Negative outcomes in life force us to hold ourselves accountable. A trader who loses money on a position only has himself to blame. External events like market news can always come in the way. However, factors such as discipline and impulsivity always have a higher, and more persistent influence, on crypto trading performance.
This article is meant to enlighten you about the most important aspect behind trading: accountability. You will learn how to remove bad habits from your trading activities and become aware of the mistakes that prevent you from being profitable.
What Are Bad Crypto Trading Habits?
I classify bad crypto trading habits as habits that lead to self-destructive behavior. Many traders fight an internal battle on a day-to-day basis. In order to remain profitable, they subdue their natural impulses and emotions. When they fail to control themselves, traders end up in unfavorable situations such as:
- Trading with high leverage due to greed.
- Chasing trades instead of waiting for good entries.
- Chasing trades after suffering a losing streak.
- Obsessively monitoring a position and ruining trade as a result of micromanagement.
I see many traders fall into these traps. I have also personally practiced the aforementioned habits at an early point in my trading career. Practicing such habits can severely damage one’s portfolio and deteriorate trading performance.
Another major concern that impacts profitability highly is the need to adjust already executed trading plans. It is important to not make any changes to one’s trading system once a trade is active. Examples of unnecessarily adjusting strategies include: moving stop loss and take profit orders, adding collateral on a leveraged position with a negative PnL, etc.
Last but not least, the worst habit a trader can hold onto is moving to leveraged trading after losing a lot on a spot position. Leveraged positions on margin and futures accounts carry a higher risk level due to the introduction of liquidations. A trader’s main goal should be capital protection. Risking more capital for the chance of earning more money is the opposite of protecting capital.
How Do Traders Hold Themselves Accountable?
Traders stay accountable by being honest with themselves and by monitoring or reviewing their trading activity. A good way to achieve accountability is by keeping track of wins and losses. You can then review your performance on a fixed time-basis. If the results are bad, you should adjust your trading system and strategy.
But responsible trading always begins with holding yourself accountable and refraining from blaming others. Copy trading another trader, because you believe that they’re better than you, is a big no no. The same applies to blaming market conditions for bad performance. A good trader trades profitably under all market conditions – bullish or bearish.
You should learn and educate yourself after discovering your pitfalls. Explore an educational portal like the Shrimpy Academy, read books about finance and technical analysis, or find a trader on Crypto Twitter who loves talking about common sense.
I urge you to explore the Shrimpy Academy whenever possible. You can find a lot of educational material on trading and investing. Our platform has more than enough material that guides you through the trading world and explains everything you need about properly analyzing assets and planning trades.
We even have a free ebook designed to help beginners get started with trading!
Read it here.
5 Tips for Trading Crypto Profitably
Now that you know the do’s and don'ts of trading cryptocurrency, it’s time for me to give you 5 wonderful tips for trading profitably. Keep in mind that these are just some of the ways that you can trade responsibly and keep yourself accountable. You know yourself best, so think about what holds you back!
1. Keep a Trading Journal
Keeping a trading journal helps you identify patterns in your trading activity and record trades. A journal is simply any document in which you write down the details of your trades and any other relevant information. You can keep the journal as complex or simplistic as you like.
Habits are simply patterns. It is difficult to get rid of a bad habit when you are unable to identify the pattern. You might forget about how your last week went or whether you have made or lost more money compared to the previous month. A journal assists you by making things clearer and more obvious.
I recommend recording and keeping track of the following aspects for each trade you make:
- Date of the trade
- Trading pair
- Capital dedicate to the trade
- Trade direction
- Stop loss level
- Take profit level
You can optionally add comments to each trade. You can describe your mood around the time you made the trade and state whether anything external has impacted your trade. I also recommend adding feedback stating what you could have done better or differently.
2. Don’t make changes to trading system mid-trade
Stick to any plan you make. It’s okay to adjust your trading thesis once you encounter new data that helps you gain a better sense of market conditions. However, the data should not radically change your trade – especially if the data makes you have second thoughts.
The worst you can do is follow a trading setup and adjust the orders. This includes moving Take Profit (TP) and Stop Loss (SL) orders.
You might move your TP order up believing the price will go higher, only for the price to hit your original TP level and fall down. Be satisfied with your win, don’t be greedy.
In the case of SL orders, you might lower your order thinking that the price might wick into your initial price level and instantly retrace. You need to accept a loss before you even enter a trade. And if you’re not comfortable with the loss, lower your position’s entry price.
3. Calculate your R/R
R/R stands for risk-ratio. It represents the amount of risk you’re willing to take. If I open a Bitcoin long position worth $1,000 hoping that I will earn $7,000, my position has an r/r of seven. Or if I risk $500 worth of Ethereum in return for $1500, my r/r is three.
You need to calculate your r/r whenever you plan to enter a trade. It doesn’t make sense to enter 1R/R or 0.5R/R trades. You should only enter trades with an R/R higher than two. Even if you enter numerous such positions and get stopped out, you will still end up green from the position’s profit. Always refrain from entering positions with bad R/R no matter what. The market will always provide you with a better trade – all you need is patience.
4. Avoid Leverage
Leverage is what ultimately kills traders. Leverage turns trading into gambling because it promises higher returns, while almost sneakingly adding higher risk. A trader who suffers too many losses in a row might turn towards leverage to “make it all back in one trade.”
Leave leverage to experienced traders. Newbies have no business playing with leverage because they’re already inexperienced to trade spot markets. Only use leverage once you have enough experience or if you happen to catch a lucky entry.
There is nothing wrong with coming up with your own conclusions. In fact, you should avoid blindly following others. DYOR – do your own research – is an important aspect of trading and investing in cryptocurrencies. You must learn along the way as the market moves up in value. You cannot risk investing based on what other people say.
I recommend using the crypto market as an environment to grow as a person. You must become an expert in any topic that can boost your skills and provide you with an edge. Doing anything other than DYOR will most of the time lead to losses.
How Does Shrimpy Help You Trade With Accountability?
You know what’s the best way to monitor your performance? By tracking all of your portfolios from one place! Shrimpy helps you keep yourself accountable by allowing you to check portfolios from more than 30 exchanges and non-custodial wallets via a unified dashboard.
Typically you want to track your order history when trading or investing on an exchange. But it might take too much time to track down and record your orders if you use multiple exchanges. Shrimpy lets you track all the trades you’ve made and more.
Interested in what our platform offers? Check our free demo out by visiting the following link.
I recommend the following articles for more wonderful guiding points for your trading activities: