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Analysts have been calling for the bottom of this so-called "bear market" since February. As you may have noticed however, none of their attempted calls have been successful as of late. Some of them even probably lost quite a lot of money following their calls and are probably upset at this very moment. Even though you may be right to be mad, you should stop blaming others for providing their thoughts on the cryptocurrency market. You need to take responsibility for your mistakes. We strongly believe that this is the first step to take before consistently being able to make money in any market.
Fear not, there are certain steps you can take in order to avoid getting beaten down by the market:
- STOP trying to pick tops and bottoms
- MANAGE your risk
- EVOLVE with market conditions
- CHALLENGE your bias
- STOP feeling ashamed of sitting on the sidelines.
- EXPLORE different markets
- LEARN from yourself
- ACQUIRE discipline
- AVOID profitability targets
- EMBRACE your style
The trend is your friend. As seductive as it can look to nail the perfect trade and catch a reversal at the exactly right time, you are probably doomed to fail by doing so. As smart or skilled as anyone might be, the odds favour the trend to keep going in the direction it has been going since it has started. While it is possible to catch a reversal on a shorter trend by scooping the reversal, the novice trader should focus on continuation to achieve success.
Preserve capital. Warren Buffett's rule of thumb is known among most investors but yet remains misunderstood. You need to limit your losses when you are wrong because you will be wrong. We personally limit every trade we take at 0.5% of the available trading balance because it is the amount we feel comfortable losing. If more than 10% of the account is lost, we freeze everything and try to see what is not working. When you feel like the world is upside down, you are not in tune with the markets and everything you are doing is wrong, it is probably for the best to wait for better conditions before you risk any more money. Wait for clarity before putting any more capital at risk.
Just trade. Your goal should be to get comfortable trading different time horizons, different plays and most importantly, different directions. The bulls make money, the bears make money, but the pigs get slaughtered. The markets are always evolving and you have to evolve with them in order to survive within the ecosystem. You have to learn when you need to be long, short or flat.
Why challenge instead of avoid? While we strongly believe that it is optimal to have no bias about the future direction of the trend, we also consider it rather utopian to assert that it is remotely possible to not have any preconceived ideas about the future direction of a trend. This is why you always need to consider two potential paths for the eventual price trajectory. The question you really have to ask yourself is: "If price goes the opposite way of my forecast, where is it most likely going to?" That way, you can put more wisely your stop loss and even reverse your position towards the other direction.
Sometimes the best thing you can do is nothing. Understand that you often need to wait for specific market conditions to create some setups before taking actions. It is better to wait for confirmations and meet your criteria instead of rushing blindly into a trade. Depending on your time frame, you can be waiting for hours, days and even weeks before entering a trade.
Expand your horizons. Cryptocurrencies are awesome, we truly get it. However, if your goal is really to make money, you should consider trading other asset classes. You should follow hysteria and capitalize on the emotions of all the market participants.
Write down and review what you did. The best way to progress as a trader is to establish a methodology where you can note all your observations about a particular set up and the way it evolves. Take screenshots of your charts and compare your thoughts over time. Allow yourself to lose a trade, but forbid yourself to lose a lesson.
Rinse and Repeat. Most traders fail because they do not stick with what they have developed. You need to realize that no technique is perfect. Technical analysis is based on probability and not certainty. When something has been working and now seems like it is not the case anymore, do not worry. Consider reducing size for a while if you feel like you are losing confidence towards your game plan.
Profitability does not always rhyme with profits. Really successful traders usually avoid establishing future profitability targets over time. They see trading as a game and they adapt to current market structure. Since the ultimate goal is to make money, the better you get, the more profitable you become.
Listen to your gut feeling. Most traders think that they need to copy more advanced traders in order to get better at what they are doing. Even though it is hard to have the confidence to do so, each trader needs to develop its trading style in order to reach a professional level.