Cryptocurrency trading is a thriving industry. Everyone, from individual traders to corporations and governments is trying to have a piece of this growing trade. However, promising as it is, crypto trading is one of the most stressful professions in today’s world. Traders have to juggle with their money, ego, emotions, and uncertainty. This often leads to rushed decisions that impact their trading negatively and cause a ripple of effects, including anxiety and sometimes, depression.
A common saying in crypto trading states, “A good trader is an emotionless trader.” The cryptocurrency market will subject you to bizarre levels of pressure as you strive to break even and make profits. Here is a comprehensive guide on how to engage in emotionless analysis and make plan-based decisions.
The crypto trading market is characterized by volatility. The value of crypto coins is known to fluctuate by as much as double digits in either direction. Traders make money by tracking the arbitrage resulting from the price fluctuations and buying or selling as they deem profitable. Bulls tend to make profits when the coin prices are on the rise, while bears make profits when the coin prices are dropping.
In such a dynamic market, traders cannot afford to play guessing games. They need to study and understand the market to anticipate the trend the market prices will take correctly.
Pro traders tend to maximize their profits by trading over more than one exchange. The results of one trade impact your trading portfolio, which in turn influences the decision you’ll make in another trade. It requires a keen eye and discipline to monitor the various exchanges and make independent trading decisions.
The major trends in the cryptocurrency make headlines across the globe. For instance, Bitcoin made headlines when it reached an all-time high value of $19,783.06 on December 17, 2017. This caused an uproar in the crypto trading world, attracting even more participants into the trade.
Five days later, the value of Bitcoins fell by 45% to bring its value to $11,000. Traders who started investing in Bitcoins due to fear of missing out (FOMO) on the Bitcoin boom ended up counting losses in a span of one week. This again triggered emotionally driven traders to count their losses and sell out their Bitcoins, only for the market to stabilize later on.
The crypto trading world is still in its developing era, and tales of crypto-boom and recess will continue to make the news. Professional crypto traders learn to be patient and rely on trading strategies and plan-based decisions to maneuver the waves that rock the crypto world.
Some traders tend to monitor and evaluate their trades manually, an approach that is both tiresome and erroneous. As a result, they fail to cover the entire scope of the market analysis and eventually make uninformed decisions due to insufficient data analysis.
Algorithm-based trading systems such as trading bots and terminals are automated to analyze the market and present traders with simple analytical charts for decision making. For instance, Superorder is an automated trading terminal that presents traders with fully-automated bots. It helps traders to test their trading strategies and make plan-based decisions.
To coin the phrase, “failing to plan is planning to fail.” A plan breaks down your agenda into smaller, manageable tasks that eventually lead to achieving your agenda. A trading plan is a set of rules that automated trading systems use to guide them in how you want your trade to be conducted. The trading plan defines the overall behavior of your trading, e.g., if you are a bull or bear. It also determines your financial goals, money management rules, risk management techniques as well as your preferred criteria for opening and closing position in a trade.
A trading plan helps traders to make plan-based decisions by reducing risk, eliminating emotion, and creating a sense of independence as it can trade on your behalf.
Orders refer to the executable instructions that automated systems follow when buying and selling on your behalf. They are the specific instructions programmed into a trading plan that guides automated trading. With a trading terminal such as Superorder, traders can eliminate emotion and make plan-based decisions by setting up the following orders:
- Market order
This is a trade order that instructs the automated trading system to sell or purchase crypto coins at the current market price. With a market order, traders do not have the power to determine the price they would want. Rather, they settle for the price available from other traders willing to buy from them.
- Limit order
Limit orders instruct the trading system to buy or sell crypto coins at a specific price or better. A buy limit order executes when the price of the coin reaches the limit price or lower while a sell limit order executes when the prices reach the limit price or higher.
- Stop orders
Also known as stop loss orders. They are executable instructions that tell the trading system to buy or sell coins once the prices reach a specific value, known as the “stop price.” They minimize the extent of losses that traders can suffer.
The pressures from your personal life and trading life will always exist. The trick is to find an equilibrium between the two. This eliminates emotional triggers that might negatively affect your trading. This helps traders to maintain their mental health, manage stress, and to take a break from trading to spend time with family.
An equilibrium is struck when a trader:
- Prioritizes their objectives.
- Finds their trading niche.
- Makes a comprehensive plan.
- Knows when to stop.
Learn more about how to find your equilibrium with our Guide to Professional Trading and Life.