Cryptocurrency Trading for Beginners - System vs. Emotions

This post is an introduction to CFD trading for beginners.

First of all, it's relatively easy to learn the very basics of day trading or scalp trading. You need a couple of days to grasp them. Placing orders, recognizing basic price action patterns or reading the most useful indicators - these seem complicated, but in fact, are quite simple especially if you trade with an intuitive tool.

Money management and trade psychology are the tricky part.

Getting to know the assets you trade

We already discussed some price action patterns that help you make decisions based only on the chart itself. However, their usefulness varies depending on the asset you trade and the timeframe you use. For example, the Japanese candlestick patterns may be useful under some circumstances, and useless under others.

That is why if you want to trade cryptocurrency, the stock market or Forex, you need some time to adjust to the symbols you are into. Each currency pair, each altcoin may have its price action behaviors that you need to learn. It's best to do it using your demo account or minimum funds on a live account. However, in the case of the latter, you need to be very careful not to zero your account in a few minutes.

Practice without taking risk

You need to test how the tools behave in your own hands since there are many possible interpretations of any trading signal. You need to learn by mistake, and that’s why a fully functional demo account is so important.

Apart from price action patterns, there are many indicators you could implement in your trading system, such as Average Trading Volume. Find the indicators that work for you, stick to them and excel in using them.

 

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Control your emotions

The most important thing to progress as a trader is to learn to control your emotions. Our emotions are great tools the evolution gave us to react to the real world events. They will help us respond in a fraction of a second when a car speeds at us, they will also make us help somebody in need, or they will give us satisfaction after a hard working day. However, they will rarely help you succeed as a trader in the long run.

Here's why. To develop and improve your trading system, you need to stick to it. Only this way you will be able to tell when it's right or wrong. Otherwise, you will never know if it was the system or the emotions.

To become a successful professional trader, you need to take the time into consideration. Many traders spend more time trading than they used to spend doing a regular job. The only difference was that instead of a secure salary you get a payout that you're never sure of.

Less is more

Don’t trade too many instruments at the same time. The goal is to save time and eliminate mistakes. The goal is to make easy money. Good individual pro traders earn their living spending from 10 to 30 minutes on trading a day.

You have to accept that unless you are fortunate, you won't get rich quickly.

Discipline is the essential feature you should work on. You can do everything right, and if you let yourself loose, you will lose money.

The system you develop consists of a disciplined heuristics for entries and exits. With SimpleFX you can do it using stop losses and take profits.

Don’t mess it up!

You need to have a pure mind to navigate the cryptocurrency markets. Emotions are usually responsible for bad decisions. Psychologists recommend an easy thought experiment. Just try to recall some of the mistakes you made - maybe you bought an expensive but useless car or relationship you got into but shouldn't have stayed too long - probably you make your decision under the influence of emotions. That is why, if you want to earn money by making a series of correct decisions in a complex environment, such as financial markets, you need to find a way to handle your emotions.

A military strategist, a minesweeper, negotiator, broker, CEO, the surgeon - all of them need to act cool. Every single time you enter the market you are in the battle. You should keep just the two objectives in mind:

1. Set up a strategy
2. Execute the strategy

Don't mess it up. And the best way to mess it up is to interfere in the plan you choose in the beginning. If you tamper with the order, you made sticking to your strategy, and you not only let the emotions take over, but also make it impossible to isolate the mistakes and improve the system.

When you micromanage your trades, even if you are lucky enough to succeed, it's terrible for you in the long run, as you have a license/rationale to go for the wrong strategy.

Don’t observe your position in real-time

If you trade 1-day charts, don't look at them intraday. Set your stop loss and take profit levels, and leave the chart. Come back the next day.

Accordingly, if trade 5-minutes charts, don't look at the 1M data. You need to ignore this information.

You won't affect it, ignore the noise, keep the system, stop making a mistake. The only result of looking at it would be letting the emotions take over.

Here is some advice you can take from me:

1. Don't chase losses - you received them, and you want to make it back - that's the gambler's mentality
2. Avoid panicking - exiting too early.  
3. Remember, give your system time to work - be patient.

That’s it. Remember, take time to put a system in work, see how it performs and try to improve it with every success or mistake. Only when you are both ready - your system and you manually - try opening bigger orders and using the high leverage available.