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So you're ready to go all-in into the new phenomenon that's giving big ROI's to some people, which some even call digital gold (granted, that's just for bitcoin). But you see the market is volatile, and, just maybe, you decide that you want to learn before going in (a good choice you can pat yourself on the back for).
You came to the right place! I'll take your questions, everything from how it works to what to do when you see a big candle, and turn them into long boring walls of text to learn from! Let's begin, on post #1 of eating crypto like candy series: Mistakes I made as a new trader, and how you can learn from them.
Why consider me a source of authority? That's simple, you don't. I know no more than what I'm talking about, so do your own research and comment here if you find anything interesting, I'll wait. Your idea might be featured for the next post!
Here we go, the list you were waiting for. (Some trading background is preferred, but you can just lookup the jargon or comment about it. The coin symbols correspond to how they're used on Binance non-US.)
Mistake #1: Panic selling after a market buy
A market buy, or a taker order, is when you execute an instant order with your money. A panic sell is when you close the trade when you see the value of your order going down, and end up with a small loss in hope of cutting your losses.
Some of my first trades this year would've been quite profitable (WRX, BTT) if I'd held for longer instead of panic selling under market fluctuations. Remember, market buys tend to be riskier than limit orders, so you should have a considerable risk appetite for profitably using them. Use an aggressive risk management strategy, and it should eventually work out.
Mistake #2: Buying coins based on what popular person X says
This person might be anyone, from the Dogefather tweeting to some random guy asking you to subscribe to his paid course and private chats.
Always do your own research before buying some coins (except when I ask you to buy them, because dude trust me). How to do research, you ask? You can read the whitepaper and check the news for how it's been going (its subreddit is often a good source to talk about it). You can even ask me to analyse specific coins. Maybe we should make that a regular thing.
Mistake #3: Getting greedy instead of taking profit
You turned a cool profit. Now what?
In one of my first trades (SC), I turned up about 500% profit (with leverage). However, instead of proper risk management of taking away at least the principal amount of the trade, I just increased the leverage. Due to price elasticity, the price went back down after that, and I overall didn't make a profit on that trade.
Remember, don't get greedy when you see a profit. What should I have done there? I should've managed the risk properly and taken out 200% of my principal amount from the market (without increasing leverage), and left the rest in, in case it continues to rise.
Mistake #4: Not diversifying investments and strategies
It can be pretty important to diversify your investment across multiple coins and using multiple strategies. What does that mean?
Putting all your money in one highly risky strategy at a time means you'll eventually end up losing everything. So what does that mean? Put it in multiple high-risk and a few low-risk strategies at a time! (For reference, a high-risk investment is one you wouldn't be comfortable using for a long period of time, say a few years. Trades that are meant for a few days at most are high-risk, while something like investing in bitcoin and waiting for a few years is, if it conforms with your risk assessment as a viable choice, a low-risk strategy.)
I'd recommend investing the majority of your capital low-risk and only a part of it in high-risk endeavours.
Mistake #5: Not using demo wallets for learning
You want to invest without losing any money? You're fine with not gaining either as long as you get to learn how the market works? Don't invest using real money then, read on to find how. Don't worry about this if you'd rather lose a real trial fund while learning.
If you're just going to practice on a computer (and no trades on mobile), then nothing beats TradingView's paper accounts. It supports cryptocurrencies, stocks and even precious metals, although it can feel a bit cumbersome to use compared to alternatives. If you just want to trade on mobile, Bexplus (on play store) teaches you leverage with a few coins.
If you want to trade cross-platform, however, you have a few options:
- Use a real paper wallet
The good old manual trading option. You maintain the idea of your trades on actual paper (or a spreadsheet/database), track prices using your preferred methods and make trades manually. (Remember to at least track exact times so that it is more useful for you to learn)
It's greatest advantage is the flexibility. You can track literally anything in any way. However, no one's gonna make sure it's accurate, and it has the most manual work, even though you learn to maintain a trading journal.
- Use an exchange with demo account
Many exchanges provide demo accounts (and some are just demo exchanges) with which you can trade. This has the least manual work and you can directly get to simulate actual trading, but the listing of coins is usually not too great, depending on the service itself. TradingView's paper technically falls in this category. This is the option I'd recommend if you don't need greater flexibility.
For multi-platform options, I'd recommend StormGain and Altcoin Fantasy League in both types respectively. StormGain also allows you to mine some free bitcoin to practice real trading when you feel ready for that (and withdraw profits).
- Use a portfolio tracker
This option is a middle ground between the two options above, and I personally don't recommend it, but quite a few people I know like to use this one, so here we go.
You can manually add coins to your portfolio tracker (preferably CoinMarketCap or CoinGecko, but even Yahoo Finance works fine and supports stocks/currencies tracking as well). This option tracks the times and prices for you and you just have to make sure you use the correct numbers and know your limits (since it won't throw an error message over an extra 0, but just add it to the portfolio), and it integrates data from multiple exchanges together so you have a wide collection of coins.
To reiterate, do your own research. Also, feel free to comment any questions or what you might want to see next.
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