The Wolf Den #166 - Trading Mistakes That Will Leave You Broke
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This newsletter is sponsored by Blockpit, the tax platform that makes my life as a crypto trader so much easier.My trades were automatically imported after setup and displayed nicely. The tax report was quick and easy to create in the app. I can also track the performance of my assets in the app. With Blockpit, I no longer have to worry about realizing profits or losses in time.SIGN UP HERE and get a 10% discount.Trading Mistakes That Will Leave You BrokeThe crypto and stock markets have extremely low barriers to entry, meaning anyone with an internet connection, a smartphone, or a computer, a bit of starting capital and insight from Reddit can theoretically become a trader. Sadly, most of these beginners learn hard lessons and go broke. Here are 10 common mistakes made by beginning traders that you should avoid at all costs. Starting with real money rather than paper trading There is no reason for a beginning trader to use real money when there are endless resources and platforms for paper trading, including TradingView. Anyone interested in becoming a professional trader should first develop a system based on a simple set of guidelines for their entries, exits, and risk management. This should not be done with actual money. Paper trade until you are ready to lose your mind, then paper trade some more. Trading without a stop lossBeginning traders tend to trade emotionally, which manifests in refusing to quickly accept losses. The most essential skill that a trader must possess is the ability to accept defeat and move on to the next trade. Failure to do this is the main reason traders lose money. Set a stop loss, and do not move it when the trade goes against you, as this behavior is likely to blow up your account.Failing to maintain balanceSuccessful traders maintain a balanced portfolio. Within my crypto portfolio, most of the time 70% is long term holds (heavily weighted to Bitcoin), with 15% in cash and 15% for trading. I only trade with 15% of my portfolio in most scenarios.Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors.Adding to a losing tradeInvesting and trading are different! Investors average down positions in fundamentally sound assets with a long-time horizon. Traders have defined levels of risk and invalidation for their trades. When their stop loss hits, the trade has been invalidated and they should move on to another asset. Period. Never average down as a trader unless it was part of the original plan. Failing to keep a trading journalSuccessful traders have a plan. Part of trading with a plan is holding oneself accountable for your actions. The only way to do this is by recording the details of a trade. This is the best way to learn and avoid repeating trading mistakes. Keep a journal and refer back to it. Record your thought process, emotional state, and the trade results. It will help you immensely. Risking more than they can afford to loseIn crypto, people are drawn to the idea of earning life-changing money by being in the right place at the right time. As a result, they go all-in on crypto, risking everything on what is effectively a lottery ticket. We are seeing this same behavior now on Reddit. Being undercapitalized As the saying goes, it takes money to make money. Many beginning traders are blinded by the promise of making boatloads of cash without leaving the comfort of their couch. This is a false reality unless they already have significant capital to trade with.A trader who wants to be a professional needs to be able to support their entire life with trading - that means their profit must cover their living expenses, without eating into their trading capital. In most parts of the world, this requires at least $50,000 - $100,000 to trade with, and a steady profit of 10% monthly. In reality, this is very difficult to achieve. As a result, many beginning traders find themselves under a great deal of stress when their expected trading returns fail to align with the actual results they produce. Acting on trading patterns and indicators that are not clearly understoodBeginning traders are terrible at technical analysis. They often identify patterns on a chart that are not there or are incorrect based on context and chart placement. Beginning traders should develop a very simple system for trading and avoid making decisions on patterns or indicators that they do not fully understand. Start with simple support and resistance, or indicators that are clear like exponential moving averages.Oftentimes, a beginner trader will take a trade recommended by a veteran technical analyst, but soon won't be able to manage the trade when they don't have an update. This happens when the chart prints a new pattern, after the beginner has bought in. Unless they have continuous guidance from the technician, they are left stuck in the mud, unsure how to analyze the trade. Following the herd Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much or FOMOing into a hot coin. Experienced traders are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to be contrarian when required.As previously discussed, most cryptocurrency traders are blindly following calls by strangers on Twitter. There is no surer path to financial ruin than spending your hard-earned dollars on assets being shilled by avatars who are likely manipulating you for their own profit.The bottom lineTrading is hard. However, if you are properly capitalized and take the basic steps required to learn trading and risk management, one can succeed and become profitable. The key is to have a plan, and no matter what happens, stick to that plan.If you do desire to get this email more often, you can join the paid version!The paid version is only $15 a month and goes out every single weekday. It is just like the issue you are currently reading! Composing this newsletter is how I spend the majority of my time, and I take the fact that my members are paying me very seriously. I would love to have you become a more frequent part of this community.https://www.getrevue.co/profile/TheWolfDen/membersIf you cannot pay with a credit card, please respond to this email and we can get you setup with crypto. If you do want to pay with crypto, I can offer 7 months for the price of 6, or 14 months for the price of 12 for the inconvenience!In This Issue:Trading Mistakes That Will Leave You BrokeBitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsChart RequestsDunning-Kruger Effect 101Robinhood Locking Out TradersChamath Schools CNBC Host What Is Fueling Elrond Gold? Reddit Partnership With EthereumThe GameStop Short SqueezeThe Wolf Of All Streets Podcast Ft. James PutraPhemex Launches "Earn Crypto"My Recommended Platforms And Tools
The Wolf Den #166 - Trading Mistakes That Will Leave You Broke
The Wolf Den #166 - Trading Mistakes That…
The Wolf Den #166 - Trading Mistakes That Will Leave You Broke
This newsletter is sponsored by Blockpit, the tax platform that makes my life as a crypto trader so much easier.My trades were automatically imported after setup and displayed nicely. The tax report was quick and easy to create in the app. I can also track the performance of my assets in the app. With Blockpit, I no longer have to worry about realizing profits or losses in time.SIGN UP HERE and get a 10% discount.Trading Mistakes That Will Leave You BrokeThe crypto and stock markets have extremely low barriers to entry, meaning anyone with an internet connection, a smartphone, or a computer, a bit of starting capital and insight from Reddit can theoretically become a trader. Sadly, most of these beginners learn hard lessons and go broke. Here are 10 common mistakes made by beginning traders that you should avoid at all costs. Starting with real money rather than paper trading There is no reason for a beginning trader to use real money when there are endless resources and platforms for paper trading, including TradingView. Anyone interested in becoming a professional trader should first develop a system based on a simple set of guidelines for their entries, exits, and risk management. This should not be done with actual money. Paper trade until you are ready to lose your mind, then paper trade some more. Trading without a stop lossBeginning traders tend to trade emotionally, which manifests in refusing to quickly accept losses. The most essential skill that a trader must possess is the ability to accept defeat and move on to the next trade. Failure to do this is the main reason traders lose money. Set a stop loss, and do not move it when the trade goes against you, as this behavior is likely to blow up your account.Failing to maintain balanceSuccessful traders maintain a balanced portfolio. Within my crypto portfolio, most of the time 70% is long term holds (heavily weighted to Bitcoin), with 15% in cash and 15% for trading. I only trade with 15% of my portfolio in most scenarios.Rebalancing is the process of returning your portfolio to its target asset allocation as outlined in your investment plan. Rebalancing is difficult because it may force you to sell the asset class that is performing well and buy more of your worst-performing asset class. This contrarian action is very difficult for many novice investors.Adding to a losing tradeInvesting and trading are different! Investors average down positions in fundamentally sound assets with a long-time horizon. Traders have defined levels of risk and invalidation for their trades. When their stop loss hits, the trade has been invalidated and they should move on to another asset. Period. Never average down as a trader unless it was part of the original plan. Failing to keep a trading journalSuccessful traders have a plan. Part of trading with a plan is holding oneself accountable for your actions. The only way to do this is by recording the details of a trade. This is the best way to learn and avoid repeating trading mistakes. Keep a journal and refer back to it. Record your thought process, emotional state, and the trade results. It will help you immensely. Risking more than they can afford to loseIn crypto, people are drawn to the idea of earning life-changing money by being in the right place at the right time. As a result, they go all-in on crypto, risking everything on what is effectively a lottery ticket. We are seeing this same behavior now on Reddit. Being undercapitalized As the saying goes, it takes money to make money. Many beginning traders are blinded by the promise of making boatloads of cash without leaving the comfort of their couch. This is a false reality unless they already have significant capital to trade with.A trader who wants to be a professional needs to be able to support their entire life with trading - that means their profit must cover their living expenses, without eating into their trading capital. In most parts of the world, this requires at least $50,000 - $100,000 to trade with, and a steady profit of 10% monthly. In reality, this is very difficult to achieve. As a result, many beginning traders find themselves under a great deal of stress when their expected trading returns fail to align with the actual results they produce. Acting on trading patterns and indicators that are not clearly understoodBeginning traders are terrible at technical analysis. They often identify patterns on a chart that are not there or are incorrect based on context and chart placement. Beginning traders should develop a very simple system for trading and avoid making decisions on patterns or indicators that they do not fully understand. Start with simple support and resistance, or indicators that are clear like exponential moving averages.Oftentimes, a beginner trader will take a trade recommended by a veteran technical analyst, but soon won't be able to manage the trade when they don't have an update. This happens when the chart prints a new pattern, after the beginner has bought in. Unless they have continuous guidance from the technician, they are left stuck in the mud, unsure how to analyze the trade. Following the herd Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much or FOMOing into a hot coin. Experienced traders are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a trade long after the smart money has moved out of it. Novice traders may also lack the confidence to be contrarian when required.As previously discussed, most cryptocurrency traders are blindly following calls by strangers on Twitter. There is no surer path to financial ruin than spending your hard-earned dollars on assets being shilled by avatars who are likely manipulating you for their own profit.The bottom lineTrading is hard. However, if you are properly capitalized and take the basic steps required to learn trading and risk management, one can succeed and become profitable. The key is to have a plan, and no matter what happens, stick to that plan.If you do desire to get this email more often, you can join the paid version!The paid version is only $15 a month and goes out every single weekday. It is just like the issue you are currently reading! Composing this newsletter is how I spend the majority of my time, and I take the fact that my members are paying me very seriously. I would love to have you become a more frequent part of this community.https://www.getrevue.co/profile/TheWolfDen/membersIf you cannot pay with a credit card, please respond to this email and we can get you setup with crypto. If you do want to pay with crypto, I can offer 7 months for the price of 6, or 14 months for the price of 12 for the inconvenience!In This Issue:Trading Mistakes That Will Leave You BrokeBitcoin Thoughts And AnalysisAltcoin ChartsLegacy MarketsChart RequestsDunning-Kruger Effect 101Robinhood Locking Out TradersChamath Schools CNBC Host What Is Fueling Elrond Gold? Reddit Partnership With EthereumThe GameStop Short SqueezeThe Wolf Of All Streets Podcast Ft. James PutraPhemex Launches "Earn Crypto"My Recommended Platforms And Tools