Are you ready for Crypto Trading?
Crypto literacy is at its peak. With every passing day, new entrants want to enter the market and want to make money. While it’s very easy to join the crypto trading club, it’s multiple times difficult to survive this ruthless market. This blog aims to provide a real “check” for the readiness of all new entrants who are at the start of their crypto trading journey or those who plan to join crypto trading in near future.
Before you jumped into the market for “making money”, it is very important to know a few fundamental yet most important things about yourself (i.e., profile yourself). Self-profiling includes asking and answering some fundamental questions. For example: Why you are in trading? What is your portfolio size? How long you can keep your capital in the market? What is the source of your capital? What is your appetite size? How much loss you can bear in case you failed?
Answering these few fundamental questions would not only define what you will be doing but will also keep you away from many losses in future. For instance, if you have a small portfolio it’s better to do trading rather than investing because a small portfolio will not give you much return if you hold it for a long period. Similarly, if you can hold your trade for longer (for instance controlling your emotions), you can get better results from your trades.
The source of capital is also important to know. Because, if you have borrowed capital for crypto trading/investment, crypto trading may be extremely risky for you. In case of losses, you may be hit by emotions and revenge trade that could lead to your liquidation. Similarly, your appetite size will determine, how much capital you can handle. For instance, a young and new trader can easily manage 100$ because if he loses $10, he will still feel that he is safe. But let’s say if the same new trader has $100,000 (one lac $), and if he loses $10,000, he will be under too much stress. Because $10,000 is a huge amount. But in trading, in both cases, the trader is losing 10%. So both losses are equal. Finally, you should always consider how much loss you can bear and always have it defined. Not having defined your loss levels, could lead you to be stuck in trades forever or worst by getting liquidated.
In the presence of experts ranging from “Tupa Tup” to the “1000s of $ charging” self-proclaimed, it is a relevant question to ask if a new trader needs a “mentorship”. To start with, no one can deny the importance of mentorship and guidance. Someone with experience and knowledge of the market if become available for mentorship that is a blessing. Nothing could be a substitute for practical trading experience. But the real question is, how you can trust an expert(s) among so many available in the market, especially when most of these do charge money too. You cannot try everyone and pay/bear loss every time. So how can you go about having a mentor then?
As a senior, my advice will be, that you should be able to distinguish between the “quacks” and real experts. If you cannot make this distinction, please wait for jumping into the market. It may sound rude, but trust me you are not ready yet. At this stage, I can give you a single hint for separating real experts from quack. Fake experts will always show you that you can get “impossible returns” from trading. What are impossible returns? Doubling/tripling your money. Making money in almost all trades. You will be getting this impression that he/she is the “master” of the market and is rightly telling about the market. And that if you follow them you will be making $$$ in no time. Your capital will get multiplied in no time. These all are very unreal, and if you see such things, it is a clear indication of something fishy, a red flag and a warning to stay away.
Financial trading in general and crypto trading, in particular, is a very technical field. It’s stupid to think that a person will read a few articles, watch a few videos, will learn to draw a few lines (support/resistance), and will master the art of crypto trading. It is not about learning a few indicators or how to enter and exit the market on levels. If it would have been that straightforward, there will be no liquidations cases in every dip. There are thousands of people who have “computer programs” written that do automatic trading for them, they would have been on profit all the time.
Unfortunately, trading is not a bed of roses. Trading is a continuous learning process, in which along with technical knowledge, you need to know the market dynamics, risk management, saving the money once it’s earned, different strategies for making money. You must have a hunger for learning new things at the same time unlearn old things. You should be open to new ideas, have an open heart to accept your mistake and learn from your mistakes.
If you are with expectations that crypto trading/investment is a quick rich scheme. You most probably will be doing immature trading. A single loss in trade will lead you to more trading to recover from losses. Each subsequent trade may result in more pressure, uncontrolled emotions leading you to further wrong decisions. Because with loss, one gets emotional, and emotions lead to wrong decisions that would result in further losses. This cycle of the same thought, same behaviour, and same choices continues and will lead to more and more losses.
Therefore, it is strongly advised, that do not trade with unrealistic expectations, stay in reality and keep realistic targets for your return and profit and at the same time do open for losses but keep your loss to a manageable level. Ideally, the loss level should be kept at 1% of the total portfolio at the starting days of your crypto trading. Once you become an expert you can accordingly fine-tune this level.
By Dr. M. S. Afridi