Newbie Buying and selling Errors That Price Me Dearly | by Razvan Tomegea | The capital | June 2021
Initially posted on lifestylemaniacs.com
My buying and selling journey began 5 years in the past when a pal confirmed me an app on his cellphone that he used to commerce Foreign exchange. He instructed me it was simple cash.
I heard about buying and selling and the inventory market years in the past in motion pictures like “Limitless” and the notorious “The Wolf of Wallstreet”, however I by no means understood how they work.
Earlier than I began buying and selling, I had the knowledge to take programs and educate myself. I took the programs of XTB and have become conversant in charts, fashions and indicators.
So, I began buying and selling on the demo account and made a revenue, so I deposited cash into an actual account and began appearing. All the things went properly till I began to lose cash; some huge cash.
“Why? Why cannot I make simple cash like everybody else? Fuck buying and selling! It is all only a diagram.” It was my perspective in direction of buying and selling till I spotted my errors and began making a revenue.
These programs value me $ 5,000 plus $ 1,000 misplaced in Bitcoin, however I share them with you free of charge, you might be in luck. Okay, let’s examine my errors.
Oh, earlier than you dive in, go and repeatedly press the Clap button till it turns inexperienced and nearly exploded. It is on the left aspect of the display screen when you’re in your PC or on the backside left when you’re on cellular.
I traded with cash I wasn’t comfy dropping. All of my month-to-month financial savings had been invested in buying and selling and it turned like an dependancy.
After dropping cash, I put a reimbursement within the hope that I could make up for my losses. It seems like playing to me, do not you suppose?
I used to be continually checking the buying and selling app, very confused and panicked seeing all the pieces in purple. I did not know what I used to be doing. This brings us to my second mistake.
My technique was to earn a living, that is all. I’ve by no means arrange a backtested technique for the three doable eventualities of a pattern (rise, fall, sideways). If the candle was inexperienced, purchase; in any other case promote. Cool proper?
Effectively fortunately for you I’ve an amazing article on a easy but worthwhile backtested technique you could apply in any market.
Earlier than you commerce or make investments, have a plan and be sure you perceive what you might be investing your cash in. Technical evaluation (buying and selling) with out basic evaluation is bullshit In my view.
The reason being easy and I am going to provide you with Bitcoin for instance. All charts and indicators level to a robust purchase, however the market’s bull cycle is over or Elon Musk makes one other tweet. Indicators are pointless on this case.
One other instance is shopping for Tesla just because the pattern is up and the oscillators say they have not overbought, however ignoring the P / E ratio of 800 (extraordinarily overpriced).
this saying: “Do not put all of your eggs in a single basket”. I did not realize it and invested an excessive amount of cash in a single deal that was additionally not a well-documented deal within the first place.
There is no such thing as a rule of thumb for diversification, however you’ll be able to undoubtedly over-diversify. The principle concept is to select totally different markets (shares, commodities, actual property, crypto, and so forth.) and purchase totally different belongings.
Now I do that by wanting on the basic cycles and indicators. For instance, I’m extra invested in crypto and commodities than in shares and actual property.
It is as a result of I do know hyperinflation is coming, I do know we’re in a crypto bull market, and I do know actual property and shares are overvalued. Once more, I’m not solely a dealer, but additionally an investor (technical and basic evaluation).
Additionally, in crypto, I solely choose the very best of the highest 10 on CoinMarketCap, and I do not purchase dozens of crypto belongings. I did and it is a dangerous method.
Okay, I hope this all is sensible. Let’s transfer on to the following large mistake I made.
I used leverage with out totally understanding it. The issue with leverage is that if the market strikes in the other way, you run a liquidation danger. Not solely that, however with out utilizing a cease loss… haha… horrible shit can occur to me prefer it occurred to me.
Leverage is the explanation I misplaced a lot cash (to me, a mean mortal). The leverage impact amplified my lack of expertise, technique, expertise and diversification.
If you do not know what leverage is, let me clarify it to you merely like this: your funding (or% worth change) multiplied by a ratio. In different phrases, if a market has a leverage of 1: 2 (2x), meaning you might be doubling the worth change.
If the worth goes up 5%, the leverage will increase and also you achieve 10%. Identical story if the worth drops. You borrow cash to take a position. $ 100 invested in a 1: 2 leveraged asset equals $ 200 invested.
The lesson is, when you’re a newbie or do not perceive the right way to use leverage, by no means use it. The chance shouldn’t be price it.
The final, however not the least, mistake is that I let my feelings management my buying and selling and investing selections. In fact, no technique, over-invested, not diversified, leverage, all of this amplified my feelings.
Investing and buying and selling should be 100% analytical; with out feelings or instinctive emotions. Should you can automate your buying and selling technique, that is nice. In any other case, know your plan and stick with it it doesn’t matter what.
do not forget that no indicator, technique, evaluation, anyway 100% assured to give you advantages. It is an phantasm that almost all newbies like me had.
We work with possibilities, and the thought is to extend the chance of ending up in revenue.
A backtested technique, with the correct amount of funding, with ample diversification, with out the chance of being liquidated, with endurance and no emotion will make you an unstoppable investor and dealer.