7 Things To Consider When Trading
Trading has been a popular way of making good money. However, that’s not the case for most of the traders out there. So, what’s going wrong? In this article, we will be exploring six things that you should consider if you’re new to trading in cryptocurrency or traditional markets.
These tips will help you reflect upon your trading process and improve it in the long run.
1. There is no shortcut to becoming rich
Trading is often seen as a way of getting rich quick. Novice traders do make this mistake and lose a lot of money. They often buy at the top of a rally because they believe the price will continue to rise. If you’re a trader who has a trading plan, then you should know that any profit from 3-5% is good in traditional markets. On a normal day with cryptocurrency trading I often see a retracement after the coin goes up 10-15%. So you may want to consider selling after you’ve made that amount of profit and wait for the price to retrace slightly before buying back in. There are times that a coin will go much higher than 10-15% but nowadays that’s a rare occurrence.
2. Money Management
Money management plays a crucial role in improving your chance to increase your overall portfolio. Next, I will share my personal allocation of funds, you do not have to follow this. I allocate 60% for trading and 40% for long-term BTC holding. That 40% BTC is stored offline on a hard wallet. It’s hard to tell which altcoins will be relevant in the next 3-5 years. I suspect most current altcoins will be overtaken by newer and more exciting tech so that’s why I avoid holding an altcoin for long term (over 3 years I consider long-term). Next, with that 60% left for trading I split that in half. 30% I trade BTC pairs, Example: BTC-NEO, BTC-OMG, BTC-LTC. and the other 30% I trade USDT pairs, Example: USDT-BTC, USDT-ADA, USDT-LTC.
3. Trading should be treated as business
Many new traders think that they can treat trading as a hobby or a part-time job. However, trading is more than that. If you want to be successful, then you need to treat trading as a business(part-time or full-time). If you do not commit properly, you are bound to lose more than you gain which may hinder your future as a trader. In short, you need to strategize and research similar to running a business properly. Spend time learning chart patterns and watching YouTube trading tutorials. Then look historically at the chart and see if you can guess what would happen next based on what you learned. Maybe even pay for a service that helps you trade like I do on my website. I created an algorithm that measure market trend and sends trade signals when these indicators aligns. Click here to watch a video explaining my services in more detail.
4. Capital is the key
In trading, your capital determines the profit you are going to make. If you start with a small amount, for example, $4,000, and make a profit of anywhere near 3 to 5%, you will gain a mere $200 to $300 profit. That’s not much for even a hobbyist let alone a full-time trader.
To overcome this, you need to invest a substantial amount into trading. Let’s say you have a $20,000 trading account. If you maintain a healthy 3-5% profit rule, you will get anywhere between $1000 to $1500 per month.
The chart to the right shows the power of compounding interest. If you started out with $0.01 and doubled it everyday, you would have $10-million by the end of the month.
5. Protect your trading capital
A good trading capital is essential, but it is also crucial to protect your trading capital. By this, we mean that you need to protect your initial investment and ensure that you do not make huge loses while trading. It takes a lot of time to build a good trading account, and protecting it should be one of your top priorities. However, you should not confuse it with losing trades as its part of the business. In short, you should do proper risk management and ensure that you do not lose your trading capital. Another way to mitigate losing trades is to set stop losses.
6. Continuous learning
Markets are never stagnant and keep evolving depending on various factors including government policies, investors and so on. To ensure that you stay up with the changing market, we recommend you to keep learning every single day. The best approach is to become a student and have a learning mindset from the very beginning. If you stay at it, you will be able to learn new strategies which you can use to create a trading methodology that works for you.
7. Keep going
Sometimes, you may feel down due to losing streak. But this is where you need to reassess your trading methodology. Even the best strategies or methods sometimes fail, and that’s normal in trading line. Sometimes a strategy may only work during a bull market and vice-versa.
The best way to ensure that you keep your losses to a minimum is to set a Stop Loss. This will reduce your loses even when you’re on a losing streak.
This leads us to the end of our list of seven things to consider if you’re new to trading. These tips and suggestion will keep you afloat more than you think and ensure that you become a successful trader in the long run. For more advanced traders I recommend a trading bot that helps automate your trading strategy. Take a look at my trading bot which automatically trades for me. So, what do you think about these tips? Comment below and let me know.