10 CRUCIAL TRADING & INVESTING LESSONS YOU MUST KNOW!
Trading is a risky endeavor. Albeit profitable, it does not come with immunity from loss.
There is no established system that can guarantee consistent profits because of the dynamic nature of the markets.
In today’s newsletter, I’ll share 10 valuable lessons that will be extremely beneficial when you apply them.
The decision to transition to a full-time trader should be well thought over. Don’t do it until you’ve mastered the art, and have more than enough capital to trade with. You don’t want your next meal to be dependent on the outcome of your next trade. Chances are you’ll blow things up!
If you’re a long-term investor, there’s no need for leverage. If you must use leverage, do so when you’re certain you have an edge in the market (and a pretty low one). Using leverage at the wrong time can wipe out your years of gains.
Many people make life-changing gains in crypto. If you’re lucky to be one of them, don’t be ashamed to exit when the ovation is loud. You will always get another opportunity to be an active participant.
Once you’ve properly learned how to navigate the market, a large portfolio will make more sense than a smaller one because it allows you to exit quicker before demise. Depending on when you’re reading this, the crypto market is fairly near a “bottom”, and going bigger has never felt easier than in the last couple of months.
The market often moves before the event. That’s why the concept of “buy the rumor and sell the news” will always be a thing. Price will dump hard before everyone agrees it’s a recession or bear market; and on the other hand, it will go up before everyone becomes confident it’s a bull market. Being at least one step ahead is a great way to avert danger or position properly before uncertainty begins.
Humans have a tendency to abhor losses. They mourn losses more than they enjoy their wins. This isn’t just specific to trading. However, it causes more mistakes which can result in a losing streak that hampers confidence and questions your judgment. This is why many traders hold on to losers. They just don’t want to experience that feeling of “loss”. Cut losses fast and don’t feel sorry for yourself.
It sounds “woke” for traders to scream “trade against the crowd”. But sometimes, you must trade with the crowd. You really don’t want to LONG a crypto like UST or LUNA during the “great depeg”. The decision to trade with or against the crowd depends on the given situation and market forces.
When you take a severe beating in the market, learn to rest! Take some time off. You want to preserve not just your financial capital, but your mental capital.
Black swan events don’t self-announce. That’s why they’re called black swans. Always anticipate one because if caught on the wrong side of the market, it can wipe off your years of gains in one swoop, especially if you’re using leverage. Never put all your money in the market at any point in time. Also, learn to take profit and keep it away from the market.
The crypto market is a complex system that one must adapt to. There are thousands of participants which will continue to grow as well as multiple factors that impact the market direction. There’s no way to keep tabs on all these forces at once. Hence, rather than predict randomly, you should create a strategy that lets you allocate funds without trying to overly time the market.
While this list isn’t exhaustive of all there is to learn in the market, I hope that it helps you become a better trader or investor in the coming months.