Trading 101: Seven Actionable Tips To Minimize Losses & Maximize Gains
Trading Analysis

Trading 101: Seven Actionable Tips To Minimize Losses & Maximize Gains

Created 9mo ago, last updated 6mo ago

Trading in the financial markets can be tricky. Anyone can gain and lose anything in a matter of seconds. A guide for everyone who aim to maximize their gains in the world of crypto.

Trading 101: Seven Actionable Tips To Minimize Losses & Maximize Gains

Table of Contents

Trading, as opposed to investing, which indicates a buy-and-hold strategy, requires an active engagement in the financial markets. A trader's capacity to be lucrative overtime determines their trading success.

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Trading In The World Of Crypto

In the world of blockchain and crypto, a term called decentralization is often used. Decentralized financing in its most basic form is a system in which financial products are made accessible on a public decentralized blockchain network, making them accessible to everyone instead of flowing it all via intermediaries such as banks or brokerages. 
A Pure decentralized finance (DeFi) environment does not require a govt ID, Social Security number, or proof of residence, unlike a bank or brokerage account.
Trading in a decentralized environment is rapidly gaining popularity as it provides peer-to-peer (P2P) financial services on blockchain that offers ease of access and transparency to users. Conventional financial services are substantially less transparent, trustworthy, and interoperable as compared to decentralized services that tend to flourish on decentralized governance organizational approaches that encourage fair stakeholder ownership. With innovations like yield farming and liquidity tokens, platform composability in decentralized finance has succeeded in unlocking value through interconnectivity.
The decentralized finance movement is founded on the concept that the financial system should be managed by proprietary third-party businesses rather than being centralized. Some people believe this for political or philosophical reasons, while others believe it will increase the financial world's productivity and effectiveness.

There are some principles you should always follow to become a sharp trader in the financial markets, regardless of whether you are a swing trader, intraday trader, or day trader. 

A trader's objective is to limit losses while increasing their profits, and in order to do so, they must properly manage their portfolio. Here are some basic guidelines for being a successful trader who accumulates more wins than losses:

1. Make A Proper Trading Strategy and Stick To It!

We are complex beings with quick-changing emotions. Panic, excitement, adrenaline, and greed are some of the most common feelings we encounter when trading. These feelings are frequently the ones that keep us from reaching our full potential.

This is why it's crucial for traders to have a proper trading strategy. A trading strategy is essentially a set of guidelines you'll follow, such as how long you will hold a position open when you are in profit, and what sort of analysis you will use to establish your entry and exit points.
You may successfully resist your human impulses to behave out of fear or excitement if you keep to your principles defined in your plan, regardless of what occurs in the market. It is also a good idea to keep track of your transactions and evaluate them to see where you can improve and where you are falling short. For a trading journal, Microsoft Excel may be quite useful, or you can download other free tools online.

2. Manage Risk in Crypto

All kinds of trading include some amount of risk, and how you handle that risk can determine your trading performance. The first guideline is to never risk more than you can afford to lose while trading.

After that, it's critical to set aside a certain amount of your entire bankroll for each deal. This will help you to stay in the game longer and withstand any market volatility.

Setting Stop Loss and Take Profit orders on the platform you're using is the second guideline of risk management. A Stop Loss order is programmed to activate when the value of the asset you're trading falls below a specified threshold, whether that threshold is 10% lower than your entry or higher.
When your asset climbs to a particular level, a Take Profit order removes profit from the equation. It is highly tempting to HODL especially with cryptocurrencies, but if you are a day trader, don't be tempted to go against your trading strategy. If you want to, you may book your profit, protect your trade entry, and then initiate another position.

3. Diversification Is The Key To Sucess

Diversifying your portfolio so that it can weather the storms of market volatility is a crucial guideline that all successful investors follow.

Diversification refers to investing in a number of projects instead of sticking to a few. Another criterion to follow is to figure out how much of each asset to include in your portfolio. 

4. Understand What You're Dealing With

Many of the world's most successful investors, notably Warren Buffet and Benjamin Graham, the father of value investing, have praised this idea. Whatever you're trading, you need to know what you're doing.

Peter Lynch is a good illustration of this philosophy. He had a unique approach to identifying high-potential stocks to invest in. Peter Lynch discovered Dunkin Donuts by becoming a customer of the business, observing how busy their store location was, and then checking to see if the other branches were as busy or not. He made a buying decision after actually knowing what he was dealing with and Dunkin Donuts became one of his best-performing stocks of all time.

You can't be a specialist on everything, so if you're interested in investing in the crypto world or any financial market for that matter, study the protocols that underpin the tokens, the project's goals, and the prospective and present user base. That is how the next great winner will be discovered. The trick is to read, read, and read some more.

5. Crypto Education Has A Significant Impact

Everyone is riding on the meme stock bandwagon in this age of stimulus-fueled traders. Some of them are fortunate, but the majority of them are wiped out. Why do you think that is?

They have no concept of how to trade at all. On the forums, you may see that. The only way for becoming a trader who earns more than he invests (and by the way, to make trading profitable, you only need to win approximately 60% of the time) is to genuinely love trading.
Learn the differences between fundamental analysis and technical analysis, what drives markets, how to read charts, and how to utilize the free trading tools provided by many brokers and exchanges. 
TradingView is great for charts. It also helps you come up with trading ideas by following other popular traders. 

6. Follow Authentic Trading Signals

Simple instructions or notifications regarding the time to enter or exit the market are known as signals. There are a lot of decent signal providers out there. All you have to do is discover the ones that are real and authentic.
Essentially, your signal source should have a history of winning 60% or more trades. Humans create certain signals, while others are generated by AI algorithms; both have their specific merits.

Check their trading history and track record to choose which package to subscribe to. To get a feel for how these signals function, you may backtest them or try them out on sample/test accounts.

7. Ensure Your Safety

Due care is required to avoid the slew of frauds that will inevitably emerge in the financial trading industry. Even if you're experimenting with new projects, keep the security factor in mind at all times. Be careful of suspicious websites that use phishing attempts to obtain your credentials. Check the web address of the site you're viewing to be sure of its legitimacy.
To prevent falling prey to fraud, projects that seem too good to be true should be thoroughly investigated. It is also advised to use a hard wallet to safely store your tokens. The seed phrase in your wallet is only for your own use. Do not share it with anyone, and do not type the seed phrase on the internet. Stay away from dubious trading initiatives and websites.

If you're unsure about something, get clarification from reputable sources to help you make an informed conclusion.

Trading Is Not For Everyone

Trading is a sensitive activity that needs careful preparation and attention in order to avoid losses. Since the crypto market is ever-expanding, it necessitates making educated judgments at every stage of the trading process. You can protect your investment and avoid poor decisions this way.

Billions of dollars have already been invested in the crypto market economy's vast potential, with some producing profits and others ending in losses. The crypto market's enormous potential implies that it will see much more investment in the near future. As a result, staying updated with various trading techniques and recommendations can offer you an advantage in making wise investment decisions, giving you a higher chance of succeeding in the trading market.
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