I would put a picture of a Ferrari, lots of young girls and booze, but that’s just what the average broker would use to attract your funds while the most successful trader in your vicinity probably drives to pick up his kids from school in his mid-end card, checking his CASIO watch to make sure he is not late.
Now let’s get down to business.
Firstly, I would like to point out the differences between cryptocurrency and the traditional investment vehicles.
But even before that, it is essential to understand what is an asset or a commodity.
I argue, that any asset which does not serve a short-term, immediate, purpose, is an instrument of transporting risk between 2 or more interested parties.
Or, if you like, an investment vehicle.
So what is the difference between Cryptocurrencies and traditional investment vehicles like stocks, bonds and national (fiat) currencies?
As you might know, public companies and governments all publish annual, quarterly and other periodic and even-driven reports.
This is merely an obligation by law, however, using creative accounting and selective financial statements, those reports are often abused to manipulate public opinion.
The principle is the same, in both cases, an entity is offering to the public to take a stake in their risk, for a possible chance of enjoying their success, using staking (stocks, bonds) or revenue share (dividends).
In Bitcoin, as well as in other cryptocurrencies, in case you buy them in their raw, spot form, the risk is still there, not less, and even more than with traditional assets, however the party which is interested in you purchasing this risk is not (aside from various type of token which are used for a purpose similar to stocks).
Additionally, in the vast majority of the cases, all the technology is open sourced for you to check and see how it really works, not how someone else wants you to see it.
1) Keep a notebook, for real.
Yes, the one from paper, or Google sheets if you must.
2) You are in charge.
Do not follow anyone’s trade, whoever that person may be, trading is a path you must take solely, consulting and discussing with other people will mostly lead to bias, remember that the majority of the people lose their pants twice and then, subsequently enough, retire.
The incompetence of people in making their own decisions about their own capital lead platforms like eToro, which I see as a negative phenomenon.
3) Make a decision and stand behind it.
Various researches show that when students change their answer in the test, it is mostly beneficial.
However, we are not taking a High-school exam, and there is real money in stake, and even a 0-difference trade can incur costs via trading fees and roll-overs.
Use trend trading, remember that timing is much more important than asset and direction put together.
However, the moment you realise that the decision you have made is wrong(with the respect of the aimed time interval), close the position regardless of PNL, on the long term it will save you money.
Retrospectives are good, but only is a very limited amount, as they drain energy from you, and, as we all know, any right decision is the easiest thing to make, retrospectively.
4)Keep your trading private.
If your real goal is to achieve greatness in life by leveraging the market, surely, there is no point in discussing and bragging about your trading.
If you want to develop the inner power to seamlessly make and execute trading decisions, you must first have the inner-power to be honest about your goals, and a great-enough person to contain your emotions.
Not to mention that to an experienced trader, looking from the side on someone who brags about a couple of pennies is the most obnoxiously funny scene possible.
5)Have Domain-knowledge.
In the same exact manner that commodities trading requires a basic understanding of the seasonal industry of harvest, or oil-searching, trading cryptocurrency requires at least a basic understanding of cryptography, technology, and guess what, code.
If you rely on tunnels, Fibonacci levels and pumps&dumps, well, good luck.
In a retrospective, many cryptocurrencies that enjoyed success lately are also the most innovative ones, and not just Bitcoin/Litecoin code with the minimal amount of changes to make it work.
For example:
Monero with it’s enhanced privacy and dynamic block size.
Dash with it’s masternodes.
Ethereum with it’s rich and far-reaching eco-system of smart contracts
So, don’t be ashamed to look at the code when scouting for early investment opportunities, it will tell you more than the ICO landing pages and marketing campaigns.
6)Select the right broker.
Always work with well known, and preferably regulated brokers (none for cryptocurrency assets the moment of writing this article, Bitstamp is an EMI, but not a regulated broker).
Make sure that your broker does not take position against his clients, otherwise it will be battle you cannot win.
From my experience all major brokers have a ‘trading’ and ‘risk management’ teams which have a wide range of functions, from enlarging margins(spreads) for specific customers and suspending market orders in highly liquid times to liquidating margin positions that might turn insolvent.
A good way to recognise such a broker, is by extreme levels of leverage (100–200 or sometimes even 500) with no or very little track record or evidence of capital, it might even be mentioned somewhere in the small letters that you are trading CFDs against the broker and not actual Bitcoin.
7) Mind the risk.
Forex is one of the most solid and low-risk markets out there, which comes as a big surprise to many traders.
What makes it into the dangerous industry that we know, is the hight leverage offered by ‘brokers’ and used by ‘traders’ (anywhere between 100x–500x).
Just to compare, regulated stock brokers, will usually offer 1.5x or 2x leverage at most on stocks, and most banks will not allow even the most experienced trader to exceed 20x leverage.
Bitcoin and Altcoins however, are not as solid as Forex, and even more volatile than stocks at times.
I would say, that as for today, Bitcoin and the major, liquid Altcoins are
10 times more volatile than the Forex majors at least, and thus more dangerous.
Keep that in mind when leveraging.
Just to compare, your 100x leverage on bitcoin is equal to 1000x leverage on a similar trade on Forex majors (yes, immediate liquidation with the smallest counter-movement on the market).
In general, there is no magic formula, and at the end, trading results are a statistical derivative, there will be losing trades, and pretty bad ones as well.
A good way to cope with the risks and improve your results is diversifying your portfolio with a large variety of assets (with growth potential, in your eyes).
Even though, a certain amount of risk is always there, if you cannot take it, there are plenty of jobs without risk out there.
8) Do not use margin,
It creates, or rather enlarges the already existing conflict of interests between you and your broker.
In general high rollovers, varying margin levels, and hanging PNLs will affect your decision making process negatively, especially as a beginner.
If you do decide to use it, be careful, use up to 5x margin, with high margin levels, as a complimentary tool reach the position size you would like to have, side-by-side with having most of the position is spot.
On a side note, be aware that margin costs (rollovers) can reach more than 100% a year in some cases.
In a general manner, trading spot is the best thing you can do for yourself, by eliminating the time factor and unneeded pressure, you allow yourself to make the right decision regardless of how much time it takes, this also may be referred to as value investing.
9) Treat your money as if you were a surgeon operating his patient.
Do not try to make money for short term purposes.
Not every asset on every market is tradable 100% of the time, in fact the markets are only in a confident trend around 10% of the time.
As a peasant collecting his harvest, you can only take what the market gives, and sometimes there is no harvest on a certain field for months or years.
In fact, a wise trader will be out of position for most of the time when applying a short-term investing strategy, to achieve a higher ‘sharp’ indicator.
Your money is your inventory of working tools, or buying power, if you like.
Acknowledge that, and that the only thing that you can purchase with it is non-tangible trading assets, as long as it is in your broker account, and thus, avoid stupid unproductive comparisons in case of loses.
10) Look at the macro picture.
In general, Crypto-markets are going up in the long term, as can be seen by indices such as CRIX.
But at any case and with any asset, avoid staring into the screen for long periods and going into high resolutions such as 1H, 30M or even 15M in the graph, the only things you will find there is a waste of time and lots of white noise.
11) Last but not least, trading in a marathon, not a short distance run.
It requires lots of durability. Start running slowly to warm-up, and increase your phase and intensity slowly and confidently.
Measure your decisions long term, do not stick in front of the graphs more than you have to, it will change nothing.
Instead get a hobby or 2 and enjoy life.
P.S
‘Everyone lies’ — Hugh Laurie, House MD
And finally, those who cannot do, teach, nothing said in this article is actually part of any bible.
At the end of the day(or the decade), you cannot argue with results.
The writer is the founder of Nexchange, the ZeroBalance Bitcoin exchange, where you can purchase and sell spot Cryptocurrency with a small spread, easily, and quickly.
