Every trader knows that it is not easy using technical analysis to trade and mistakes are sometimes involved. There is no how you can be a trader without incuring losses. Even those that are experienced do make fewer mistakes. With this mistakes, they may try being rational and calm so as not to incur losses that are huge.
They know how the ecosystem works and they keep reading what the market is telling them. With these, the thrive in their trades and become successful. So to be successful in the crypto ecosystem, you need to develop qualities that can help you manage risks, analyze mistakes and constantly keep improving.
They do this successfully using technical analysis which is one of the most used tools or ways to analyze the financial markets applied in forex and crypto. This article introduces or exposes you to some mistakes that are common in technical analysis. One of the most common is overtrading.
It is common as an active Trader do thank you always need to be in a trade. This trading involves a lot of analysis that can be time consuming and stressful. With some trading strategies, getting a reliable signal to enter will require you wait a long time. Some Traders may enter trades data above 3 on a yearly basis and still produce results that are outstanding.
One popular Trader said money is not made by trading but by sitting. We should try avoiding entering trades just for the sake of money. In some market condition, it is more profitable to wait for an opportunity to present itself.
By so doing, you preserve your capital for other good trading opportunities which will require patients to wait until they come around. Analysis on lower time frames can be a similar trading mistake. Analysis done on higher time frames will be more reliable than analysis done on lower time frames as these lower time frames produces a lot of noise in the market and may tempt a trader to enter trades more often. This trading strategy is not recommended for beginners as it is very risky.
Another mistake is revenge trading. It is a common mistake by Traders especially when the encounter significant losses. As a way of revenge so to speak as they have been liquidated by the market, they try trading immediately to make back whatsoever loss the encountered.
This doesn't matter whether you are a technical analyst or swing trader. One thing worthy of notice to avoid emotional decisions in the market. It is always advisable to stay calm when things goes wrong as this is what many fail to do. I know of someone who saw $300 loss in a single trade. He didn't just want to back out that way. He entered lots of trades to get back what he lost. At some point, he got half of what he lost. When he used the half on a trade he lost everything and kept losing because his emotions were at stake.
The word analysis in technical analysis means an analytical approach to the market. To be a successful Trader, you must stay calm even after the biggest mistake and avoid decisions that are emotional in Trading. This will help you to keep focus and you have this logical and analytical mindset. Trading immediately after suffering a big loss can lead to even more losses.
Some Traders may not even want to trade at all for a period of time due to the losses. Another mistake we should take notes of is not cutting our losses.
Starting out with trading can be daunting at times. Your view when you start isn't to win. It is not to lose. This is why it can be good to start with smaller margins or positions in a trade like 4 to 7 dollars or not risk real funds. Binance features have a definite you can try trading before risking your hard-end funds. This way, you can protect your capital and risk it only once your consistently making good results.
Setting a stop-loss is a way you can cut your losses and your capital should always be your number one priority. Your traits should always have invalidation points if you don't apply this in your trading, you may not be doing well on the long run as you might end up holding a losing bag, hoping the market recover soonest.
These are three out of 6 mistakes I'll point out on trading with technical analysis. The other three would be exposed in my next post. The screenshots below aren't trading decisions you should follow but a guide to show us what mistakes are there
All screenshots are from my binance
Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have
