This is Why Beginner Traders Lose Their Capital – 4.Overactivity

Dear friends, it’s been a long time since I posted a lesson for beginners, please excuse me, I have been overactive with my projects.
Thank you for reading my previous educational posts. I was glad to see in the comments that you have learned something that will hopefully help you take better decisions in your trades. Remember that when you like and leave a comment, you give me feedback about these lessons.
Today, I would like to talk to you about another mistake I see a lot of beginners do: being overactive – or trading too much. Overtrading? Maybe that is a word. This idea again comes from the messages I get. The types of messages that inspired today’s topic are in one of the forms: “What do you think about SHTCN3/BTC (unkown coin) – I saw a breakout”, “On the 15m chart ETH dropped 5dollars, should I sell?”, “I just closed a trade for BTC, when should I buy again?”.

How to know if you are overactive about trades?
Well there are many signs which say that you are using your time unwisely in trading. Usually it comes because of a combination of fear of missing out and a rush to be rich.
- You are watching the charts all the time and are always on high alert. Also, you perhaps sit on small timeframes trying to catch all price movements or you generally try to catch all price movements out of FOMO regardless of timeframes.
- You are under the impression that the values of the different coins will take off without you and you missed a new train / bitcoin and your opportunity to get rich fast without putting in the effort others have to put to get there.
- You are in a rush to make / recover some money.
- You are under the impression that you always need to be in a trade because otherwise the opportunity will pass by you.
- You force the interpretation of different indicators (which maybe you don’t fully understand yet) to find trading opportunities when they are not there. Like in the past days, things have been flat, yet I see people ask me about opportunities that simply are not there.
- And of course, you follow all the top authors because they do the thinking for you and all you need to do is follow them. (spoiler: you need to also do your own research!)

Why is this bad and what mistakes does overactivity lead to?
I can be, of course, wrong (but chances are I am not), but by being overactive in trading, especially in the beginning, you will set yourself up for frequent misjudgments and mistakes.
Trading all the opportunities you think appeared, you are bound to make errors. Many quick decisions – many mistakes. Although there can be exceptions, 1 in a few thousands, and everyone thinks about themselves that they are the greatest and smartest human that was ever born, I can tell you that I really believe you should place the odds in your favor, not leave it to chance. You leave things to chance when you are not confident on why you are entering a trade.

But wait, mistakes are good sometimes, mistakes make you learn. Problem is that if you make a lot of mistakes frequently in the beginning, you don’t have time to take a step back, study the mistake, and learn from it. What happens instead is, you make some errors, you lose some money, you have no idea what’s the best course of action and you gamble on the next decision, lose more money, and so on. Now you have a ton of pressure on yourself and you need to recover it fast. This just keeps getting deeper and deeper until everything becomes 100% a gamble.

評論:

When you are overtrading under pressure you are likely to make the following errors:
- Rushing to join movements on small coins after breakouts on tops, just before a dump. Then you will be left holding and hoping or exiting at a big loss. Most time you do this it will be more loss than miraculous profits.
- Exiting early from good trades that didn’t go your desired way from the beginning. Remember to follow your plan of exit once you entered a trade. If you can’t accept that the trade will be lost, then you should trade with a smaller volume (as I said in a previous post). Because the markets don’t go straight up or down, it’s normal to leave the price to follow its course until either stop loss or profit target. Otherwise, you will exit from many good trades because you had no patience or got scared too soon.
- You are probably following some authors. That is good. There is much to learn from their experience. But do they have the proper experience, and do you understand their ideas properly? Are you reading their ideas down to the last “if” ? When you don’t understand something do you rush to a book or at least to google to find out what they mean to say ? You need to put in the effort, remember that different traders can have different strategies and they can all be right (or wrong), even if they post trades in different directions. Each has their own strategy. A BIG mistake is to open a trade on one a strategy that a trader posted, and close it based on the idea of another trader. Don’t do that.

評論:

What is the best cure or the best course of action?
If you recognize your behavior in some of the things I described above I suggest to just take a break. Just take some time to think well what is causing you to make all mistakes. Try to make some order in your mind and organize that pressure that pushes you into the wrong decisions.

Take the time to understand what is generating your mistakes?

Is it because you are rushing to make money fast? Then, slow down. In trading you should be patient, not rush. If you need a lot of money fast, and you are a beginner, than understand that it is very not likely to make that money fast in trading. It is likely to lose that money fast, as more than 90% of people who trade do. Again, I will tell you boring things: learn the basics, do paper trading, do real trades with only very small volume until you learn. When you feel like you learned switch from very small volume to small volume only. Have patience, don’t rush.
The second question you should ask: Is the strategy you are using correct? If the market goes the correct way like you hoped but you are losing money, your strategy can be wrong. If is not this, then maybe look again at the market: did the trend chance? Are you using the correct strategy for this trend? For example, if you were using a strategy that worked on a uptrend and the trend reversed, then it’s normal to hit stop loss on some of your active trends, it does not mean your strategy was wrong, but perhaps it’s time to stay out and wait. Sure, your strategy can be wrong, which means, you need to go back and test a new strategy or adapt the current one.

評論:

If you are using somebody else’s strategy you have a new set of questions you should ask yourself: is his or her strategy wrong for this market? Who is this person you are following, how long have they been trading? Are they overenthusiastic about their wins and take their losses with denial. Tip: professionals take losses and wins the same way: calmly - because either of the two is just business as usual. Do they make sense, are they consistent? You don’t have to follow only professionals, but understand who you are following and for which purpose is important. If people post trading ideas (they are marked with “short” or “long”) then you can consider that a trade and there should be some levels highlighted there. If they are posting an analysis of a market, they are probably just discussion the possibility of a future trade IF the specific market conditions play out. Make sure to understand the difference between the two. And then the most important tips are:
- When following someone make sure you understand their strategy and their trades and still do your own research before entering a trade with your money
- If you enter a trade based on a strategy (yours or someone else) exit the trade on the same strategy. From that moment on you should not care if another legend says BTC is going to 4k and another one says it is going to 20k. You should just follow that plan and exit it as you decided before.

評論:

Remember that you are a beginner, and until you have enough knowledge and experience, you should not try to trade with real money or at least not with high volumes if you did not learn how to do it first. If you want to get better do paper trades, you can do that right here on TradingView with a free account. That way you will learn with 0 risk. You will win either way: if your trade is profitable, good, try again with the same strategy, and this time, if you lose, try to understand why! Then repeat and improve.

評論:

Key takeaways

Keep calm, don’t try to trade every market movement, and don’t spread yourself across multiple markets which will make everything hard to follow. Keep away from small timeframes ( <1h), everything looks scary and dramatic there. If you are a beginner concentrate on learning, not on maximizing the profit.

Trading is more like fishing and chess than it is like a sprint race. Be patient and try to enter only when chances are on your side. Take the smallest risk possible, because the crypto markets are volatile, unregulated and have a lot more risk than classic markets. If you rush, you put a lot of pressure on you to recover your losses, while if you are patient you can invest your time in understanding your mistakes and correcting them. Always keep learning.
Be consistent with the strategy you use, do not open a trade on one strategy and close it on another.

If you follow others, you still need to take responsibility for your trades and treat the trade seriously. Like a business not like a game. Understand the strategy of the person you follow, read the whole analysis and still do your own research. If you don’t understand why you are entering the trade, then skip it, because you are using your money not theirs.

I hope this text will help some of you to trade better by being more patient in your trades. Remember two things at least: if you know how to trade properly with 100$ you will know how to trade properly with 10 000, 100 000 or 1 000 000$. And the second thing is that there are ALWAYS new trading opportunities! Don’t give in to FOMO and don’t rush!

If you liked this post, please like and comment on it! It will be my reward and it will keep alive my motivation to write more!

評論:

Dear friends, thank you very much for all your comments and likes to this post! I'm very grateful!

評論:

I started writing a new post. I'll try to post it within 3-5 days. Thank you very much for all your comments and likes! It's amazing! You are the best!!!