Why Should You Trade Bitcoin (BTC) Or Why Should You Not?
Before you make negative trading experiences, it is worth it that you answer this question for yourself, because it can save you a lot of money and spare your nerves. Trading, no matter if precious metals, foreign exchange or Bitcoin, Ether & Co, only makes sense if there is a certain volatility of the market, i.e. if larger price movements are to be expected.
Since the cryptocurrencies are a young growth market, the chances for bigger price jumps are much higher than e.g. within the Forex market. At the same time, however, the risk of losing everything increases with the potential profit. At the beginning of July one could observe how the price in almost all cryptocurrencies collapsed by more than half.
Trading Bitcoin and Ethereum is only something for you if you are sufficiently occupied with it and are aware of the risk of total loss.
If you want to earn money with Bitcoin trading, you need the necessary expertise. Earning money fast does not work for most people, only 1% will succeed.
Can You Earn Money With Bitcoin Trading?
In today’s times, all of a sudden, every financial and trading expert seems to be in a position, especially as long as the world of cryptocurrencies is still opaque. There are many promises made how to make money quickly with Bitcoin without much effort. Ominous Bitcoin Dubler, Bitcoin free gifts and Bitcoin trading programs are flooding the pinboards on Social Media Sites.
Here you can see an old saying “greed eats brain” in practice. The questions you should ask yourself here are:
- Why should someone give you money?
- Why should a trading system give you 30% of the profit when it can get the money from the bank from 5%?
- Why should it be easier to earn money with Bitcoin than “normal” money?
Yes, you can earn money with Bitcoins – in many different ways. You can buy and hold the cryptocurrencies directly – since January you have been able to make an average of over 200% profit with them. You can trade cryptocurrencies with the so-called margin trading on special exchanges, you can buy and trade cryptocurrency CFDs or lend for example also Bitcoin and earn with the interest. Despite the tempting possibilities one should examine each option and look out what fits best to one and not be carried away by high-sculpted Hypes.
And if your car mechanic or baker around the corner is suddenly a financial expert on Bitcoin trading – don’t do it. The chance that you will otherwise become part of a wild MLM system that will soon go into the rush is clearly too high.
How To Trade With Success In The Long-Run And All By Yourself
Whether you win or lose in trading depends primarily on your behavior. Trading psychology is an important factor in the development of a trader. In the following you will get seven valuable tips.
Have you ever asked yourself after a trade what exactly happened in your head? Could it be that you have something completely different in mind for this trade?
This time you wanted to wait until the final breakthrough of the resistance and not speculate on a rise before. But why did you do it? Couldn’t you wait?
Well, welcome to trading psychology.
This topic is so profound that it doesn’t fit into a blog post. That’s why I’m going to focus here and now on the really practical, actionable tips for traders.
These tips should help you to get a new perspective on your trade management. If you accept this information and check it for yourself, you will very quickly see an enormous increase in your trading performance.
Before we start, there is the necessary basic knowledge of trading psychology.
The stock exchange and its participants have always been a phenomenon that can hardly be explained. The (actually) logically thinking person likes to behave naively and illogically in financial transactions. A study from 1979 found that people generally avoid risk, but become disproportionately risk-averse in phases of loss. Is this the reason for the downward spirals that we have all experienced in trading?
Since time immemorial, people have had the urge to be able to control things. But that is not possible at the stock exchange. There is no safe formula and also no holy grail in trading. Anyone who has found a trading strategy that is coherent in itself today has to fear that changed market conditions will destroy the good performance to date.
Because we cannot predict or control market developments, we find ourselves in a permanent state of uncertainty in trading. This uncertainty is an emotion that eventually leads to fear.
Fear is again an emotion that is good. It has accompanied our species since it has existed and ensures our survival.
In stock market transactions it may also be good to be afraid. An example is cautious trading with small position sizes and small levers. But it is also a hindrance, because it regularly leads us to a point in trading where we can no longer think rationally and throw our clean plans overboard. In concrete terms, fear sometimes leads us to realise profits too early and let losses run too long.
Another point in trading psychology is our impatience and actionism. We think that a day without trading is a lost day. It is forgotten that not every day is a good day for your trading setup.
All in all, there are some (bad) behaviors that emerge in the subconscious and only attract our attention when it is almost too late. First and foremost it is a matter of becoming aware of your mistakes in trading. The following tips will help you.
Trading Tip 1: Hide Account Balances
Many traders become restless when their account balance becomes unhealthy as part of an ongoing trade. On the one hand this is due to a leveraged position, on the other hand to the certainty that the hard-earned money could soon be gone.
One must always remember that losses are simply part of trading. Who looks too much at the account balance of the trading account should simply turn off the visibility. In Metatrader 4 this is possible, in other charting software you might have to work with tricks like overlapping windows.
Trading Tip 2: Turn Off Screens
You have recognized a good setup in a base value and are now planning your trade. You determine your risk and money management and place Stop Loss and Take Profit. Finally you press the buy button and off you go. The trade is running.
Now your work is done. You can devote yourself to other things with a clear conscience. Really. The market doesn’t need you!
As soon as the trade is running and you have placed SL and TP sensibly, it’s enough to check (depending on your trading style) after a few candles if the trade is still running and if the stop has to be pulled. Dedicate your time to important things like analysis, new trading ideas or leisure activities.
By drastically reducing the time before the trading desk, you will have much less contact points with your trading emotions.
Trading Tip 3: Log Your Thoughts
This point is particularly important. First and foremost a trading diary helps here. But traders don’t just have to list the profits and losses, they also have to list the emotions and thoughts they experienced before, during and after the trade. In the second step these thoughts must be analyzed and evaluated. If this process is carried out over several months, the trader recognises his behaviour patterns and now knows which mistakes have to be corrected.
Trading Tip 4: Keep Position Size Small
The emotions usually boil up when the trader can’t cope with the chosen position size. Example: If I have a 1000 EUR trading account and the value of 1000 EUR makes up a large part of my savings, then I have an emotional connection to this amount. If I now choose LOT 3 in EUR USD in a trade, then I am mercilessly leveraged. The result: After a few pips in the wrong direction I lost 20-30% of my account.
No matter if the trading direction was chosen wisely or not, in this condition you forget your clean analysis and make irrational decisions (usually the wrong ones).
The solution is that the trader has to choose a position size that he can emotionally cope with. The 1% rule serves as an orientation, according to which only 1% of the account capital is risked per trade (in the above example 10 EUR). In order for this value to be reached sensibly, the position size must be calculated accordingly.
Trading Tip 5: Match Time Units
I often hear day traders say: “I only trade out of the 5 minute chart”. This statement is naive and dangerous. If you want to trade successfully on the market, you have to understand the interaction of all asset classes and the different time units in trading.
If you want to trade from the 15-minute chart, you should nevertheless compare it with the hourly chart in order to identify resistances and supports such as the EMA200. It also helps to recall the overall picture when the minute chart goes wildly back and forth. So you can remember what the general weather situation looks like and keep your nerves.
Some investment banks and hedge funds spend a lot of money on trading psychologists to keep the trading team on course. The trader’s psyche is the decisive factor for success or failure in trading.
We traders often have to play tricks on our psyche in order to survive in the market. However, this only works if I am aware of my own behaviour and am willing to correct certain mistakes.
The tips shown here have proven themselves with many traders and should also help you to take the next development step in trading.