Crypto trading can be fantastic, it offers so much profit potential and works very much the same way as forex down, so if you have traded forex before then you know pretty much everything that you need to when it comes to crypto trading too. There are however a few differences too, which means that if you rere to trade exactly the same as forex, things might not go quite so well. At any rate, we are going to be looking at some of the reasons why you may be failing at crypto trading.
Trading Like Forex
While things are very similar, we are using the same trading platform, we are often using the exact same brokers, the charts are the same, and indicators and expert advisors work on crypto trading too. However, even though the majority of things are the same, this does not mean that we trade it exactly the same. In fact, we trade it very differently. The fundamentals behind how the cryptocurrencies move are very different from those on Forex. If you were to trade it exactly the same, you will come across margin issues, you will come across movements that go against all of your indicators. If you are planning on trading cryptocurrencies then you will need to alter the way that you trade, you will need to change your indicators and change the way that you analyze the markets. Do not trade the exact same way, cryptocurrencies are not made the same way and so the markets do not behave the same either.
Not Managing Risks
There are a lot of risks when it comes to trading crypto, a lot more than there are with things like forex and due to this you need to manage them properly, not doing so will only lead to losses and potential loss of your account. Risk management is paramount when it comes to trading crypto, more so than it is for any other asset that we have traded before. You need to ensure that you are using things like stop losses with every single trade, you need to ensure that your risk to reward ratio is in place and being used with every single trade. Make sure that you are using risk management techniques at all times, otherwise, your account will blow pretty quickly.
Too Many Trades
It can be very tempting to place a lot of trades, far more than you should be, especially if things are going well for you. This can lead to something known as over trading, where you simply place too many trades. When we do this it is often going against the risk management plans that we have in place. Each trade that we place uses up a little bit of our available margin, when this runs out the broker will close all of the trades at the current value, most likely for a loss. The more margin that we use, the smaller the drop has to be in the markets for us to blow our account. So try and stick to your risk management plan, if that allows you to open a lot of trades then it may need some adjustments. Try and limit the number that you take in order to keep your account safe and try not to get carried away once you have a few good wins in a row.
Trades Are Too Large
One thing that you certainly need to take note of when trading with cryptocurrencies is the vast difference in what a lot size is, when we trade more than one cryptocurrency, we need to be aware that they will act differently. A 0.1 lot size for bitcoin on some brokers is 1 bitcoin, for others, it is 0.1 bitcoins, things like XRP, 0.01 lot could be 10 XRP for others it could be 100 XRP so it’s a big difference. So you need to be aware that different brokers have different amounts, especially if you are taking trading signals from somewhere. You will also then need to manage your trade sizes in accordance with those sizes, so while you may normally trade 0.1 lot sizes, for some you may need to change down to 0.01 lots or even go up to smelting like 0.5 lots in order to stay in line with our current risk management plans. Just remember that it is better to go a little lower than a little higher.
Not Understanding How Markets Move
The crypto markets work and behave very differently to forex markets, they react differently to news, they can be far more influenced by the larger players than the forex markets can and they have certain seasonal movements, not to mention the huge trends that can double, triple or even increase the price tenfold. These sorts of movements can catch out a trader who is not prepared for them. You need to know these things to properly implement risk management techniques, which are of course vital to the survival of your account.
Not Enough Money
Depending on what you are trading, you will often need a lot more capital in your account in order to trade crypto properly, things like Bitcoin can have huge movements, these huge movements can be both up and down, so if you get hit with a downward movement, you will either need to close out our trade or to have enough money to hold it, which can at times be very expensive and require a very large account. Other coins have similar things happening to them too, so if you are looking to successfully trade cryptocurrencies then you should certainly start with a higher balance.
Those are just some of the reasons why people often fail at trading the crypto markets, they can be dangerous things, there are a lot of opportunities to lose money or for you to be caught out. Having said that, they also offer some of the best returns that we have seen with trading in a long time, the trends are long and hard which are fantastic for those that get it right, but the hurdles are there, it is just about getting over or around them.