It is very important to distinguish between respect for the market and fear of the market. Being respectful of the market will assure that your losses are kept to an absolute minimum. Fear will keep you from making correct decisions. You won’t win, if you’re fearful of losing
A common error made by novice and amateur participants in the crypto currency market, is to assume that, somehow, the digital currency markets are “nothing like” the other long-time established financial markets of the world. This is an absurdity.
Equities, commodities, futures, foreign exchange, digital currencies. No matter which market it is, no matter what the asset is that is being traded – the one common denominator in each and every financial market is: prices move due to the thoughts and perceptions of a collection of human beings. Therefore, the one recurring (thus exploitable) element commonly found in every single financial market – is human psychology.
In addition to this, I consistently make reference to the fact that amateurs will only buy something when it is trading at an excessively marked-up price, breaking through price range after price range, when it is already displaying an above average trading volume, and when skilled traders have already profited.
If you were to break down the numbers of skilled players who bought into CRAVE at the right time, and compare it with the number of novices who bought at the wrong time – you’d find that the novices would excessively outnumber the amount of skilled players, every single time.
This is because human beings tend not to make conscious decisions.
We are constantly on autopilot.
Therefore the bulk of our decisions aren’t made consciously, they are formed subconsciously by all of the thoughts and opinions that we have gathered throughout our lives up until that point.
This is why, a novice trader will stumble upon an obvious trading opportunity – at the most optimal time – low price, low volume, low sell resistance etc. And will fail to make a decision based on rationality.
He will combine everything he knows (whether correct or incorrect) about the market, and his decision will form subconsciously.
Every loss in the market is caused by either a lack of skill and knowledge, or by an abundance of erroneous and incorrect knowledge.
The common (and incorrect) wisdom in crypto is “look for good buy support, high volume, high activity etc etc.” This is what would cause our novice trader in the above example to pass up on that optimal trade.
Then, a day will pass… Another day will go by, and that same coin will have climbed several hundred % and be sitting right there on the front page of Bittrex, displaying a 150% 24hr gain. 100btc 24hr volume. It will have heaps of buy support (other novices) near or at the current market price. And it is now, at this exact moment, that this novice trader will decide to buy – at the very top of the market.
There is nothing rational about this kind of behaviour.
Some will call it an “impulse trade.” That isn’t what it is.
This trade was born out the fact that human beings make the vast majority of their decisions on autopilot. Using all of the thoughts and opinions that have been gathered throughout their lives up until that point.
With that being said, I must repeat: Risk comes from not knowing what you’re doing.
Trading altcoins isn’t about using bollinger bands and other idiotic tools that have never put money into your pocket. It is about understanding that the “common wisdom” in crypto, is your toolkit to exploit the majority of market participants – novice traders – for profit. It is that simple. Trading is a game of psychology – using your knowledge and skill, to get ahead of those who aren’t in the know.
Trading is as simple as buying something whilst it is properly priced (and still in demand) – knowing that novice traders and gamblers will always be there to put money into your pocket when that coin rises 100%+.
As a trader, you have to understand that behind every short-term price movement is a long term trend. Behind every long term trend is a gargantuan amount of profit.
Therefore, those who concentrate only on short-term price movements – will always make less money (if any at all) than those who are authentically tuned into the long-term trend.
If you aren’t aware of the long-term trend, then you will never know when it is the right time to buy, to hold, or to sell. This would be the equivalent of attempting to drive a car that has four flat tires. You will go nowhere
Always keep in mind that there are hoards of deep pocketed traders who play these markets – but aren’t frequenters of the Bitcointalk forums. They make most of their trading decisions based on technical factors alone. So don’t get too engrossed and absorbed in the daily noise and chitter-chatter of the market. When the technicals of a coin are in perfect order – then it will attract volume regardless of what the general sentiment of the market is.
People tend to over complicate things, using overly excessive and, sadly, useless indicators and charts. Which only serve to the detriment of your overall performance.
That’s not to say that fundamentals such as news and updates aren’t relevant. I tend to pay some attention to fundamentals when trading, but not in the conventional way. I don’t try to gauge whether the fundamentals are bullish or bearish. Rather, I focus on the market’s response to fundamental news.
For example, if a market is shrugging off a barrage of bearish news, I would view that as an impending bull run.