Despite the popular belief that trading is easy, the truth of the matter is that it takes a lot of practice and know-how to become a successful trader. There is a widely known statistic that says that 90% of traders are not profitable.
So, over time, 80% of those who enter into this profession lose money, 10% usually break even, and 10% percent are able to generate returns from the price action in the markets.
For this reason, Digitex is doing everything in its power to help traders around the world reach their financial goals. This time, we want to provide you with different practices that you can employ before entering a trade to minimize losses and maximize profits.
The Power of Knowledge
First and foremost, it is very important to have a clear picture of what you are getting into. In trading as any other profession, education is what separates those who are able to reach their goals from those who do not.
It is essential for traders to not only be aware of the developments around the market and the cryptocurrency of their choice but also focus on learning something new every day. Technical indicators can provide guidance regarding what the future may hold for a given digital asset, but on-chain metrics can help identify what the so-called “market makers” are doing.
With the vast amount of data that blockchain technology provides to investors, it is important to consider diving into these metrics before entering a trade.
Protect Your Capital
People are usually optimistic and tend to discourage the potential of adverse market conditions. But with the unpredictability of the cryptocurrency market, wild price movements can be triggered at any second. Now that the market is in the midst of an extremely bullish cycle, having capital to deploy is a must.
Before going long or short on any cryptocurrency, it is critical to assess the risks that are involved. Having a good idea of where to place your stop-loss order before even thinking about the profits, is a great way to stay afloat in such a volatile market.
As a rule of thumb, most retail investors risk no more than 2% of their investment capital on any single trade, and hedge fund managers usually risk less than this amount, according to Investopedia.
Keep Calm and Stick to Your Plan
The final and most important practice to have in mind before entering any trade is to stay relaxed and have a solid plan of action. If you were supposed to enter a trade at a certain price and you missed your entry point, don’t worry about it. A new opportunity will likely present itself in the near future.
Chasing trades is one of the best ways to put your capital at risk. Therefore, staying true to your trading plan and maintaining a solid risk management strategy will help you minimize your losses.
Remember that you don’t need to win every trade. Indeed, many traders, including 45-year trading veteran Peter Brandt, only win 50% to 60% of their trades. However, they make sure that their winning trades are bigger than what they lose by implementing stop-losses.
So before you enter into your next trade make sure to be aware of what is happening in the market, prioritize your stop-loss order over anything else, avoid trading when you’re not in the right mind frame, and keep calm.
Digitex’s zero-fee model introduces a unique opportunity to try out new scalping strategies on Bitcoin futures that wouldn’t be profitable on other exchanges. So if you’re ready to start making money on bitcoin futures whether the market goes up or down, sign up for our zero-fee trading platform now.