Major mistake all traders make

[Canis Majoris]

An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.

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[1Referee]

Important aspect for any trader is avoid trying to take advantage of each potential market movement. In case of the near peak levels of last year, it comes down to common sense, because it was pretty obvious that there was no room for any up movement left anymore. I have been a day trader as well, and the urge to constantly try to exploit the movements were what was holding me back. I turned out to make much more profit while take distance for a good moment, than being active all day in a forced manner. And yes, I do agree that if you did end up buy yourself in the market at what later turns out to be a horrible price, liquidate your positions as soon as possible. In some cases you just have to accept that the market is always one or two steps ahead of you, and that you have to take a hit. It should be considered collateral damage as long as you make more profitable than losing trades.

[slaman29]

An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit when the entrance is and do that fast.

I'm not sure what you mean by dumb stop-loss orders. Stop losses should be set together with entrance, prior to making any trade. If the trader just makes a random decision on where stop loss is then okay, that is dumb, but basic trading means you make clear headed decisions as to where you want to enter and where you want to exit (not so much when). However, if those exits never arrive, which is unlikely if you are a medium and long term trader, then yes, of course you make decisions to rethink.

[Canis Majoris]

Important aspect for any trader is avoid trying to take advantage of each potential market movement. In case of the near peak levels of last year, it comes down to common sense, because it was pretty obvious that there was no room for any up movement left anymore. I have been a day trader as well, and the urge to constantly try to exploit the movements were what was holding me back. I turned out to make much more profit while take distance for a good moment, than being active all day in a forced manner. And yes, I do agree that if you did end up buy yourself in the market at what later turns out to be a horrible price, liquidate your positions as soon as possible. In some cases you just have to accept that the market is always one or two steps ahead of you, and that you have to take a hit. It should be considered collateral damage as long as you make more profitable than losing trades.

I don't particularly disagree with your approach. To tell the truth, I stick to it myself with fiat currencies where I'm definitely a long-term holder based on fundamentals. Also, I am a strong believer in Litecoin, and thus I do keep some coins there long term too. But that's not quite my point. What I'm trying to convey here is more about your overall attitude toward what you are doing, in trading or elsewhere. It is not about particular trading techniques or anything, it is more about being completely intolerant to situations in which you get caught unprepared, those which you don't consider, take into account, or allow for in advance. Indeed, you can't plan for all possible outcomes, but it is not about that either. It is about how you deal with the unexpected and unforeseen when it actually happens, when the shit hits the fan.

[ktabb]

The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.

[MartynasB]

In my opinion, big mistake that a lot of new traders chase coins that price is growing fast like it was with Iota, Tron ant etc. They buy coins at all time high and think that it will grow much more

[Canis Majoris]

I'm not sure what you mean by dumb stop-loss orders. Stop losses should be set together with entrance, prior to making any trade. If the trader just makes a random decision on where stop loss is then okay, that is dumb, but basic trading means you make clear headed decisions as to where you want to enter and where you want to exit (not so much when). However, if those exits never arrive, which is unlikely if you are a medium and long term trader, then yes, of course you make decisions to rethink.

Okay, I will try to explain. For example, some novice trader reads it in a book on trading that he should always place stop-losses, so he blindly does exactly that but still ends up always losing. The market knows everything about your stop-losses obviously, and it may go specifically after them. This is what flash crashes basically are all about, to trigger a lot of stop-loss orders. On the other hand, an experienced trader takes into account these tricks and cannot be fooled by such attempts because he follows some other metric in his trading decisions. It doesn't mean that he will never close a losing position. It means that he is well prepared for this hunt for triggering stop-losses.

The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.

I don't know why you think that day traders believe that they have an edge over the rest of the pack. I for one don't feel like that. I'm a day trader in some assets and a long-term holder in other assets. Though I agree that short-term trading is mostly gambling unless you know what you are doing. But this is the whole point of this thread.

[magneto]

An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.

The most common mistake would be panic selling and weak hands, honestly.

If you invest in bitcoin then you are probably going to have to prepare for the long term. Trading bitcoin short term will mess up your entire trading psychology because you'll keep on trying to go for just that little more profits.

If you are trading bitcoin short term, make sure that you have a stop loss level in mind, and a target where you sell your coins. Otherwise, you'll always fall into the hole of selling low and buying high.

You make a fair point. Positions are there to be liquidated, you don't always have to close a position with a profit. You win some, you lose some. But you need to be mentally prepared for anything before you invest.

[Indrawan77]

Yes I ever in that situation a lot of times, in trading there  should be an exit strategy to prevent deeper lost, but it all will depend on the traders, sometimes the drop down still got chances to go up again, I think the decision to put stop lost limit is depend on the experience and the market situation, most of the traders not get enough information so they make the wrong choice

[Don Pedro Dinero]

The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.

I totally agree with that

I don't know why you think that day traders believe that they have an edge over the rest of the pack. I for one don't feel like that. I'm a day trader in some assets and a long-term holder in other assets. Though I agree that short-term trading is mostly gambling unless you know what you are doing. But this is the whole point of this thread.

It is gambling even if you say that you know what you are doing. Your above example isn’t a good one for me:

For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

As a long-term holder, I just HODL. That saves me a lot of headaches and a lot of trading commissions. You just put an example of what newbies do: to buy after the last ath out of FOMO and to sell after the dip out of panic. This is the opposite of what I usually recommend

[samcrypto]

A great mistake of every trader is focusing on their possible profit without setting out the possible loss you may incur, meaning setting up your target and cut loss price can help you secure the money. Day trading is really risky and if you are just depending on any luck I'm sure you'll be stuck forever on that.

[pooya87]

one of the biggest mistakes that "bitcoin" traders make is usually being late!
they buy late and sell late. it is actually partly the follow up of what OP said, meaning not backing out of a trade when something goes wrong. they wait and wait and when it was too late they start doing something, they sell at the very bottom and then buy back too late when it is already on top. rinse and repeat!

[timerland]

An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.

I don't really get what you're saying here. But I'm assuming that you're saying that people should ready themselves for anything and even if when SHTF they have a clear strategy of what they want to do instead of following their emotions?

If that's true, then yeah. It's definitely one of the skills you have to have trading and speculating on bitcoin.

It's all psychology. If you bought in december and sold in January, then you would have made out a 70% loss. It's tempting to sell when markets are tanking like that for sure. Either have a stop-loss, or just hold it through, and unless you really need the cash or in some extreme circumstances, don't liquidate your position. That's my strategy at least, dunno about you.

[TERA2]

When that loss looks so steep and too big to take but suddenly the chart scales down and you're at a 10 times bigger loss.

[vintages]

The biggest mistake that day traders make (especially crypto day traders) is believing that they have an edge over everyone else because of the charts they look at. The biggest mistake is not believing that day trading is 100% gambling, because that is exactly what it is. The only way to consistently make money over the long term is to invest based on value and fundamentals.

Exactly, I usually consider day traders as gamblers whom have decided to take massive everyday risk. With the unstable price of bitcoin, I do wonder how they make their gain; though some traders claims it very gainful. Its takes one with huge capital and heart hardened to become a day trading. Because for me alone, bitcoin trading is a perfect risk on it own. I most times soley depend on long time investment.

[TERA2]

Your comment makes no sense. An unstable price is exactly why there are daytraders. If the price was stable there would be no trades to make.

[Canis Majoris]

An active day trader myself (sort of), I often think about common mistakes people make in trading. And it seems that I have traced back most if not all such mistakes to their root cause. In a nutshell, it all comes down to being unable to back out if something goes wrong. For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

It is not so much about placing dumb stop-loss orders or other trading techniques aimed at minimizing losses as about your mental disposition or general attitude to immediately get out of what can be loosely called a decision limbo when you basically don't know what to do. In other words, search for the exit where the entrance is and do that fast.

The most common mistake would be panic selling and weak hands, honestly.

If you invest in bitcoin then you are probably going to have to prepare for the long term. Trading bitcoin short term will mess up your entire trading psychology because you'll keep on trying to go for just that little more profits.

If you are trading bitcoin short term, make sure that you have a stop loss level in mind, and a target where you sell your coins. Otherwise, you'll always fall into the hole of selling low and buying high.

You make a fair point. Positions are there to be liquidated, you don't always have to close a position with a profit. You win some, you lose some. But you need to be mentally prepared for anything before you invest.

It may of course be the most common mistake but I'm trying to trace this and other mistakes to their root cause in this topic. I'm not defending short-term trading vs long-term holding because these approaches to trading (investing) have their cons and pros. And frankly, I don't feel like my trading psychology is messed up or even fucked up. As per OP, it is not so much about closing a losing position, it is more about your whole mental outlook you have in trading as well as in other activities. For example, you buy at the top but you expect the price to plunge and decide beforehand that you won't get out even if Bitcoin goes down to zero. Then you won't be liquidating and that's okay because you know what you are doing.

[hase0278]

Your comment makes no sense. An unstable price is exactly why there are daytraders. If the price was stable there would be no trades to make.

Somehow OP is right and makes sense since at some point of our trading experience, there would come a time where we bought at a high price. He didn't point out and blamed  unstable price for it also. The point about what others do in order to minimize losses is also spot on but it is not the wisest move all the time. Another way others use when facing this kind of problem is by hodling. It can be beneficial and risky at the same time. Nevertheless, it is the best option to profit from the investment one had made even if it requires changing from day trading to short term or long term holding.

[TERA2]

Your comment makes no sense. An unstable price is exactly why there are daytraders. If the price was stable there would be no trades to make.

Somehow OP is right and makes sense since at some point of our trading experience, there would come a time where we bought at a high price. He didn't point out and blamed  unstable price for it also. The point about what others do in order to minimize losses is also spot on but it is not the wisest move all the time. Another way others use when facing this kind of problem is by hodling. It can be beneficial and risky at the same time. Nevertheless, it is the best option to profit from the investment one had made even if it requires changing from day trading to short term or long term holding.

I'm responding to vintages, not OP.

[Canis Majoris]

It is gambling even if you say that you know what you are doing. Your above example isn’t a good one for me:

For example, you buy a few bitcoins at a December high and expect the price to continue rising, which is kind of obvious. Instead, the price starts crashing down and you find yourself in a situation that you didn't envisage or consider beforehand. So your best option would be to bring things back where they were as fast as possible even if it means some loss.

As a long-term holder, I just HODL. That saves me a lot of headaches and a lot of trading commissions. You just put an example of what newbies do: to buy after the last ath out of FOMO and to sell after the dip out of panic. This is the opposite of what I usually recommend.

Actually, I have no problem with this approach. It is your choice and I'm okay with it. In fact, I also follow something similar with coins which I think are worth holding. But you seem to be missing the whole thing I'm trying to demonstrate here. It is not what you do specifically, selling or holding, or whatever, it is how you do it, whether you are doing it because you have no other option left and out of despair, or it was your choice planned beforehand. This is where I'm trying to draw distinction here, not between certain actions like closing or sticking to a losing position.