5 Crypto Trading Tips To Stop Losing Money

Updated: Nov 14th, 2021
Kevin Groves
Kevin Groves
5 Crypto Trading Tips To Stop Losing Money

Traders may be familiar with the widely publicized statistic that “95% of traders lose money.” Although, cryptocurrency exchanges such as Binance, FTX, BitMEX and Bybit have been seeing massive growth on its margin cryptocurrency accounts in which new users are attempting to trade the crypto markets to earn additional profits by longing or shorting Bitcoin.

Unfortunately, the overwhelming majority of new traders end up losing their money on crypto margin platforms. If this is you and searching for crypto trading tips and strategies. In this article, we will share our best tips to improve your crypto trading. 

Crypto Trading Tips To Action Right Now

Here are our top crypto trading tips to become a profitable trader:

  • Learn to trade crypto using a demo account
  • Keep it simple
  • Reduce position size and leverage
  • Be patient and don't force trades
  • Keep a journal of each trade and improve

1. Learn to trade crypto using a demo account

First-time crypto investors will be tempted to multiply their investment using popular cryptocurrency trading platforms. These exchanges allow users to speculate on the price of digital assets in an attempt to buy low and sell high. However, we would caution against this without knowledge of the markets and a game plan.

A better alternative is to learn how to trade crypto with a demo account before depositing any funds, particularly if you don't have any trading experience. One of the best crypto demo accounts is eToro and Plus500 (Availability subject to regulation) which offer a user-friendly CFD platform to learn how to trade and develop a crypto strategy. It is free to create a demo account with eToro and can be used over and over to back-test a crypto strategy without losing money. 

As a general rule of thumb, if you can’t profit in a practice trading account, then it is likely that you will lose money trading on a real account. At least this way, your investment is intact on your crypto hardware wallet while you learn about crypto trading. 

2. Keep It Simple

A lot of new traders get 'trader's brain' where they do too much, think too much, look at the charts too much, trade too much, micro-manage trades too much, risk more than they should and so on. Does this sound familiar?

These are classic signs that you do not have a trading plan. If you find yourself making these mistakes, then you will benefit from taking a lesson from the most successful investors and traders who spend the vast majority of their time on the side-lines waiting for opportunities and analyzing the markets.

Only a tiny portion of their time is spent on executing trades and managing risk. Therefore, to increase your profitability means doing less! A classic analogy is a spider and the web. It is far better to know your game plan and wait for the perfect trade to come to you. This includes when your position is active. Let the trade play out according to your trading plan, cut losses early and let your winner run.

3. Reduce Position Size And Leverage

A common trading mistake is using incorrect position sizing. This is compounded when traders use high leverage on margin trading exchanges. Experienced traders are able to capitalize on the small price swings in the market using high leverage on an exchange such as FTX. However, as the crypto market can be very volatile, the higher the leverage amount means the closer the liquidation price gets to your position.

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If you're just starting out, reduce the amount of leverage, risk a maximum of 1% of your capital on each trade and ALWAYS use a stop loss. This means, you would have to lose 100 trades in a row to blow an account, which is very low in probability. In fact, several crypto exchanges have a position calculator tool to assist with sizing a trade based on your initial capital.

4. Be Patient And Don't Force Trades

One of the biggest trading mistakes you can make is to rush into a trade position using a market order. In addition to paying a premium in trading fees to execute a market order, it's usually the worst entry point where the price can immediately reverse against you resulting in another loss. If you have the urge to jump into a trade when price moves quickly, you are suffering from FOMO.

Crypto traders need to remember the market is open 24/7. So, if you miss a trade setup, be patient and wait for the next opportunity. While it can be frustrating for swing and arbitrage traders on the daily or weekly time-frames, there is always another opportunity and at least you have preserved your capital.

5. Keep A Journal Of Each Trade And Improve

Have you ever heard of the phrase, "Bulls Make Money, Bears Make Money, Pigs Get Slaughtered?" It means, pigs are greedy, so don't get slaughtered and is a warning to traders against the desire for greed and impatience in the markets. Greedy traders let their emotions take control which can be caused by:

  • Unrealistic expectations
  • Stubborn ego
  • A strong belief of the market trend
  • Must 'be in a trade to profit' mentality

If this describes you, then you're trading like a pig and will eventually lose your balance. Trading crypto or the traditional markets requires strong mental discipline, focus and solid risk management practices. New traders will focus too much on perfecting a crypto day trading strategy. This could not be further from the truth.

In the words of Warren Buffet, “the critical determinant in an investor’s success is not intelligence or skill but temperament.” If you don't have the temperament and strict discipline, then you are trading like you're at the casino and gambling with your crypto. This is a harsh reality, but if you trade like a pig, you’re not going to succeed as a crypto trader.

Unfortunately, not everyone has the right temperament and discipline to become a profitable crypto trader. If you are struggling to make a profit after several years, it might be the correct decision to accept trading isn't for you. There are other ways to earn cryptocurrency besides trading that you can consider such as earning interest on crypto and Bitcoin cashback apps.

Conclusion

Trading crypto is a serious skill that requires a lot of skill and patience. It is not for everyone but we hope these crypto trading tips for beginners are useful and will dramatically improve your P&L in the long run. If you're interested in trading but don't quite have the skill to become profitable, another option is to start a Bitcoin exchange as a business to profit from the market. 

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Kevin GrovesKevin GrovesKevin Groves

Kevin is the founder and chief editor at HedgewithCrypto that he started in 2019 which has reached over 1.5 million visitors worldwide. He is passionate about cryptocurrency as an emerging technology and is heavily involved in the fast-growing fintech space. An experienced trader growing his portfolio since 2016, he has a strong understanding of investing in the crypto market using exchanges, brokers and derivatives platforms.

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