DEVELOPING TRADING MINDSET...
Recently we saw a massive bull run for Bitcoin and other cryptocurrencies. Bitcoin is the most known and recognizable and many gauge the market on how Bitcoin performs. It seems since mid december, we saw a new all time high for Bitcoin everyday or at least every other day.
Logic will tell you that at some point, there has to be a dip in the price, but movement is not logical in a bull market. Finally, between January 10 and 11, we saw Bitcoin price drop from near its current all time high of almost $42,000 down 30%.
Many in the market, especially those new to cryptocurrency were panicking, thinking that it is all doom and gloom now. Being a cryptocurrency trader or investor can be a volatile ride, especially if you let your emotions get a hold of you. The best defense against making emotional decisions in your investing and trading is to educate yourself and have the right mindset around it.
What uneducated people saw as a bloody day for Bitcoin and the cryptocurrency market, experienced and educated investors and traders saw the opportunity to create more opportunities to profit. Below is one of the early How-To Crypto Reports called Developing A Winning Trading Mindset. Everyone who invests is at some level a trader so it is important that your mindset match your strategy. Read up below and make sure to double down on your education by going through the Newscrypto School as well.
THE CRYPTO IN 2021
The ability to take something of value and, through buying and selling, turn a profit or increase the amount of that asset someone owns has intrigued the human race for centuries. Many times in history, access to profit from these markets was limited to those in power or the wealthy elite. Today, we live in a digital world that gives instant access to many across the globe to trade in stock markets, foreign currency exchange markets, and now the cryptocurrency market. Trading online first began in what is not considered a primitive form, over the phone.
Those wanting to engage in trading had to do it through Stock Trading Brokers, and by executing buy and sell orders over the phone. With the rise of the internet, and the evolution of software and network infrastructure, we now live in a connected world that allows us to execute buy and sell orders anywhere in the world. Buy low and sell high is always the goal of a trader, but those who have mastered it in any market have identified that it is really 95% controlling what happens in your head and 5% of how the market moves and reacts.
HOW TO DEVELOP A WINNING TRADING MINDSET?
Trading can be a rough journey that can drain your mental energy and make it hard to focus. At times, there will be so much noise in the market that you may find it hard to focus and identify what you should do. Below we will discuss how to develop a trading mindset and why it can have such a big impact on your trading performance.
Emotions left unchecked can cause you to make some serious mistakes. Some of you reading this may be thinking, “I’m not a day trader,” or “I just want to buy and hold.” Having the right mindset is important no matter what your trading style is. Even those that call themselves holders, or hodlers (a misspelling that’s growing in popularity in the cryptocurrency world) are still traders. They are long-term position traders, with the intent to sell at a much later date hoping for a drastic increase in value by the time they sell.
Developing a trading mindset is the most important skill you must possess as a trader. But like a muscle in the body, you must develop, exercise, and continue to learn and evolve to stay sharp in your trading and keep your mindset strong. You can have the greatest trading tools in the world, such as Newscrypto tools, but you must pair any tool with the proper mindset to be able to take the right actions at the right time. Below, we will look at 5 attitudes and beliefs that are key to sharpening your trading mindset and then provide some tips to help you develop the right mindset.
POSITIVE ATTITUDE
First and foremost, a positive attitude is where you must start. As James Allen wrote in the book As a Man Thinketh, “A person is limited only by the thoughts he chooses.” Is it normal to have negative thoughts and fear? Absolutely, but we must consciously focus on always returning our mind to positive thoughts. Positive thoughts will form our belief and our belief dictates every action we take or fail to take in life, and in trading.
A positive attitude does not mean to deny the truth by saying everything is great. A positive attitude is where we remain positive and hopeful, even when something is wrong. Losses in trading are inevitable, but, looking at each trade or even each mistake as a learning opportunity can help you to stay positive even in the face of adversity. The opposite of a positive attitude is a negative attitude, which can lead you to placing anger and even blame on things outside of your control. Not taking responsibility in your trading journey and painting yourself as a victim will lead to no personal growth and little-to-no success in your trading journey.
COMMITEMENT
The second on our list of attitudes and beliefs to develop is commitment. Little happens in life without commitment. Commitment means to do the things you say you are going to do, even long after the feeling is gone that you had when you said you would do that thing.
Commitment must be to first develop your trading mindset, followed by the commitment to learn, practice, and grow your trading skills. Many people participate daily in trading, but only a small percentage of traders are committed to take the time and effort to practice, study, learn, and grown in their trading mindset and skills.
This should make it no surprise that for the same reason, only a small percentage of traders are profitable over time. Commitment must also go hand in hand with persistence to become a profitable trader and to maintain a trading mindset. Trading will give you ups and downs, with a whole range of emotions, so pairing your commitment with persistence to push through every tough situation will allow you to continue your trading journey, even while most give up on their dream to be a successful trader.
HUMILITY AND SELF-AWARENESS
The last of the attitudes and beliefs we will discuss go hand-in-hand, humility and self-awareness. Many may confuse humility with lack of confidence. Confidence will serve you well as you progress in your trading, but overconfidence and arrogance is what you must avoid. Stay humble even as your trading strategies improve and your trading profits grow.
Always remember that risk must be managed with every trade, and there is never a point where you are too good to not make trading mistakes. Humility also includes the intent to never stop learning.
Once you stop to study and learn in your trading, you will see your trading skills start to decline. Self-awareness ties into humility as you need to be self-aware of your emotions and, in turn, your humility. You need to also not be too judgmental or emotional when you identify mistakes you make along your trading journey. Self-awareness involves acknowledging mistakes and creating action plans to correct and improve on your weaknesses identified during self-reflections.
TAKE ACTIONS...
Now, we will take a look at tips and actions you can take, many while incorporating the attitudes and beliefs listed above. The reason we talked about beliefs and attitudes first is that all action or inaction is predicated by our belief.
If one does not believe they can have success trading, they will not even attempt to start or quit if the belief manifests after starting to trade. Many people believe that trading the markets are too difficult, so you must first change that belief along with any other negative belief about yourself before you can conquer your trading.
First and foremost, you must develop a good daily routine that sets aside the time you will trade. With the cryptocurrency market being open 24 hours a day, 7 days a week, identify when you plan to work on your trading. I would normally say a good morning routine is crucial, but with cryptocurrency being around the clock trading, just be sure to build a disciplined time to trade.
This routine will best serve you if you have some quiet time or meditation planned before beginning your trading. The worst thing to do is jump right into trading from a prior event that you still could be feeling the emotions of that prior event. Take the time to clear your head, relax, so you do not carry those negative or anxious feelings into your trading. This will allow you to approach the task at hand, calm and relaxed.
CONTROL YOUR EMOTIONS...
This leads into the next tip which is, you must control your emotions. As listed above, try your best to leave behind any negative emotions from prior events of the day or prior days. Also, now talking about your actual trading activity, do not get emotionally attached to any trade.
The more you practice your trading discipline, the better you will become at this, but also, be aware that as you trade with larger sums of money, those emotions will creep back in. Just be aware when they are there and ensure you are not letting it control your decision making and actions.
Also, understanding that markets are amoral will help you when you engage in a losing trade. Losing trades will be part of the journey. Embrace each as an opportunity to learn and become better. Even professional traders take a hit from time to time trading markets, so remember to not take it personal. Now if you find yourself in a series of losing trades, it may be best to pull back for a minute and evaluate your trading actions, emotions, and strategy, of which we will discuss below.
DEVELOP A TRADING STRATEGY...
Now we want to talk about developing not only a trading strategy, but also a set of effective risk management rules that you will follow in your trading. The more you stick to a strategy, the better chance you have of not letting your emotions take control.
Some parameters to take into account as you develop your trading strategy are the following. Only trade money you do not need or can afford to lose. Losing is a part of the trading journey as you cannot win 100% of your trades, and as you develop and fine-tune your strategy, you may lose more in the early trades. Always use a stop-loss and limit orders. This allows you to set your risk tolerance for each trade as you enter a trade and not later when emotions can take control.
A clear entry point, exit point, if in profit, and stop-loss for contingency if trade goes the opposite direction are vital to your trading journey. Now, with that being said, you will want to consider what your overall risk tolerance will be. This is different for every person so you must consider your investment goals, your experience, how much you are willing to lose, and your age.
Age is important because someone closer to retirement goals may not want to risk as much as someone in their early 20s or 30s. In this, as mentioned earlier, you also need to control your risk per trade. Some trades are riskier than others and/or less likely depending on what the charts may be showing. You are only trading on the likelihood of something happening as nothing is definite. If you decide to trade with leverage, be sure to evaluate the risk of every trade since even though the profit can be way more, so can the loss.
IF IT HELPS, USE A TRADING JOURNAL
Now that we have covered emotions and strategy, next you want to ensure that you keep a trading journal. This will allow you to spot common mistakes in your trading and fine-tune your trading strategy. Do not just journal the trade details, but also journal your emotions, before, during, and after the trade is complete.
Identify, looking back, if you made any mistakes, broke from your trading strategy, or let emotions take control. Being able to self-reflect will allow you to grow faster in your trading journey. If you follow others, such as on Trading View or other channels, always verify if you copy their trade recommendations that it matches with your current strategy and what you see when you study the charts.
You must still take responsibility for each and every trade you make. You own it. You can also use this, when done properly, to learn from the mistakes of other traders. It is important to again remember to never stop learning in your trading journey.
The more you study, learn, execute, and reflect back, you will gain more wisdom to stack on top of your knowledge. I heard a mentor say often that “knowledge is knowing that a tomato is a fruit, but wisdom is knowing not to add it to a fruit salad.” You can have all the knowledge in the world and be a walking encyclopedia, but you will need to pair that knowledge with the principles listed in this article to develop wisdom. Wisdom that can help you transition to a consistently profitable trader.
The biggest variable in whether or not that will happen is one thing….YOU.
Content written by Blockchain Wayne and the Analysts Team at NewsCrypto
