How do I earn money with Bitcoin? Where is the money in the crypto world? The answer: you need rules. I have collected the most delicious wisdom from countless trading literature, screened and baked to 11 golden rules.
1. There is no win-win situation in crypto trading
Remember the see-saw at the schoolyard. Two kids rock up and down. There are two states: either one child is down and the other is up. Or they balance quite hard in the middle. This is how trading works. Sometimes nothing happens and the courses are very balanced in the middle. But every time a trader makes a profit, another suffers a loss. The rocker can not be up on both sides. Simple physics. The question is: why do you think you are better than your counterpart?
2. Crypto trading is war
In state-organized fighting there is the term “fog of war”. The general does not see the entire map, but only what is before his eyes. He has to make decisions with incomplete information. That’s the way it is in trading. Individual traders are always on the wrong side of the asymmetry. There are so-called whales — they have so much crypto that they can change the course with a trade. But only the whale knows when it does. If a (real or fake) message drives the price, we usually find it too late. In the trade win those who have essential information before.
3. 50 plus 1
Again the see-saw. There are only two relevant states that a course can take: rise or fall. That’s a 50/50 thing. If we let a monkey trade, then the odds are that it is right at exactly 50 percent. Nobody is 100 percent right. There is no system that can correctly predict an irrational and constantly manipulated market. The goal of every trader is to be at least 51 percent correct. Every trader needs the frustration tolerance to lose in 49 out of 100 trades.
4. Faith is (unfortunately) everything
However mathematical the system is, our belief in magic and destiny keeps getting in the way. Example: A coin is being pumped, reaching dizzying heights. We know it’s already too late to get in, but we’re afraid to miss something (FOMO). Or we see patterns where there are none. There is also an own field of research in psychology: Bias. Result: Nobody is rational. To believe that we act rationally in the market is a mistake.
5. The mistake is you
The market is always right. If the market does not behave the way you calculated it, you’re wrong. Forever and ever. Amen.
6. The 80/20 Rule of Crypto trading
The good traders make their money with 20 percent of their trades. The rest is either a draw or a loss. If a good trade brings 16 percent profit, then a worse may bring -4 percent on average. This ratio can be achieved with a stop loss. So you can also calculate whether you make a profit in the sum. In addition, one sees then that a trade with three percent profit is in fact no profit.
7. Beginners lose when crypto trading, because they:
- use too much money
- trading without knowledge, so to speak play the lottery
- keep positions too long
- trade with cheap shitcoins
- play with foreign money
- never get their profits out
- Trade too often, so try mediocre trades
8. Invest in what you understand
Inform yourself before you buy coins. What are they doing? Does this make sense? Or at least understandable? The better the product, the sooner the price will rise in the long run. This advice also implies that you should not trade Shitcoins.
9. The differences from crypto to other markets
- Crypto markets do not sleep, they are open 24 hours a day.
- The cycles between euphoria and depression are shorter by a factor of X, crypto trading has warpspeed. If a stock market is bearish , then you can take a few weeks and months off. In crypto it will be different again next week.
- Volatility — ie price fluctuations — can amount to as much as 30 percent in one day for smaller old coins. For example, traditional media are too slow for that. When it is said that a certain Altcoin has dropped by 30 percent in the last few days, the situation has already changed when the editor puts the article into print.
- Stock traders think in percent. Crypto traders think in x (in the form of the x-fold).
- Everywhere, illegal things like insider trading happen. But in the unregulated crypto world, it happens more often and the effects are bigger. Knowledge advantage pays off even more in crypto.
- Engineering price analysis can work well in the crypto sector because the market is small and many analysts are on the way. If many act according to the same results, then the forecasts come.
- Outside of the top 20 you should not make big purchases or sales (greater than 1,000 dollars). With low trading volume, the price deteriorates between the first and the last dollar.
10. Make 100 bad trades fast
The only way to increase your chances of winning is real trading experience. Reading books does not help. Also do not trade with play money. Only real trading with real money brings experience, insight and success (if at all). Start small. Start with 100 dollars. If you have doubled this, you can shoot another 200 dollars. If the 400 have doubled, then you repeat the game. And always only trade with enough money that it does not increase your heart rate. Nervousness is bad for business.
11. Less technical analysis (TA) is more
Learn Moving Averages, Stochastic RSI, Trend Lines, Candle Stick Basics, Up & Down Channels, Bull Flags, Breakouts & Wedges. TA can be “zoomed”, they can be formed from daily, hourly or minute values. The shorter the period, the more error-prone the pattern. Do not search in minutes, which you can not discover in hours.
Marko Vidrih @cryptomarks
@cryptomarks (@VidrihMarko) | Twitter
The latest Tweets from @cryptomarks (@VidrihMarko). Cryptocurrency trader, Researcher, Investor and Crypto enthusiast…
The latest posts from Marko Vidrih. Follow me at @cryptomarks. Crypto, Bitcoin, Blockchain
Image via Pixabay