In order to trade in the electronic markets, be it Forex, Futures, Stocks or more recently Cryptocurrencies traders require a special kind of mindset. Knowing how to read and interpret the charts is not always enough, especially in a market like cryptocurrencies where things can change very quickly.
Beyond the academics of trading and the knowledge of technical and fundamental analysis, there are certain attributes that differentiates successful traders.
Community Manager at Huobi Global, Chukwuemeka Ezike describes this as understanding human psychology. Ezike notes that every trader needs to understand that the market is connected to human behavior and that can be used as an advantage to make trading decisions. Some of the areas of human behaviour that are necessary for successful trading adventure includes the following:
Know Your Limits
Almost on every trading platform, you will find some little piece of advice that explains the risks involved in online trading. Some will go as far as warning you on the possibility of losing all your investment over a short period of time. In the end, you will be advised not to trade with more money than you can afford to lose.
Despite these clear warnings, people still put all of their life savings, or even borrowed money into trading activities. This explains one simple factor – most traders do not actually know their limits. In order words, most traders are indiscipline.
Being disciplined is a trading and investment attribute that cannot be substituted for anything. Traders are taught to always have a plan. Such plans include knowing what to invest from the beginning, even before going into the markets. In order to succeed as a trader, you must learn to stick to your plan. Such plans must include knowing the extent of your market exposure and sticking with the plan.
Think Accumulation and Distribution
According to Ezike, people always want to accumulate(buy) wealth and also decide at what point they distribute(sell). If you have been able to understand the first you should be able to determine as a trader when fellow traders are accumulating and that can support you in making smart trading decisions.
What this implies is that beyond the knowledge of how to read charts or interpret news pieces, a trader needs to know what other traders are doing in the market. Meaning that other sources that provide information on trading volumes and order placements are important for accurate trend predictions.
Learn To Accept Defeat
Trading is not about winning all the time. Every trader has losing moments, sometimes the losing moments could even come in streaks of serial loses. As a trader, you must know when a trade gets out of your control and quit. This also must be part of your initial plan.
A successful trading career does not imply winning all the time. It only requires that your wins are more than your losses in terms of value. Sometimes, when you check the frequency of wins and losses, the losses could be more. What matters is what happens with the final aggregate. One of the popular crypto analysts on Twitter with the handle @TheCryptoDog describes it this way:
There is nothing more satisfying than losing less money than you thought you were going to lose.
— The Crypto Dog📈 (@TheCryptoDog) December 3, 2019
You can stay in profit through more number of wins, or bigger values in the winning trades. It all depends on your trading system. However, you must remember that losing is an important part of trading, and know when to accept that a trade has gone bad. That way, you will learn how to cut your losses and enjoy your wins.
Avoid Trading on Impulse
It is hard to separate personal wealth from emotions, but that is what you must learn to do as a trader. Impulsive trading is one of the leading factors towards an unsuccessful trading career. No matter how good the chart looks, try to know why it is responding in the way it does.
You could be a fundamental analyst that trades based on news, or a technical analyst that depends on chart patterns to make trading decision. Whatever your preference, always ensure that you find a reason for entering into a trade. Otherwise, you will do well to sit on your hands. In cryptocurrency trading missed opportunity is better than a misjudged trend.
Ezike puts it this way:
Emotions can affect your decision making in trading, avoid being emotional when trading, and always stick to your plan. Let things go when they do. Discipline is an important character for a successful trading Journey
Cryptocurrency trading is a blossoming industry and many young people are beginning to build careers out of it. The extent of volatility that the cryptocurrency market experiences, and how wide the margins are provide huge opportunities for people to make money. However, one thing to bear in mind when going into cryptocurrency trading is that the higher the opportunities, the higher the risks also. This is exactly why it is important that crypto traders have all the pieces of the puzzle together before attempting to enter the markets.
There is nothing like a perfect trading system. As a matter of fact, the closest thing you can have to a perfect trading system is one that imbibes all the elements of trading. This includes both winning trades and losing trades. What makes it perfect is if in the long run, after going through the ups and downs of the market, a trader comes out on top, with profit.
Iyke Aru is a seasoned author and educator in the blockchain and cryptocurrency industry. He has been in the business of crypto content writing for many years with thousands of his articles across several platforms on the internet. Iyke is based in Nigeria where he stands out as one of the most informed and credible figures in the cryptocurrency industry. Outside blockchain and crypto, you will most likely catch Iyke playing or discussing football with friends and family.