What it takes to be a successful cryptocurrency trader

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by Bruno Perinelli *

Due to the astonishing mass of cryptocurrencies and their ability to appreciate almost exponentially over short periods of time, many individuals, mostly young people, have wanted to become traders in order to gain economic benefits from this sector.

But as in almost all disciplines and professions Being a successful trader is not an easy task, mostly because there are many qualities to master, both mentally and technically.

How important it is to be a good trader

If we don’t know what we are doing and how we are doing it, we can make money in small or large amounts in the short to medium term by buying and selling cryptocurrencies that follow the herd.

However, this only happens in uptrends, when prices rise in unison due to high demand. If the situation is reversed and prices start to fall, which is normal because the markets are cyclical, Only good traders don’t get that bad and don’t even make money.

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As legendary investor Warren Buffett puts it, you don’t know who swam naked until the tide went out.

Successful cryptocurrency traders master a range of technical and emotional skills. Source: Pexel.

The basic qualities of a successful trader

Well, to be a successful trader it is not enough to know how to analyze assets and strategize, as we will see later. Also, as well It is important to control risks and master certain psychological and personal qualities will forever improve our experience in the cryptocurrency market.

patience

One of the keys to success is patience. No one new to tennis can claim to be Roger Federer in a few months or want Arnold Schwarzenegger’s physique in his first two weeks in the gym. The same goes for cryptocurrency trading.

Achieving consistent positive results takes many years (yes, years) of practice and improvement. Over time, we will be able to acquire new knowledge and new tools that will allow us to improve operations and even polish the weaknesses we have as a trader.

Furthermore, It is only in the long run that you can see the rewards of the reinvestment of profits. If we buy and sell cryptocurrencies with more capital each time, but don’t have the patience to make the proposed strategy work, it becomes more difficult to build wealth as a trader.

discipline

Secondly, Discipline is essential to be a good trader. The cryptocurrency markets are very volatile, which means that prices can fluctuate wildly and change the whole situation overnight.

In this context, You have to follow the armed trading strategy to the letter. For example, if we buy bitcoin because it breaks an upward resistance and we place the stop loss below that level, when the price turns we should sell as soon as it reaches the stop loss and not hold the position hoping it is the other way around.

Patience is essential when trading cryptocurrencies or any financial asset. Source: Pexel.

responsibility

Another issue to consider is liability. Navigating the cryptocurrency markets can be exciting, and even more so when we’re making money, but You have to try to stay mature.

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Since the risk lies in the amount of money invested and not in the chosen asset, it is not your responsibility to sell the house and get into debt to invest everything in bitcoin, ether or any other cryptocurrency that we believe will increase in price in the coming years, weeks.

no responsibility, everything we fought and learned for can disappear overnight, and it can also lead to a very serious financial situation, especially if you commit yourself.

courage

But responsibility does not mean a lack of courage. In fact, you must have this quality to be a good trader, otherwise you would be just an analyst.

If we believe that a cryptocurrency can rise in price, we must invest some of the money intended for trading in it, either directly or through derivatives.

Apparently, You have to find the balance between risk and reward to be brave responsibly, However, it is important to realize that financial decisions must be made in order to win.

Cryptocurrency prices fluctuate constantly, which affects decision making. Source: Pexel.

emotional management

The successful cryptocurrency trader is someone who controls their emotions very well. The technique can be perfect, even the analysis, but when emotions dominate us, the result of the operation can be devastating.

In this case, we need to pay attention to six psychological biases that influence financial decisions.

  • Prejudice of the present: One of the most dangerous biases in trading is current bias, which is responsible for prioritizing present and immediate long-term pleasure. Due to this drawback Building long-term strategies is often difficult, as the brain needs immediate reward, which means that great benefits are missed.
  • Confirmation bias: The confirmation bias causes the cryptocurrency trader to go to great lengths to find information to support their thoughts. This is a very damaging bias. because the person is unwilling to read or listen to other opinions that could be useful to his operations, simply because they conflict with his tastes and preferences.
  • Optimistic trend: Another bias that prevents financial growth is the bias of optimism, which leads the trader to believe that everything will be fine and that they will not need that much money in the future. For him, Many people cannot retire with enough money to survive, since at the time of saving they saved little capital by allocating everything to the farm. The good trader must not stop thinking about his financial situation outside the markets.

There are six main psychological biases that interfere with good trading. Source: Pexel.

  • Conservation bias: When we start studying a cryptocurrency or a strategy to deposit our money, we tend to fall into savings. This mental block causes the person to keep the first information collected and cannot add new data. For example, if the first conclusion of an asset is that it cannot rise in the coming weeks, it will be difficult to make the brain understand that the new information available suggests it will not.
  • Bad bias control: Many traders engage in false control bias which, as the name suggests, it makes the individual believe that he has some control over a completely random situation. For example, he repeatedly makes unnecessary purchases and sales thinking he is influencing something, when in reality he is just losing money.
  • Current Experience Bias: Typically, a forex mistake leads a trader to believe that the most recent information overrides all previous background. A typical example is when repeated analysis and estimates indicate that a given cryptocurrency cannot continue to grow, but a short message suggests there may be hope and the decision to buy is made while ignoring everything previously analyzed.
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Controlling emotions is the key to making money in the cryptocurrency market. Source: Pexel.

technical skills

If a person is disciplined, responsible, manages risk and emotions, and masters the other skills mentioned above, but does not have the necessary technical tools, they cannot become a cryptocurrency trader.

technical analysis

In the field of cryptocurrencies Technical analysis is very important for buying and selling, both in the short, medium and long term. This methodology helps interpret the supply and demand behavior of an asset based on its historical prices and trading volume.

For example, if the price is rising and the volume is increasing, you can conclude that the uptrend is strong and will continue. And vice versa, if the price goes up but the volume goes down, the trend is weak and could end.

Technical analysis is a very comprehensive study methodand it can get very complex, so you have to learn it very well to make cryptocurrencies work.

fundamental analysis

On the other hand, there is also the fundamental analysis of cryptocurrencies. In this case, unlike companies, There are no budgets to study, but there are white papers for decentralized projects which have their own tokens showing signs of how the asset’s price could move.

In the short term, with a few exceptions, fundamental analysis is generally not used the most, but for long-term trading, those looking to follow big trends can be a very valuable and useful tool.

Without strategy and technical skills, traders will not be able to be successful. Source: Pexel.

strategy

The last aspect you need to master to be a successful cryptocurrency trader is the strategy you need to execute. Do we buy? will we sell? What is our stop loss? When is our profit? Do we hedge with derivatives? will we use?

These and many other questions should be analyzed to create a profitable and as detailed trading plan as possible. Remember that trading should be a routine and specific activity that should be as emotionless as possible.

Creating a strategy based on our goals and needs is the key to successfully navigating the cryptocurrency markets.

Being a cryptocurrency trader or any other type of financial asset is a task that seems easy, but it’s not. Mastering this discipline takes years of effort and learning, but in the end, your rewards will be more than satisfying.

* Bruno Perinelli has a degree in economics with a specialization in capital markets; Associate Analyst for Weekly Cash Flow, Super Millionaire Stock, and Soado’s Retirement Plan; and 5-minute market columnist at Global Investor.

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