I began trading using the crypto I earned on a blockchain blogging platform. I was keen on learning derivative trading using crypto since it was brand new information for me. This meant I started experiencing both profits and losses here and there.
In my quest to learn trading, I soaked up insights from experienced traders and their struggles. However, regardless of how many times you absorb someone else’s experiences, true understanding only dawns upon you once you step into the arena yourself. Similar things happened to me. Even though I had a fair bit of knowledge before diving in, a few months into full-time trading, I committed several rookie mistakes.
Here’s a rundown of them:
1. Inadequate Risk Management
Initially, I would set these price points when initiating a trade. However, as the market turned volatile, I found myself adjusting them. When the market moved favorably for my profits, I would raise my profit-taking price point and vice versa. If the market moved against my trade, I would shift my stop loss, hoping the trend would reverse before hitting the liquidation price. Sometimes, the position would liquidate in the blink of an eye.
This brings me to the next point.
2. Deviation from the Trading System aka “The Plan”
Another example is when to avoid trading certain coins. For instance, if there’s news about a project being a fraud or scam, it’s natural for the value to drop. Taking a short position during this time can be risky since there might not be any buyers.
However, with the market open 24*7, it was impossible to completely forget about trading. So, sometimes I would ignore all the parameters I had set for my system and jump into trades. Sometimes it was just FOMO.
As far as I remember, my mind used to be all over the place. That meant sleepless nights, social isolation, and irregular eating times. If I were updating my Instagram back then, it would probably look like this.
3. Persistent Revenge Trading
Unfortunately, this approach always ended in disaster.
The best way to handle such a situation was always to accept the loss and close the laptop. However, I made various versions of this mistake, including messing with my own mind and whatnot!
4. Failure to Accept the Market
Yet, when it came time for execution, all those plans went poof. It was the thought of “what if….” that won. Then, it was the same loop again. I’d lose, revenge trade, take a low-risk trade to preserve the capital, liquidate the account, and there comes the notification: “your crypto deposit is successful”…
Oh wait, there’s more! My audacity to ignore the trend reversal. Well, that’s the last and final point.
5. The poisonous hope
Let me give you an example. Let’s say I’m trading X. I’ve taken a long position with a set profit margin and stop-loss. I see the market approaching the point where I should take profit. Suddenly, the company makes a major announcement about a new partnership, and everyone is buzzing about it.
Now, instead of exiting the market, I’d take partial profits and keep some positions open. It reaches a certain point and starts to decline. Crypto markets are known for pump and dumps. However, my hopeful mind anticipates an upward trend with the new announcements.
The candles inch closer to my stop-loss, and my hopeful mind whispers: “what if….” There goes all the wisdom of history repeating itself, accepting the market, and practicing risk management. My account is now completely liquidated, and I’m all set for a fresh start!
That’s a brief rundown of my early days in crypto derivative trading. Eventually, I learned a lot from this experience. The majority of which were life lessons, and you can read about them in the upcoming blog. Making mistakes is a part of learning, and I’m happy that I got to learn them early on.
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