Crypto Swing Trading Summary (C9): Common Mistakes

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Even the best traders make mistakes, so no doubt you will too.

Like anything in life, you want to learn from the mistakes you do make and use those lessons to improve your systems.

But don’t just learn from your own mistakes, learn from the mistakes of others as well, which is what this chapter is all about.

Overtrading is like having a tiny puncture in a tire. It will slowly drain your capital, until one day you will notice a big chunk of it has gone.

Don’t feel like you always have to be in the market and avoid trading out of boredom. Sometimes the best trade you can make is none at all.

Practice patience and limit the number of open positions you have at any one time. This will force you to be more selective.

Revenge trading is when you lose a trade and then try to quickly make up the loss with more trades.

The problem is that you often go into the ‘make up trades’ with emotion, and that can lead to bad decisions.

Instead, take a step back and analyse your losing trade. What went wrong and what can you do (if anything) to prevent that same mistake in the future?

Also assess your emotional state before getting back into the market. Take time off if needed.

Risk management is one of the most important aspects of successful trading.

There is no such thing as a sure trade. You never want to ‘bet the farm’. Create your risk management plan before you trade and stick to it as if your life depends on it.

Note from Sam: Here are two risk management guidelines that I have come across many times.

1. Never risk more than 1% to 2% of your total capital on a single trade. So if you have $100 in trading capital, no single position size should be more than $1 or $2.

2. The minimum risk/reward ratio for a trade is 2 to 1, i.e., after deciding your entry, stop loss, and take profit figures, your take profit amount should be at least double your possible loss.

You may develop an emotional attachment to an asset. Perhaps you have profited from it in the past or you really believe in the technology.

Whatever the reason, this emotional attachment can distort your judgment.

Remember, you are swing trading to make money. Be open to trading any coin that presents a good opportunity, and to dump those that don’t.

Technical analysis is great, but you can’t ignore the fundamentals.

Be sure to stay informed about the projects you invest in as well as the crypto market in general.

Read the next chapter here.

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