By Larry Wright
Those of you who would like to make crypto trading their bread and butter must know a thing or two about technical analysis. Before making a trade or investing your money into a dedicated entity or crypto, you must undergo a thorough technical analysis of the asset to know if the asset in itself is worth investing in. You are not going to get everything right the first time, and that is alright; when it comes to trading, you are going to make several mistakes because it is actually part of the process.
You can’t expect yourself to become successful overnight without having to make a few mistakes along the way. On the other hand, if you are not going to care about what the present trends are saying, the current condition of the market, as well as the present situation for a dedicated asset, and are just going to please your own ego, then the crypto market is not for you. Not only the crypto market but any financial market should be off bounds because you are going to play it irrationally, and you are not going to succeed.
Traders and investors who really want to go after the true value that an asset can present them with should conduct proper technical analysis of the situation, and from there on, they can take the wheel in whatever direction they like. You must not let the mistakes that you made along the lines get to you because, as explained earlier, it is nothing but part of the process. This is where you have to be open-minded, you have to become patient, and you have to be completely rational regarding everything that is taking place before you. Every beginner is going to make these mistakes, and that is not something that is just applicable to you.
Learning from mistakes is what you need to do here; you don’t need to let these mistakes drag on you emotionally or mentally for too long because if you continue to live in the past, you are never going to get where you want to go in the future. To have a clear-cut understanding of the mistakes that you are making and stumbling upon the very process to rectify them, it is important for you to understand what technical analysis is? Without the proper introduction to technical analysis, you wouldn’t have anything solid to go with.
You must understand how much it works, how technical analysis actually funnels down to the very assets or cryptocurrencies that you are interested in, what are factors should be taken into account to analyze the price of the asset, and in what specific scenarios technical analysis isn’t a solution. Remember, the ultimate goal here is to provide yourself with proper insight so you can trade better, not trying to use technical analysis where it isn’t necessary and then getting royally screwed.
A Brief Introduction to Technical Analysis
Technical analysis refers to the cyclic progression of taking multiple indicators into account when it comes to predicting the future movements of a particular asset or cryptocurrency. This kind of analysis is run to analyze the current progress of the financial markets and to predict the future movements of not only crypto but also for forex, stocks, and gold. You might not have to spend a lot of time trying to understand what technical analysis is, but you would have to spend a considerable amount of time trying to master the art.
You will be making a lot of mistakes along the way, but it will eventually be worth it because you would be able to not only understand what technical analysis is, but you would also be able to perform it in the most subtle way possible. This will give you multiple insights regarding a particular asset or cryptocurrency, should you be investing in it or should you be running away from it, and what will be the future indication of the same asset or crypto.
All of these insights are for your own betterment; these are going to make you a solid investor and a trader that can foresee advancements that are going to take place in the near future. If you truly want to become invincible and get a better grip at performing the technical analysis, then you would simply have to root out the mistakes that you are making is a beginner-level investor. Following are some of the most common mistakes that people make as a beginner and how you can bounce back from these mistakes and turn these into your eclectic power to foresee the events that are going to take place for the crypto market;
- Traders Fail to Cut Losses
If you want to become a good trader, then you have to evidently cut your losses; if you are not getting out of the bad positions that are eventually going to tank, then you are willingly taking all this baggage on your shoulders that you can’t clearly hold up. You have to let go of it, slide it right from your back, and let someone else worry about it. If you can cut your losses, then you have already become a better trader, and with only a few other elements coming together in a definite proportion, you will get there where you want to be. This might seem a bit too simple and something that everyone knows about naturally.
The only thing about this ailment is that people know about it, but they are not going to give it any kind of importance. You should always be looking out for capital, and that should be your first priority because if you are not looking out for your investment, then sooner or later, it is going to get away from you; it is going to get snatched. You are out there as a beginner not to win but also not to lose. You have to play the game by remaining in the middle and as middle as possible because these are favorable odds for you at the moment, and by striking your ego too much and giving it the importance that it seriously doesn’t deserve, you are making a grave mistake, and you are going to make trades that are eventually going to get you into trouble.
It is not a pleasant sight to see all of your hard-earned money disappear in front of your eyes for the silliest mistakes that you have been making along the lines, and out of those, the most prominent one was not giving your capital the attention that it deserves. If you have run into a similar situation in the past, then you need to let go of your ego and accept the fact that it was the wrong idea that you were after, and now that you know the mistakes that you have been making, you can rectify them and become better for tomorrow. This way, even if a trade comes out to be a bad one, you wouldn’t be losing as much as you would have if you were not looking out for the capital. Because now you know that everything is secondary, and your investment is your primary scale of focus.
- Overtrading
Another mistake that people make is overtrading. When you see value in an asset or crypto, you only have to stake as much money as you have at the moment or set up a proper limit and then adhere to it. There is no need to stretch the limit any more than you have the dough to support the transaction. That being said, only stake the money that you have set aside for a particular trade, and no matter how classic of an opportunity presents itself, you should not be at liberty to invest anymore, or otherwise, you are going to break your investing cycle.
With that being said, you also don’t need to be in a trade at all times; remember, there are some pretty good trades that present themselves as prospective opportunities that you just can’t get out of. These are fine trades, you can invest your money into them, but you don’t have to get carried away, or otherwise, you are going to lose it all. Trading is not about always throwing your money at things and prospective trades you wouldn’t want or those that don’t make any apparent sense to you. It is more about waiting out for an absolute opportunity that you know for certain that it is not going to abandon you or have you eating the dirt by opening a bad position with that specific trade.
With that being said, you might have to wait a little bit longer than you initially intended to. There are traders out there who don’t take any more than three trades for the whole year, and they are still making a pretty good profit on their trades; you can be that trader, or you can be someone who is making numerous trades around the month and most of them tanking up or blowing up in their faces and not getting anywhere with their trading career.
When the market is in a plummet, you actually don’t have to do anything but to wait it out because if you wait it out, you might be able to grasp other prospective opportunities as soon as these are made available. Another thing that you need to accept with certainty is that opportunities come and go; if you were not able to grab an opportunity that just slipped by you, then don’t worry because another one is going to come, and then you would be able to make a trade in that.
- Emotional Decisions and Revenge Trading
In the world of trading, you can perform a lengthy analysis to make sure that you understand the market, the asset in question, and your own trading capabilities regarding the present indicators that you are witnessing or exploring at the moment. Other than that, you can base some of the success that you’re going to have with this trade on luck, some of it on instances and opportunities, while some of it might very well be pinned on your feeling of the gut. But that is about it, even when you have consulted with these factors at length, you are never ever sure that the trade in question is going to bring you a considerable amount of profit.
For all you know, it is going to tank up, and you are going to secure some significant losses. It is part of the game, a genuine part of the process, and when you sign up for financial trading, you are actually signing up for this thing also behind the curtains. When traders make a bad trade, and they end up securing a lot of loss, they would go out of their way to make another trade just to get back at the trade, which blew them off earlier. It is known as revenge trading, and this is something that is going to become the doom of you and your financial career in trading.
Making emotional decisions and not thinking with your mind is something that is going to get you in so much trouble. Everyone makes mistakes, everyone rebounds from them, and they learn from them, and that is all true in financial trading, whether you are interested in the forex sector, stocks, or crypto.
The rules are technically the same, and there is no need for you to go out of your way and make revenge trades. Technical analysis is all about understanding the current condition of the market, securing as much information as can about the commodity or asset that you want to invest in, and then staying calm and waiting for your opportunity. Analysis means getting after something in a more rational and rhetorical sense; it doesn’t mean that you can be hasty or let emotions take a run on you because then you are truly finished as a trader.
- Fixed Mindset
Sometimes people take things straight to their ego; they are willing to throw anything and everything down that tornado when it comes to their ego and them being right even in the face of an inevitable defeat. If you have a large enough ego and you don’t care about your future, then by all means, neglect the trends that are being disposed of in front of you and feed your ego as much as you want. Because there are people out there who just continue to pour money into a bad deal or investment even if the end result is going to be catastrophic, they just can’t seem to back off; why?
Because what others would say? This is the only thing that is stopping them from changing their minds and strategy towards a problematic trade and ending their position while there is still time. The true gist of a trader or investor who knows what they are doing is that they will continue to change their mind around the clock. They would be thinking about something specific in the morning, and then by night, they would have a completely different strategy drawn up to tackle the issue that they were having.
This is the right attitude to have for an investor who is completely in sync with the momentum of the market because the market is not stiff, neither it is completely jeopardized. It is going to change in the blink of an eye, and you have to be ready to change your strategy accordingly, or otherwise, you would be swept away from the game. It is always good to have multiple sides to your argument in case things take an unexpected turn. You can’t expect the market to fall into your own chasm or the specific mold that you have prepared in terms of putting down money for your own investment; you have to change yourself and the investment along with the strategy that you have at hand in accordance with the market. Only then, you are going to become a great trader.
- Technical Analysis Deals with Probabilities
When push comes to shove, technical analysis is nothing but a game of probability, you can churn the numbers, study the trends across the market, take into account every possible insight that is present for that particular asset that you are interested in, and then at the end of the day, you just have to go with the flow. Whatever insights technical analysis proposes to you or you end up with playing merely a game of probability, they are not rigid, and these are definitely not like something has been etched into the stone.
The market is always going to behave the way it intends to, and that is something that is completely different from the insights that technical analysis drums up for you. You can’t expect the market to dance around to the chords that you strike; this is not how any financial markets operate or behaves. That is why whenever you perform technical analysis or you are going out on a limb based on the insights that were proposed to you by the same analysis, you must keep in mind that it might not happen in reality. But as said earlier, it is not a guarantee, and you must be vigilant enough to make the trade and not expect a great return even if you have done the math, and math seems to be working in your favor because the market might not be.