Three Bad Habits of Trading Cryptos
Although dedicated cryptophiles have been printing returns as early as the 2010’s or before, 2017 was really the year when the cryptocurrency mania exploded. Unfortunately, the music stopped abruptly in the beginning of 2018. Many inexperienced crypto traders saw their profits dwindle at best. Traders must endeavor to build and keep disciplined trading habits. Discussed below are three bad habits I've identified in many novice crypto traders, which has led to trouble during less clement times.
FOMO
As we discussed above, it was rarely ever not the time to buy and hold cryptocurrencies. Typically, the markets are really good at sieving out traders with FOMO (Fear Of Missing Out). This is the tendency for traders who did not get in on the initial move to enter a trade late, typically at the end of the rally, just in time for the inevitable retracement. When many cryptocurrency trades were printing profits in the 1000% range, it could be difficult to find an impertinent time to enter, so there is was impetus to avoid FOMO.
HODLing
There was once a time where even if one bought at the wrong time, he could just wait out the storm and eventually be on track. This habit, known as HODLing (Hold On for Dear Life), is another bad habit in trading. Crypto traders are known for holding a trade 10% or 20% underwater or more, which would make an experienced futures trader cringe. While the markets once allowed for this during the exuberance phase, this all came to a screeching halt in 2018.
‘To The Moon’
When the returns of cryptos were as high as they were in late 2017, it was tempting to leave all of one’s capital invested. This tendency overlooks another important aspect of trading: knowing when to take profits. I've seen many novice futures traders have a lucky streak and double an account, then again, and even a third time before one bad trade blows up their account. With this in mind, after a successful trade, it is wise to take some profits and live to trade another day.
Conclusion
Over the past decade trading stocks, futures, and forex, I've seen novice traders get washed out by making mistakes that can easily be prevented with the proper education and discipline. Giving in to FOMO, holding a trade underwater, and not knowing when to take profits are three of the most common bad risk management habits that can easily destroy a futures account. Crypto traders learned this the hard way in 2018. If there is one crypto trader that can save their account by avoiding the bad habits listed above, then this article has served its purpose.