Crypto Academy Week 12- Homework Task for Professor @fendit -Don't Get Lost in the Fuzz.

Hello Steemians, I'm happy to here to talk about the most important aspect of the life of a trader and I can't wait to talk about my experiences and things I have learned about trading. But firstly, I want to thank professor @fendit for providing these amazing lessons. Today's topic "Don't get lost in the fuzz" was a special lesson highlighting what every trader goes through at the early stage of their trading career.

Source

Just like my mentor Cuebanks will always say " Trading is simple but not easy". People always come to me to ask a question on how to get started with cryptocurrency trading. The first question I ask them is, Do you already know the system you are trying to venture into?. One mistake most people make is that is, they jump into trading with the mindset of packing the bags in a short period. They have no idea that the market also wants to take their money from them. I believe the first thing in trading is understanding how the system works and then developing a strategy to take advantage of the system.

You are in this situation: You bought BTC a couple of days ago at a price of USD 62K. Suddenly, you see this situation:

What would you have done before reading this class? What would you do now Explain in detail if there is anything you would do differently.

What I would have done

Every trader has a trading plan and this includes having an exit strategy. Before I bought BTC, I must have carried out my prediction that BTC will go up. Similarly, I will also have an exit strategy in case my prediction goes wrong and we know the high volatile nature of the market. If I had bought BTC and woke up to this, the first thing I will do is to check out for fundamental news that might cause the price to dip this way. Just like, we got a massive dip when American President Joe Biden released the statement on taxation on cryptocurrency. If there's any such news, I will know that the dip is just a panic created by traders and the price will correct and continue in its original direction. But in a situation where there's no fundamental analysis backing up the dip in BTC, I will look at my technical analysis to see the market structure. I will still hold onto my trade if the overall structure of the market is still intact. BTC has made a strong push to the upside and there's always a correction after a push phase. So I will confirm if this is a correction or a reversal of BTC price to the downside by using the Fibonacci retracement tool and RSI indicator. If after my analysis and I notice this is correction, I will still hold onto my position. But when the dip isn't clear with regard to both technical and fundamental, I will convert to a stable coin to protect my funds.

What I would do now

After this class, I noticed that holding onto my position when the market is down is allowing my emotions to take over me before I thought that price will reverse based on technical and fundamental analysis backing my thoughts. This scenario happened back then in 2018 when BTC was bleeding after hitting an all-time high of $19K, most people held onto their position with the mindset that the price will bounce back. Instead of cutting their losses on time, they kept holding on until fear finally grips to sell at a bigger loss. Whereas people who cut their losses and sold at $15K have the opportunity to buy more when the price came down to $5K. The market is full of uncertainties and you never can tell when how far the price will dip. So I will rather cut my losses on time than holding onto a market I never know how dip it will go or when it will bounce back to my entry price. Similarly, cutting my losses on time allows me to buy more when the price dips further.

1B- Share your own experience when it comes to making mistakes in trading: What mistakes have you done when trading and what did you learn from them? If you have little experience when it comes to trading, tell if you got to know about someone else's experience.

Every trader makes mistakes especially at the beginning stage of their trading career. The mistake I always make is fear and being impatient and allowing my position to run. Before I enter a trade, I have carried out my technical analysis, set my profit target, and also set my stop loss. The uncertainties in the market always put fear in me that the price will reverse to stop me out at a loss even I'm in profit. This always makes me trail my stop-loss as my trade approaches my profit target. But we know the market doesn't run like straightforward, it makes some corrections as it moves in a particular direction. So because I trail my stop-loss, I'm always stopped out when there is a pullback. And after that, the price will continue going in my predicted direction.
Another mistake I made when I started trading is holding onto a losing trade and not cutting my losses on time. We make predictions based on technical analysis before entering a position. The market always does what it wants to do and not every time our prediction is correct that's why we use stop-loss. So instead of allowing the market to take me out at the initial stop-loss which is in line with my risk management, I keep increasing my stop loss and buying more with the hope that when the reverses, I will recover the losses from the initial position and even made more profit. This particular situation has made me lose 75% of my trading capital.
Over the years as I keep developing in cryptocurrency trading, I have learned to be a disciplined trader. I make sure I use proper risk management in every trade and I don’t use more than 10% of my capital to open a position. Similarly, I have learned to stick to my trading plan and always be patient with my trades to run. Also, I have learned that every trade isn't a winning trade, either will a particular trade hit your profit target. The most important thing is proper risk management which requires you to trade what you can afford to lose.

2B- Which of the strategies discussed in this class you find the most useful for you? Why?

All the strategies discussed in the class are useful. But the one I find most useful is Using a stop loss, over trading, and letting your emotions control you.

Using a Stoploss

Most traders use psychological stops to trade cryptocurrency and that is a very risky way of trading. The high volatility nature of cryptocurrency can make the price of an asset see a 20% change in some minutes and can lead to loss of trading capital. Stoploss is essential to protect a trader and get him out of the market on time. This will help to minimize losses and protect your capital to take another opportunity. Though you might still hold the coin until it gets back to your entry price, you never can tell how long it will take. Also, you won't even try using psychological stops when trading cryptocurrency CFDs because you will blow your account. I just want to point out few things why stop loss is very useful.

• Anything can happen in the market at any time.
• Our predictions are not always correct.
• Cryptocurrency is highly volatile.

Traders who have knowledge of all these things won't dare to trade without using a stop loss.

Over trading

Most traders think that, if they are not trading they are losing money. Because the market is opened 24/7 doesn't mean you should be trading. Trading is all about having a trading strategy and having a trading plan and you are to trade according to your plan. Similarly, most traders become aggressive when they have a losing trade. They try to get back into the market and even double their position to cover their losses and this can lead to more losses. Furthermore, getting too excited after a winning trade makes traders get back into the market to make more money, they tend to increase their position with this excitement and this might lead to losing your initial profit on the trade. This one of the mistakes I made when I started trading, I always feel excited to get back into the market and I always end up giving back all the profits I have made. Overtrading is very bad and can lead to anxiety and losses.

Do not let your emotions control you

When I started trading, I had no experience with trading and I never understood how the system. I always run from a signal group to another, watching youtube videos and entering positions without any technical or fundamental backup. After much time losing trades, I realized I needed to calm down and take my own decision. I started by learning about cryptocurrency and reading charts. After that, I gained confidence in my analysis and make my own decisions. This helped me control my emotions and take responsibility for my trading.

C- Place yourself in the following situation: You're browsing Twitter and you see this:

You see that whenever this kind of thing happen, BTC prices rush. What would you have done before reading this class? What would you do now? Explain in detail if there's something you would do differently.

Well, this kind of situation falls under sentimental analysis and this is a very bad way to trade. This kind of news only creates panic and volatility. Some traders might jump into the market and get trapped in the correction. Though news like this can make you profit, there's a chance of incurring losses too. This kind of news should be combined with a technical analysis before rushing to open a position.

What I would have done before reading this class

From my experience as a trader, I have developed my own trading strategy which always follows to trade. This includes a proper technical analysis to back up my prediction. When I see this kind of news, I usually make sure it corresponds to my technical chart. If not, I will stay out of the market. It is not compulsory that I will trade and me taking advantage of news like this without proper technical or fundamental backup is against my trading style. One thing I always tell myself is that If I don't trade, I don't lose money and this has always helped me not to over trade even when there's panic because of news like this.

What I will do now

After reading this lesson, I will still maintain my decision not to jump into trades without proper technical and fundamental analysis to back up my decision. With this, I can always take responsibility for my trading which will help me control my emotions. Trading without a plan and proper analysis mean gambling to me.

In conclusion, I have learned a lot about trading psychology in today's lesson. This is the most important aspect of a trader's career. I believe every trader should have a system and trading strategy that suits their trading style. This will help minimize losses and avoid over-trading. Not having a trading strategy will lead you into jumping from one trade to another. Finally, stop loss plays an important role in trading, trading cryptocurrency without stop-loss is very and can lead to loss of trading capital.

Thank you professor @fendit for this amazing lesson.