importance on risk management than profit. Contrary to what inexperienced traders do, they tend to focus on profit without risk management. They think it’s easy to make money in the market. They believe they can make a monthly or weekly profit from it — until their account burns down, and then they realize how essential risk management is. Most traders use the help of crypto trading platforms bitcoin-system.io to connect with professional traders who provide advice in risk management.
This situation happens because they are comparing their previous professions to trading. But they don’t know that trading is not the same as work. No matter how long you spend on the monitor keeping track of the chart, your money will not grow. It is like a business that when you start, there is no certainty whether you will make money or not.
Good money management has rules to follow. It is not only focused on putting a stop loss on every trade. It also calculates the percentage you can lose on each trading and the amount you can lose in a month. Once a trader reaches a limit per trade or hits the target percentage for the month, they tend to stop. Successful traders know their limits, and this discipline is what every trader needs to adapt, short-term or long-term. For others, consulting professional crypto traders is the most strategic move to do.
Source: Plato Data Intelligence