Category: 06. Common Mistakes

Following the herd

Another common mistake made by new traders is that they blindly follow the herd; as such, they may either end up paying too much or FOMOing into a hot coin. Experienced traders are accustomed to exiting trades when they get too crowded. New traders, however, may stay in a...
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Acting on trading patterns and indicators that are not clearly understood

Beginning traders are terrible at technical analysis. They often identify patterns on a chart that are not there or are incorrect based on context and chart placement. Beginning traders should develop a very simple system for trading and avoid making decisions on patterns or indicators that they do not...
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Using leverage

Don’t do it!!! According to a well-known investment cliché, leverage is a double-edged sword because it can boost returns for profitable trades and exacerbate losses on losing trades. Leverage should only be used by advanced traders who have been profitable consistently for years. There is no surer way to lose money...
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Being undercapitalized

As the saying goes, it takes money to make money. Many beginning traders are blinded by the promise of making boatloads of cash without leaving the comfort of their couch. This is a false reality unless they already have significant capital to trade with.  A trader who wants to...
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Risking more than they can afford to lose

In crypto, people are drawn to the idea of earning life changing money by being in the right place at the right time. As a result, they go all-in on crypto, risking everything on what is effectively a lottery ticket. ...
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Failing to keep a trading journal

Successful traders have a plan. Part of trading with a plan is holding oneself accountable for your actions. The only way to do this is by recording the details of a trade. This is the best way to learn and avoid repeating trading mistakes. Keep a journal and refer back to...
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Adding to a losing trade

Investing and trading are different! Investors average down positions in fundamentally sound assets with a long time horizon. Traders have defined levels of risk and invalidation for their trades. When their stop loss hits, the trade has been invalidated and they should move on to another asset. Period. Never...
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Failing to maintain balance

Successful traders maintain a balanced portfolio. Personally, I only have 10% of my wealth in crypto. Within my crypto portfolio, 70% is long term holds (heavily weighted to Bitcoin), with 15% in cash and 15% for trading. I only trade with 15% of my portfolio and that portfolio as...
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Trading without a stop loss

Beginning traders tend to trade emotionally, which manifests in refusing to quickly accept losses. The most essential skill that a trader must possess is the ability to accept a loss and move on to the next trade. Failure to do this is the main reason traders lose money. Set...
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Starting with real money rather than paper trading

There is no reason for a beginning trader to use real money when there are endless resources and platforms for paper trading, including Tradingview. Anyone interested in becoming a professional trader should first develop a system based on a simple set of guidelines for their entries, exits and risk...
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