Why you should not start your journey in the crypto market with a large amount, how high is the probability of becoming a successful trader and how not to be disappointed in digital assets at the stage of acquaintance
The probability of making a big mistake while getting acquainted with the blockchain technology market is especially high at the very beginning. The cost of such a mistake or an incorrectly chosen strategy can be incomparably more than just a position closed at a loss or lost funds – often all user relationships with cryptocurrencies in the future are at stake.
At the beginning of the journey, any failures are perceived more acutely, and bad experiences most often lead to the fact that users give up studying and interacting with the market due to their unwillingness to face negative emotions again.
There are mistakes made by novice investors and traders that happen most often. However, this can be avoided if certain rules are followed.
- Misconceptions About The Market
The belief in the possibility of easy and quick profits is one of the widespread stereotypes about the cryptocurrency market, which prevents novice investors. Quick profits are indeed possible in some rare cases due to favorable market conditions, but such random successes can lead users even further down the road of confusion.
Unreasonable euphoria from large profits often pushes inexperienced users to open even larger and riskier positions, the failure of which will be final for the entire portfolio. As in any serious business, the relationship with the crypto market should be perceived as a long-term and complex process with new information appearing all the time and, as a result, the need for constant learning and practice.
The market capitalization of the sector is likely to triple in the next decade, so the task of users should be to achieve sufficient endurance and discipline that will allow them to wait for the fruits of investments without destroying their deposit before the opportunity to make a profit.
The second stereotype about the market is the belief that the market can be fully understood and predicted. This misconception leads to an overconfidence in one hundred percent working out of analysts’ forecasts about price movements or unconditional faith in the signals of crypto channels.
Of course, no analyst or channel can perfectly predict price movements and all external factors, otherwise the market simply would not exist in principle. Analysts’ forecasts can only be more or less correct. To be able to truly evaluate the statistics of an analyst’s forecasts or channel signals requires a complex study of a lot of data and the separation of advertising statements about profitability from real statistics on public transactions.
- Misconceptions About The Profession Of A Trader
Those dreaming of a career as a trader should familiarize themselves with the already approximately calculated probability of success in such a business. Unlike long-term investments, where almost every user is able to collect a profitable portfolio, everyday successful trading is many times more difficult, accessible to only a few percent of people.
It is believed that for certain categories of people the probability of successful everyday trading will be slightly higher. So, mathematicians, programmers, linguists, accountants, chess players and professional gamers who have experience in calculating a set of probabilities in given periods of time trade a little better than the rest in statistics.
The selection process and everyday life of traders are described in detail and without embellishment in the book “The Way of the Turtles” by Curtis Fees, who came to the conclusion that successful everyday trading on the stock exchange, even among people specially selected for this task, will be available only to a few. However, you should not give up trading completely. Periodically trading, allocating a small share of the total deposit for this, is possible and necessary for a deeper understanding of the functioning of the market and improving the skills of technical analysis.
- What about trading on paid signals of closed channels? And here everything is not as cloudless as it might seem.
- Firstly, analyzing and finding a good channel with a suitable ratio of subscription price and quality of trading signals is already a difficult task in itself;
- Secondly, even the simple repetition of successful signals is a job that requires certain skills, due discipline and a lot of free time.
Depending on the situation on the market, signals can come at any time of the day and will work only if the conditions for entering a trade and the appropriate placement of stop loss and take profit orders are met. Delay in repeating the transaction after the signal threatens to change the complexly calculated initial conditions and the signal is outdated. Those who want to try paid signals for the first time are advised to allocate at least a month to get used to the system of working with the selected closed channel, during this month it is recommended to use only a small test deposit.
- Too Big First Position
Unfortunately, most of the environmental factors contribute to the overestimation of the first position by users. These include: the desire to immediately get as much profit as possible, excessive confidence in the success of the position and the desire to save time by immediately making a big deal. Also, the desire to open a larger position causes an artificially created “successful” image of a crypto investor “getting out of a Lamborghini and getting into a yacht”.
Compared to the ostentatious luxuries of advertising, new users may feel their deposits are small and seek to increase their first positions to compensate for this artificially created discomfort effect. An excessively large first position in almost all cases will lead to undesirable consequences. Too much loss in case of failure will create a threat to the overall investment portfolio, and excessive nervousness for funds will make it impossible to soberly assess situations and follow the initially chosen plan.
Even if the position turns out to be profitable in the end, the nerves spent and the deterioration in the quality of life in the process of monitoring the position will not be worth it, and ultimately the user will try to get rid of negative emotions and activities associated with them, that is, from all interactions with the market.
- Too Little First Position
The reverse side of the problem described above can be opening too small a position. The insignificance of the amount will contribute to the fact that the user will not pay due attention to the analysis for the transaction, as well as monitor the position after it is opened.
There is a possibility of completely losing too small positions due to the loss of passwords from exchanges or private keys from wallets, since the user will not feel at least some responsibility for an insignificant investment.
A good criterion for choosing the minimum recommended position for each individual portfolio will be planning possible actions with potential profit from the transaction in the future, the amount should, for example, correspond to some kind of product or action in real life, albeit insignificant, but pleasant and quickly implemented.
Going through the entire cycle of actions from analyzing and opening a position, to making a profit and turning it into an event in real life, gives users a sense of a job well done, increasing their motivation to further explore and interact with the market.
The long absence of any connection between investment and trading practices and real life, on the contrary, can create a feeling of infinity and aimlessness of the whole process and, as a result, a loss of interest in the market.
The most successful representatives of the blockchain sector regularly transfer part of their profits to charity and thus give their activities with numbers in front of the monitor a special meaning.
In 2021, it was cryptocurrency investors who were recognized as the most active and generous category of investors making donations, overtaking investors in traditional financial instruments by this indicator, according to Fidelity Charitable.
