Trading crypto on leverage appears to be a fantastic idea. All of those benefits are yours! That is until your trade turns into a downtrend and you are left holding the bag. This, like most mistakes in cryptocurrency trading, does not result in a significant loss, but it is something that can be avoided.
If you don’t want to lose all of your bitcoin or altcoins due to a bad trade, make sure you learn what NOT to do when day trading crypto from this article.
In today’s article, we’ll discuss some of the common mistakes people make when it comes to day trading crypto on leverage. Now, I’m not suggesting that you never trade crypto at all or that you should never learn about it. In fact, I believe that trading crypto is both enjoyable and demanding, particularly for beginners. However, there is a proper method and a wrong way to trade crypto, as with anything else.
Disclaimer: This is not investment or financial advice. Please thoroughly do your own research before investing.
What NOT to Do When Day Trading Crypto on Leverage
It’s quite easy to get carried away by the frenzy of news headlines. We’ve compiled a list of some of the most typical crypto mistakes you need to AVOID:
1. Trading on Leverage WITHOUT a Stop Loss
Trading on leverage without any kind of stop loss is probably not a great idea. You need to have a stop loss and that stop loss has to be equivalent to the amount that you are willing to risk on that trade. Not a little bit more, not a lot more. It has to be realistic.
If I lose this, I’m fine. It’s just part of my strategy. It’s part of my plan.
I personally use 1% stop loss.
1% is very tight for a physical stop. If you’re using a physical stop, I wouldn’t go tighter than 1.5% but your stop loss does not need to be like 20% 30% 50%. Of course, easier said than done when we’re frustrated or when we feel like it’s really gonna go in our favor. We never know for sure.
So you always always always need to have a stop loss. I cannot emphasize that enough.
2. Entering a Trade WITHOUT a Plan
Sometimes, it can be tempting to make decisions while you’re actually in a trade based on your feelings. So, we see a lot of green candles and we’re like, “Oh, wait, I feel like it’s going to keep going up. Or we see a lot of red candles and we’re like, “Oh, I feel like it’s going to go against me.” Or we see the price movement going sideways for a while and we feel like this is never going to move anywhere.
It’s really, really tempting to make decisions when you’re in a trade based on what’s happening right now.
But you really don’t want to do this.
You want to come up with your plan for every scenario before you actually get into the trade. Once you’re in the trade, you’re a robot, you just execute your plan. That’s it, you don’t do anything other than just execute the plan.
You have to know the plan in its entirety before you risk any money. That’s how you prevent emotional trading,
3. Keep on Trading While Stressed Out
We began this post by suggesting that instead of trading based on your emotions, you might consider building a technical technique for day trading. While this is true, focusing too much on technical indicators, ignoring what is actually happening in the market, and eventually getting stressed out if not everything is according to your plan can be dangerous.
4. Working on Your Mindset and Psychology Because You Think That’s Good Enough
When you are on a winning streak, when you are doing well, your day trading is going well, you’re bringing in money, and you’re hitting your profit targets day after day. Things are going great!
It can be super tempting to give up the habits that got you there. Things like:
- working on your mindset
- sleeping well and eating well
- having a routine before you sit down to trade
- making sure you stop trading after certain hours
- stopping after you hit your daily goal
All of those good habits that you have in place that got you to where you are can be really tempting to start being like:
I don’t need to do that anymore. I’m good. I’ve made it I’m a day trader. now I don’t need to do any of that.
That’s a bad idea. At any time, it’s so easy to slip back into our negative streak because you stop working on your psychology, your mindset, and all of that other stuff that makes the biggest difference.
5. Letting a Winning Trade Go Negative
This post ties into number 4 about not making decisions once we’re actually in a trade. The plan comes before we enter the trade and when we’re in the trade, we just execute the plan.
So one of the most important things to remember is: Do not let a winning trade turn negative.
Just don’t, don’t do it. Never do it. If your trade is sufficiently in profit – whatever that profit target is you’re going to decide that before you enter the trade (I personally use 1%. You can use 1.25 or 1.5, whatever you want) – as long as you’ve decided that that is your threshold for considering the trade, it’s going to move sufficiently in your favor for it to be in profit.
At that point, your stop loss (whether it’s physical or mental) goes above your breakeven point. Such that, if you do get stopped out, you stop out at breakeven.
Wrapping it Up!
Day trading suggests that trades are executed every few minutes. But, as many of these mistakes show, day trading success isn’t always about discovering a completely new possible trade every second: you might be better off taking your time, selecting options you’re quite sure about, and completing a couple of trades a day or two.
If you’re curious to know how to day trade, be sure to check out our beginner’s guide. The more knowledge you have before you begin, the more prepared you will be when you enter the industry.
Knowing what NOT to do when day trading crypto and imagining your emotions during trading can affect the decisions that you make when it comes to trading psychology. For example, if you enter a trade with high expectations but lose money on it, then this could lead you to be less confident about trading in general which will then result in losing money once again because of poor decision-making skills.
That being said, having good self-control with my highly recommended App is also an important factor when it comes to achieving success in day trading crypto since it helps keep yourself focused on what needs doing at any given time:
After reading these day trading mistakes, now you are ready to start learning about day trading. Check out Martina’s Learn to Trade & Invest Crypto Academy platform to get access to a complete trading & investing video curriculum, trading resources, our trading community, e-mail support, and 2 Zoom lives with Martina every month. Your first month is 100% FREE!