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5 Things to Avoid if you Want to Make Profits as a Crypto Trader

Photo by Jamie Street on Unsplash

It’s no longer news that bitcoin and other cryptocurrencies have enjoyed a massive boom over the past few months, even beyond what many crypto fans were expecting. The last few months have seen bitcoin rise from grass to grace, or rather, from a lower level of grace to a higher level of grace. Some time ago, very few people knew about cryptocurrencies, and only a few among the few really understood it. Thankfully though, today, almost everyone knows about bitcoin and a lot of soon-to-be parents or heavy mothers may just have chosen the name Satoshi Nakamoto for their unborn kids. In the past, the phrase “to the moon” only makes us think of Neil Armstrong, the first man to land on the moon. However, today, when we hear “to the moon”, we only think of one thing and one thing only — Cryptocurrencies.

Thanks to the mass adoption and backing, bitcoin has proved that it is here to stay. In recent months, the price of bitcoin has surged rapidly. From the $10,000 region to the $60,000 region. Altcoins too weren’t left out of the party. Theta, for example, moved from around $1 to $13, within 4 months, Cardano moved from around $0.2 to $1.2. All these statistics point to one simple fact — The bulls are in control of the party. Sadly, despite the season, we find ourselves in, a season for rejoicing in the crypto space, some traders still find themselves losing money to the market. In this article, I will be highlighting four things you must avoid as a crypto trader if you want to be profitable.

It is a sin in the crypto world to use all your funds to invest all at once. It doesn’t usually end well. Whether we are in a bullish season or not, it doesn’t make sense to go all-in due to the highly volatile nature of the market. It is more reasonable to divide your funds into various portions. These portions can be pumped into the market gradually. When this logical division is done over a long period of time, it is known as Dollar Cost Averaging (DCA). While this method of investing and trading does not produce maximum gains, it guarantees profit over a reasonable period of time. The goal is to be profitable and no trader can actually perfectly catch or buy the bottom and sell the top.

This applies to futures and margin traders. The truth is, a bull run can easily make you rich even without using high margins. The lower your margin, the lower your chances of getting liquidated and vice versa.

As simple as this sounds, this is where many traders have failed. The truth is, trading is psychological to a large extent. When the market is down, that is the best time to buy. When the market is up, that is the best time to sell. Unfortunately, the average human brain that is untrained for trading tells you otherwise. When the market is down or when there is a dip, many traders ask themselves the question, “What if it keeps going down? What if this is the end of the Bull Run?” Hence, many traders sell off and eventually lose their hard-earned cash. When some traders hear that a coin’s value is appreciating, they buy without proper analysis hoping that the value of the coin keeps going up forever. This ignorant method of trading has terrible consequences.

“Be fearful when others are greedy and be greedy when others are fearful” — Warren Buffet.

The Take Profit or Sell Button on your trading app is there for a reason. Use it! You can never go broke taking profits. If you are scared of leaving the bull party too early, you can pull out a certain percentage of your funds and leave the rest to ride. Even if not all, take some profits. If you are familiar with the crypto space, you must have heard the term “you haven’t made a profit until you have sold”. That is absolutely correct. Always keep that at the back of your mind. You may even decide to keep it at the front of your mind so that you’ll recall it easily. However, taking profits at key opportunities does not apply to long-term investors. Long-term investors are like a marriage mate. They stick to a coin in sickness and in health, in pumps and in dumps.

Imagine this young man named Tomoko. Tomoko is a trader. Tomoko buys coin X. Two days later, he checks one of the crypto communities he belongs to and sees them talking about coin Y that has increased by 20% in the last 8 hours. Tomoko sells coin X to buy coin Y so as to “chop the pump”. Guess what? Coin Y stopped pumping. In fact, it’s now dumping. Tomoko waits for three more days to see if coin Y will rise again (pun intended). On the third day, Tomoko receives a price alert from his trading app. This time, coin Z has increased by 7%. “Well, 7% is cool. Maybe I should hop into coin Z now before it gets to 20%”, Tomoko says to himself. He sells coin Y and buys coin Z. So sad. If you were asked to describe Tomoko with one word, what will that word be? Well, I can’t read your mind but I’m pretty sure that word won’t be WISE. Sadly, many traders are like Tomoko. They simply don’t have the patience to wait. They keep moving from one coin to another until their $1000 investment shrinks to $15.

In summary, if you want to be successful as a trader, you must avoid trading with all your funds at once. Avoid unnecessarily high margins or leveraging, don’t buy when the price is high, and sell when the coin is in a dip. Apply wisdom and do the opposite. Buy when there is a dip and sell after the coin has pumped. You must take profits when you have to. Finally, you must avoid jumping from one coin to another unnecessarily.

Silentpoettt _ A science student who fell in love with art. I write articles related to investment, online businesses, finance, blockchain and crypto.