What You Should NOT Do To Become A Successful Crypto Trader!
Tags: Investors, Risky Behavior, Cryptocurrency, Emotional Trading, Mistakes

What You Should NOT Do To Become A Successful Crypto Trader! Eljo420 Jul 9·9 min read

Every crypto investor could share similar stories to mine.

Instead of the usual larps that you see in crypto twitter, let me tell you about my biggest mistakes during my crypto journey. In full honesty. Let me be your lesson.

This is the part of my story, that I would like to forget:

I heard about Bitcoin the first time when I was around 13 years old. “Dark net”, “digital money”, those were the kind of stuff that caught my attention. Did I buy some BTC with some of my pocket money? Of course not. I invested every cent into football panini cards. No regrats. Every time I heard the term “Bitcoin” again, I thought that I’m too late. The train has left the station without me.

So, when did I put my money into crypto for the first time? You bet it — on the peak of the 2017 bull market. Like full peak. I bought the top. While the market was in freefall, I had no idea what to do. I was paralyzed. Scared during the crash.

Finally, the market bounced back. I was like “back to normal”, “100k BTC soon”. I felt the FOMO, so I bought more. Guess what: I bought the Top of the bounce.

This happened with almost every major bounce. I was scared at the range lows and euphoric at the range highs. I even realized my mistakes, but the emotions were stronger than my rational behavior. I was the typical “buy the top, sell the bottom”-investor.

One of the main reasons why I didn’t change my strategy earlier was, that I only read what fitted my bias. I ignored every advice that went against my «only up»-bias. If you only read what you want to hear — it has to happen, right guys…? R-right?? G-g-guys?

My primary news- and information-source were mainstream-media, and the biggest crypto subreddits. Sometimes 4chan. The space was flooded with shills, bad investment-strategies, and lots of people like me — clueless people desperately looking for advice.

So it happened that I invested in some shitcoins. Like real garbage coins. The kind of coins that barely have a working website — they don’t even exist anymore. But how did I decide what shitcoin to buy? Easy: I bought the one that got shilled most. And we all know how this usually ends up. The loudest voice in a room is seldom the wisest.

To get an idea of my potential gains, I compared the current market price to the ATH price. Then I multiplied it with some random numbers that I read from shillers, to calculate my potential gain. I also liked to compare it to BTC. «If shitcoin X gets to the same market cap as BTC, my shitcoins are worth Y each». Pretty smart strategy, right?

The only investment-strategy I had was pretty easy. We all know it — it’s hodling. I don’t think that hodling is the worst decision one can make. But it is not the best decision during a bear-market. Especially if you invest in shitcoins like I did. Most of them won’t come back ever. Believe me. I got some leftovers on IDEX.

After a lot of losses, I changed my strategy. I read that during bear markets, it’s best to “sell the bounce”. For me it was obvious. To be able to sell a bounce, I need to buy some coins on a local bottom (didn’t know about shorting). How did it turn out? I bought the “bottom”, only to see it fall further to the next “bottom”. After a few “bottoms”, I sold. And then it finally bounced. FOMO kicked in — and I bought the top of the bounce again. To be honest, this still works pretty good now: Whenever I feel really bearish, usually we are right at a support. Whenever I want to buy and go all in — we’re at resistance. Playing against my emotions works like a charm.

I have far too big an ego and can’t stand the feeling of losing. So, I had to do something. That was the first time that I actually educated myself about TA, charting, leverage trading, and all the other stuff. I learned a lot. It also helped to improve my strategy.

But I also discovered leverage trading. I knew about the risks. I used quite a low leverage. It worked so well, that quickly I increased my leverage. I was winning. And so it happened that I ignored all of my risk-management strategies that I just acquired.

I still vividly remember, how I transferred 0.1BTC to BitMex (it was worth around $700, and as a poor student it was quite a lot). Within a week I had 1 BTC.

One fucking entire BTC. With all the emotions, the greed came back. I felt like I understand the market now. “Just make another x10 Eljo”, “you have 10BTC after that, Eljo” I told myself.

The 1 BTC evaporated within a few hours of bad trading. It hit me pretty hard, but the thing I probably hate most is to quit. So, while my friends were having a good time partying, I worked overtime to buy more BTC to trade. I bought another 0.1 BTC (~$850), transferred it to BitMex, and guess what: I fucking made it back within a week. Back to 1BTC. This time around I was smarter. Instead of losing it in a couple of hours, it took me a couple of days. But in the end, my second BTC was gone. POOF. Although I’m not stupid, I can be a hard learner. So, just to be sure of my mistakes, I did it again. Bought another 0.1BTC, made a x10, and lost it all again. Lesson learned. No leverage trading anymore (said every stupid trader before).

One of my rules that I had, was to always take out the initial investment as soon as possible. I never did it. Because I always thought, “only one more trade and then I take it out” — Well, to be fair, someone probably took my initial investment out — but it wasn’t me. I gave it back to the market.

To be honest, after this, I was quite devastated. It takes a lot to take me down mentally, and although I don’t like to admit it, it hit me pretty hard. Months of work and sacrifice for nothing.

I focused more on my studies again and during that time I learned everything I could about human psychology, risk-management, and about the crypto space. I was back. With newly acquired knowledge. We were still in the middle of the bear market. My strategy was pretty easy and straightforward. Buy high quality projects during the remaining bear market, with the intention to sell them during the next bull market (little by little, since no one can predict the top). We entered a bull-market. Everything went according to my plan.

I felt confident again. Felt like I understand and master the market. I even went back from spot only to leverage trading. I always set my entries, targets and stop-losses in advance. I made more money than ever before. Life-changing money. And then the whole market nuked (end of summer 2020).

Usually I always set my stop-losses, and I was pretty strict about that rule. There was only one open position (cross-leveraged), where I did not set a stop loss, because I was too greedy. This single position liquidated a big part of my leverage-trading portfolio. I felt like in 2018 again. Paralyzed. Not able to make any proper decision. I swapped everything to stables. That was a good decision. The market corrected further. I was still up by a huge amount, but the only thing I was thinking about, was my loss.

I lost half of my portfolio value. I know that humans tend to value losses more than gains. I studied this fucking shit. But my emotions were stronger. I was like “I need to make my losses back ASAP”. That’s when the real shit started. I found some promising DeFi projects (in hindsight they were only promising in my reality distorted by my emotions), where I put in quite substantial amounts of my portfolio. Only to get rugged. No way this could ever happen to me. I’m way too smart for that. Now I know, that when my emotions start to kick in, I ain’t shit anymore. Just a greedy bastard.

So, after two-and a half year, I finally got rug-pulled in crypto. That was an expensive lesson. I put in way more than what I was comfortable to lose.

I managed to turn around right in time. If I didn’t, I would have lost it all probably. My suddenly not-so life-changing money anymore.

Sure, the mistake with the missing stop-loss, that’s on me. Shit happens. The 40% loss on my spot position was okay. Happens during bull-markets. I knew it was far from over. But the “I NEED TO MAKE IT ALL BACK IMMEDIATELY”, was just plain stupid. No excuse for this. I knew better. This won’t happen again. NEVER let your emotions influence your decision-making, especially after a huge loss!

The coming months were an emotional roller-coaster. I was close to quitting. But that goes against my nature. I never quit. I came back. Again.

I never really had a lot of money before. Had no clue about investing. And I had no one to teach me. The good thing about all those terrible experiences is that now I’m at a point where I really matured within my investment decisions.

After my biggest loss (so far lol) during the first DeFi-Bubble, I improved my strategies by a lot. I started writing down every single trade. I always set some targets, where I take profits out and put it into stables. And I really always do it. No exception anymore. Not too long ago I would have thought “just another x2, then I’ll take it out”. Guess what. Usually, it nukes before that. You need to fight the natural human greed. There are plenty of opportunities to make money — but you need capital to invest. No one has gone broke from taking profits. Don’t listen to people who tell you “YOU’RE NGMI!” Everyone is responsible for their own (financial) decisions, and in any financial market, usually the herd is wrong. Stick to your plan.

It hurts a lot, when you take profits out and it just climbs higher, and higher. That’s why I just take partial profits on the way up. Like a machine. Without thinking too much. Like I said. It hurts. But we all know what hurts more. Seeing your profits from a whole bull-market disappearing withing a few hours/days. It also helps when you already feel dead inside. After all those experiences, I do. Believe me.

Of course, I would have made more if I sold the top. But I bet that I would have missed the top for sure. Like almost everyone else. I also “lost” money during the recent nuke. But this is the first time, that I got rewarded for just sticking to my plan and not let my emotions and greed ruin it. This is also my motivation to keep improving and continue to focus on capital-preservation and risk-management. Financial freedom is a marathon, not a sprint — that’s the truth.

Another thing that I had to learn while taking profits is, that you don’t always have to be in a trade/position. For me it was always either ALL IN or ALL OUT. No inbetween. Now I know, that this attitude is just wrong. Often during uncertain periods it is better, to scale-in or scale-out, there is no need to fully commit to one direction.

This time around I managed to preserve my capital and I’m ready for what comes next.

Some more key takeaways, that most of you probably heard already, but are relevant for every investor:

Be fearful, when others are greedy. Be greedy when others are fearful. (Warren Buffet)

Only invest what you can afford to lose.

Never borrow money or use money that u need (e.g., for rent) to invest.

The market can stay irrational longer than you can stay solvent.

Don’t chase after trades. Keep it simple. Stay patient. Let the opportunities come to you. You don’t always have to be in a trade. Whenever u chase after your next trade, things get dangerous. Sometimes it’s better to stay sidelined.

Pick a strategy and stick with it.

Always listen to the opinions that contradicts with yours, instead of simply ignoring them.

Cut losers.

Don’t overtrade.

I also made another Thread where I wrote about psychological factors that influence your risk-behavior. I will make a second part soon. Stay tuned for more.

You can read it here:

https://threader.app/thread/1410576680570216449

Stay safe out there!

Eljo