Welcome to another Trading Academy section.
This time we would like to focus on a couple of elementary reasons why people tend to lose money while trading crypto’s. As we all know, crypto is at an early stage of adoption compared to other mature asset groups such as stocks or bonds, hence volatility is considerably higher. The other reason for short-term volatility is due to speculation that is also liaised with the total current volumes and still incipient phase of adoption. Once years go by and adoption enlarges, volatility should follow suit and stabilise with all other things being equal.
Trading obsessively is a common negative practice especially among unexperienced crypto traders who often use emotional trading to derive their trades. This is in no case advisable and often leads to significant capital losses. New traders tend to push their limits to chase highs in hope of getting rich quickly. When the price drops they are often the first to exit the market and lose hope of earning back their lost capital, which is a supplementary reason for high volatility in the space. In addition, every trade they make incurs a fee which further impacts their balance negatively. Our advice is to have a well-planned strategy in place and research the crypto you want to invest in before actually performing and executing trades. Depending on your trading strategy (short/medium/long-term) we advice having stop-losses and take-profit orders around key exponential moving averages technical levels. One way to find out more about this and stay up-to-date is to follow E-Club Trading community and subscribe to the Morning Game Plan and Weekly Newsletter products in order to have a comprehensive overview of the market from both the technical and fundamental perspective.
The other reason for quickly burning cash is not choosing the appropriate crypto trading platform. There are bunch of cryptocurrency trading platforms out there each charging various fees. Some with higher fees than others. And the differences can be huge. Good exchanges allow crypto traders to enter positions without charging too much to allow them to participate in the market. E-Club Trading has elaborated in one of its previous Trading Academy articles about the best stock and crypto trading platforms on the market. You can find out more details about the topic by checking E-Club Trading Academy section and subscribe free of charge for updates every time a new video or article is being posted by the content team.
Lack of understanding the crypto market is another main reason for capital losses and market volatility. That is why an investor has to research as much as possible the coin she/he intends to buy and understand fundamentally the added value. Once gone through that, you evaluate and determine your entry point into the coin from the technical analysis perspective and fix your investment horizon. If you are determined to invest short-term then choosing the right entry point is even more important. You should possess a certain more advanced trading skills in order to be able to determine the best entry point in a particular asset. For this, it is advisable to understand candle charts and use of technical indicators. You can begin your learning journey by subscribing to E-Club Trading content that enables traders to understand why and when it is best to enter a particular stock or crypto.
Remember that there are numerous ways of making money while trading crypto’s, but at the same time there are just as many ways of quickly losing your capital if not properly prepared.
With complimentary regards,
E-Club Trading team.
And let’s not forget the most important mistake people make when they start trading crypto (just like with forex): using too much leverage, which wipes out the entire position quickly because of volatility.
Completely agree! Thank you for this capital addition.