crypto trading psychology

Crypto Trading Psychology: 11 Mistakes I Made

Seven years ago, I started my crypto trading journey, and believe me, I wish I had a mentor. It would have helped me avoid so many pitfalls in the markets.

The crypto trading world is like a wild jungle, and without the right psychology, you can quickly lose all your money.

There are so many things I wish someone told me when I started trading rather than learning it the hard way.

Thankfully, you have me.

In this article, I will share 11 things I wish someone told me earlier about crypto trading.

If you take these points seriously and use them as a guide, you will become a profitable trader.

If you’re ready, let’s dive.

Crypto Trading Psychology: What I Wish I Knew Earlier

1. Protect Your Capital At All Costs

Does Trading Psychology Apply To Crypto

It’s the most important lesson I have learned as a crypto trader.

Protecting your trading Capital is the hardest thing you will ever do in your trading journey.

Trading is not about making profits. If you have that mindset, you will likely lose money consistently.

Trading is about protecting your capital before thinking about making profits.

Your trading Capital is what gives you the opportunity to trade in the market.

If you refuse to cut your losses, you will eventually find a great trading opportunity, but you will not be able to trade because you have lost all your capital.

I blew over three trading accounts before I finally realized that trading is war.

You’re trying to take someone’s money who is also trying to grab yours.

If you don’t protect your capital, it will be taken from you, and you will have no funds to trade again.

2. Never Add To A Losing Position

One of the best ways to get rekt in crypto is to keep defending a losing trade.

You will likely keep defending the trade until your capital is burnt out.

Cut your losses on time because if you don’t, it will become more difficult as the losses grow.

You will start hoping that the trade will soon go your way, so you will keep defending it, but you might be wrong.

Relying on hope is an emotional strategy in crypto trading, and it won’t take you far. Instead, you want your trades to be based on defined rules.

You must have the maximum loss you can tolerate in a trade before you close it.

For me, I only take a 5% loss, and the trade closes automatically, then I wait for another buying opportunity based on support and resistance.

The truth is the market always brings new opportunities. That is why you shouldn’t be stuck in a losing trade.

I learned this the hard way: The crypto market is a vast ocean of opportunities.

As long as you protect your capital by using a stop loss, you will definitely find another trade opportunity.

3. Never Trade Your Opinion

The biggest challenge most crypto traders face is trading their opinions instead of what the charts are saying.

I have also been a victim.

But if you want to become a profitable crypto trader, then you must listen to the chart.

The chart has a voice that can tell you its direction, but most traders don’t want to listen. They want to trade what they think because they are proud.

Unfortunately, the market doesn’t care about your opinions.

Technical analysis is useless if you’re going to trade your opinion after reading the charts.

On my trading desk, I have an inscription that reads, “Don’t trade what you think.”

4. Be Humble After A Win

Overconfidence can make you take more risks because you believe you’re invincible, especially if you’ve had multiple wins in a row.

You might begin to feel you’re the best trader in the world, and you can’t lose.

You then increase your trading position and ignore stop loss due to overconfidence in your trading strategy until it fails.

No trading Strategy is fail-proof because the market can sometimes go in a direction you least expected.

No matter your wins or profit, remain humble because it will help you focus on self-improvement.

5. Analyze Charts Daily

is crypto trading stressful

Studying the charts every day would help you become better at technical analysis.

When you sharpen your chart reading skills daily, you will be able to make informed trading decisions that will likely result in profits.

Most traders who lose don’t read charts daily.

They might do it once every week and make their decision based on that, but the market can suddenly change direction, and you won’t know.

The crypto market is very dynamic, and crypto prices can change direction when you least expect it.

Daily chart analysis doesn’t mean you should trade daily; if a trade doesn’t meet all your rules, you should ignore it.

6. Have A Trading Plan

It’s an essential critical requirement for profitable crypto trading.

If you want to succeed, you must have a trading plan with defined rules and a journal to document your trading activities.

Your trading plan should have conditions that must be met before you can execute a trade,

Such as the entry, exit price, and stop loss price.

You also need to choose a trading style based on your goals and risk management; you can decide to be a day or swing trader.

Only trade crypto with a well-documented plan, or else you will lose your funds to emotional trading.

7. Stick To One Strategy

In the crypto markets, a lot of traders are looking for the latest strategy that will give them 500% profits within a day or week.

Most people have a crazy desire to follow any strategy that comes out without properly observing if it aligns with their trading style.

Traders are looking for any strategy that promises excellent returns all over social media.

Some traders have even subscribed to membership groups with the hope that they will find a winning strategy.

You only need one strategy if you want to succeed in trading.

The more strategies you have, the more likely you will get confused and enter the wrong trades.

I only use one strategy, which I keep refining based on knowledge. I have no intention of changing it because it works.

If you already have a strategy but your trades are not profitable, you shouldn’t abandon the strategy; instead, refine it until it works.

8. Trade On Multiple Exchanges

Trading on multiple exchanges gives you more opportunities, but to keep things organized, you should not trade on more than three exchanges.

You should have at most two active trades running on all the exchanges simultaneously.

Some cryptocurrencies are listed in one exchange and not listed in the other.

By trading on multiple exchanges you will have more opportunities to enter into trades that meet your conditions instead of being stuck in one exchange.

I trade on Binance, Kucoin, and These are the best exchanges to use for acquiring cryptocurrencies with potential.

9. Avoid Revenge Trading

crypto market psychology

Closing a losing trade results in anger, and you might want to throw away your laptop.

However, the downside of being angry after a losing trade is that you might be tempted to open another trade to make up for what you lost.

Revenge trading is often an emotional decision, meaning it forces you to ignore your trading plan and trade based on your feelings.

You might open a bigger position and ignore setting stop loss because you’re angry with the market and keep saying to yourself that if they want to take all your money, they should.

You shouldn’t be trading when you’re unhappy or angry because such emotions would make you take a gamble with your trades.

10. Practice Patience

How to be patient was my biggest challenge when I started crypto trading.

I was good at technical analysis. I could predict the direction of a cryptocurrency, but I wasn’t patient enough to wait for the price to reach my entry or exit point.

Sometimes, I bought too high, and other times, I sold too early.

It wasn’t until I understood crypto trading psychology that I realized that patience is a critical component of successful trading.

You would hardly make life-changing money in crypto trading if you’re not patient.

If you’re in a hurry, you might take a 10% profit when you could have taken a 200% profit if you had waited a little longer.

Practice patience because you will need it in your trading journey.

11. Avoid Pump And Dump Schemes

Pump and dump schemes can make you believe you will make a lot of money when you join them, but in reality, joining their group will help them make money from you.

Pump and dump groups promise you easy money, and if you’re a newbie trader or a trader who wants to be lazy, you might feel it’s a shortcut to riches.

Pump and dump schemes are the fastest way to lose all your money in trading, and the worst part is that you won’t be able to hold anyone responsible.

If you’re a new or experienced trader, focus on education and developing a unique strategy that will yield consistent profits.

I also recommend you get a mentor to help you navigate the wild world of crypto trading.

Frequently Asked Questions

Does Trading Psychology Apply To Crypto?

Yes, trading psychology applies to crypto trading, and if you don’t understand it, you will end up losing your trading account.

Trading psychology is the study of the feelings, attitudes, and behavioral patterns that affect a trader’s choices in the financial markets.

This area of trading focuses on the emotional and psychological aspects that affect a trader’s capacity to make logical judgments.

Can I Make A Living With Crypto Trading?

Yes, you can make a living trading crypto. You just have to be disciplined and professional in your approach.

If you take it as a hobby, you might never make money.

Is Crypto Trading Stressful?

Yes, due to the volatile nature of the crypto markets, it could be very stressful to be a crypto trader, especially when you don’t have the right strategy or a mentor.

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