Bitcoin - Why Most Traders Lose In This Market - Sentiment Cycle
Hello Traders,
In this educational, I want to point out why many traders lose in trading.
It does not really matter what instrument you are trading, whether it is cryptos, forex, indices, commodities etc. I did a lot of research and wanted to provide you some bullet points why YOU still not made it so far in trading or at least not satisfied of what you have thought trading would give you back.
First of all, let me start with a simple question. Why do we even start with trading? Most traders started trading for one reason. To make MONEY! If you look today, how simply you can access the financial markets it becomes kind of scary. You can access educational stuff on the internet about trading strategies and you simply have to open a trading account and implement the strategy which you found on the internet and we all become rich right?
Well, unfortunately, that is not that easy and we all know that. At least advanced traders. When money comes into play as a tool to make money, there is a very important factor: Trading Psychology.
The overall goal which we want from the crypto market is very clear. Making money in a fast way. What does that mean now? Well if you make money today there is always a loser on the other side. That is how it naturally works!
We as traders, will also deal with losses, again and again and again. We need to understand first, that it is how it is. We can’t win every trade. We can’t even win 95% of all our traders. If you are good you will win maybe 60-65%. So the other 35-40% we will lose our money. And that is the problem for new traders in my opinion! An unsuccessful trader or new retail trader can NOT and also don’t want to deal with losses! They get very emotional and try to face the loss with overtrading, trying to recover the loss on the same day with higher position sizes or risking more than initially thought. That is emotional trading and those traders won’t last for long. Believe it or not, that is a fact.
By losing money you have earned so hard maybe with your 9-5 job, you obviously become emotional when you start losing it in trading. I do understand this point. But the markets especially the crypto market dont care about you becoming emotional. It will just wipe out your whole account when you get emotional. When you start making money and your account starts to rise you will get excited, by thinking you beat the market. However, a falling account will put you in scary position, where you think twice whether the strategy is working or not.
If this applies to you, you need to learn to control your emotions and concentrate on the main thing: “Capital prevention” Why? Because when you can keep your capital in trading you will automatically make money. You are a money manager at the end of the day. You don’t want to lose your money rather you want to keep it and cumulate it to growth. This will bring you into an advantageous position.
Your risk and emotional behavior changes depending on profits or losses. For example, if you win 4 or 6 trades in a row without booking one lose and you risk maybe 3% with a risk to reward of let say 2. You made over of 24%-36% in profit. At this stage an unsuccessful trader starts to think that he is the hero and starts putting more risk into the upcoming trades. Guess what. Eventually, he will lose all his profits he may gain earlier. Because losing is a part of the game. And I even didn’t mention the drawn loss. If you can win 4 or 6 trades in a row. You can also lose 10 trades in a row after you won 6 trades in a row. You become impatient and in the end, you will also lose your objectivity because you lost a lot of money. The key is always to win more than you initial lose.
That is the key to success in trading. If you always risk 2% on each trade with a constant risk to reward of 2:1 you will be profitable in the long run. (Obviously, with the right trading strategy, risk management and right traders mindset of course)
In this educational, I want to point out why many traders lose in trading.
It does not really matter what instrument you are trading, whether it is cryptos, forex, indices, commodities etc. I did a lot of research and wanted to provide you some bullet points why YOU still not made it so far in trading or at least not satisfied of what you have thought trading would give you back.
First of all, let me start with a simple question. Why do we even start with trading? Most traders started trading for one reason. To make MONEY! If you look today, how simply you can access the financial markets it becomes kind of scary. You can access educational stuff on the internet about trading strategies and you simply have to open a trading account and implement the strategy which you found on the internet and we all become rich right?
Well, unfortunately, that is not that easy and we all know that. At least advanced traders. When money comes into play as a tool to make money, there is a very important factor: Trading Psychology.
The overall goal which we want from the crypto market is very clear. Making money in a fast way. What does that mean now? Well if you make money today there is always a loser on the other side. That is how it naturally works!
We as traders, will also deal with losses, again and again and again. We need to understand first, that it is how it is. We can’t win every trade. We can’t even win 95% of all our traders. If you are good you will win maybe 60-65%. So the other 35-40% we will lose our money. And that is the problem for new traders in my opinion! An unsuccessful trader or new retail trader can NOT and also don’t want to deal with losses! They get very emotional and try to face the loss with overtrading, trying to recover the loss on the same day with higher position sizes or risking more than initially thought. That is emotional trading and those traders won’t last for long. Believe it or not, that is a fact.
By losing money you have earned so hard maybe with your 9-5 job, you obviously become emotional when you start losing it in trading. I do understand this point. But the markets especially the crypto market dont care about you becoming emotional. It will just wipe out your whole account when you get emotional. When you start making money and your account starts to rise you will get excited, by thinking you beat the market. However, a falling account will put you in scary position, where you think twice whether the strategy is working or not.
If this applies to you, you need to learn to control your emotions and concentrate on the main thing: “Capital prevention” Why? Because when you can keep your capital in trading you will automatically make money. You are a money manager at the end of the day. You don’t want to lose your money rather you want to keep it and cumulate it to growth. This will bring you into an advantageous position.
Your risk and emotional behavior changes depending on profits or losses. For example, if you win 4 or 6 trades in a row without booking one lose and you risk maybe 3% with a risk to reward of let say 2. You made over of 24%-36% in profit. At this stage an unsuccessful trader starts to think that he is the hero and starts putting more risk into the upcoming trades. Guess what. Eventually, he will lose all his profits he may gain earlier. Because losing is a part of the game. And I even didn’t mention the drawn loss. If you can win 4 or 6 trades in a row. You can also lose 10 trades in a row after you won 6 trades in a row. You become impatient and in the end, you will also lose your objectivity because you lost a lot of money. The key is always to win more than you initial lose.
That is the key to success in trading. If you always risk 2% on each trade with a constant risk to reward of 2:1 you will be profitable in the long run. (Obviously, with the right trading strategy, risk management and right traders mindset of course)
- Have exact execution rules and strategies that work and that you tested yourself!!!! Not others!
- Prepare for the market and an alternative path which it could take besides from your analysis
- Do always the same and don’t change your strategy day in and day out
-RISK MANAGEMENT: Trade and risk always the same amount (my suggestion 2 max 3% on each trade, depending on your trading type (Long-term, short-term or even day trader)
- Don’t trade based on other trading analysis. You can use them as an overall gauge of what other analysts think but do you own analysis and research. Nobody will take that job from you!
- Know that the market is ALWAYS right and never gamble and risk more then you can’t effort to lose!
Cheers