Spot Trading: 10 Commandments For Long-Term Success

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Spot trading, or any type of trading, for that matter, can make some people rich overnight. For the vast majority of people, it is a loss-making venture. However, the good news is that it doesn’t need to be. Here are some do’s and don’ts to not only survive but thrive in spot trading the crypto markets.

1. Thou shalt not chase the hottest trend: FOMO (Fear of Missing Out) is real, but it can lead to financial disaster. Resist the temptation to jump on the latest trend just because everyone else is, because you might just find yourself the victim of a rug pull. The safeguard against FOMO: research, research and research some more to see if there is any merit to a crypto project.
2. Thou shalt not be greedy: The allure of making a quick fortune is strong, but remember: pigs get slaughtered in the market. Taking profits is just as important as cutting losses. Don’t get too greedy and hold on to a winning trade forever. Set realistic profit targets, and when you reach them, cash out your gains.
3. Thou shalt not put everything into one trade: Novice traders might allocate a large portion of their capital to a single trade, leaving them vulnerable to substantial losses if the trade goes south. Smart traders pay attention to position sizing i.e. determining the amount of your capital you’re willing to risk on a single trade. For instance, if you have $10,000 in your trading account and you decide to risk 2% of your capital on a trade, your position size would be $200. This means that, even if the trade goes against you, you’re only risking $200 of your $10,000 capital.
4. Thou shalt not overtrade: This is one that novice traders are especially susceptible to; they tend to always feel the need to trade, no matter the market trend. As such, overtrading can lead to not just increased transaction costs but trading losses, as it requires more advanced skills to trade in a non-trending market than one that’s clearly trending up (or down.) In other words, it’s perfectly fine to not have any open trades sometimes, and wait until there’s a clearer trend.
5. Thou shalt not trade with money thou can’t afford to lose: Only invest funds that you can part with without losing sleep. Don’t even think about touching your emergency funds to use as trading capital (ahem, Murphy’s Law.) Otherwise, you might find yourself panic-selling at the slightest sign of a dip, and end up with losses.
6. Thou shalt keep thy emotions in check: Emotions are a trader’s worst enemy. Fear and greed will sabotage your judgment faster than <insert your favorite metaphor here> which is why it is so important to have a trading plan, and even more important to be committed to sticking to it.
7. Thou shalt never buy at ATH (all-time high): No matter how tempting it is to jump in when you see those back-to-back green candles, always remember prices can come down just as fast as they went up. Buying a token at an all-time high price is super risky because that’s when it’s often riding a wave of hype and excitement. These highs are frequently followed by sharp corrections or crashes, leaving investors with losses and disappointment. Instead, wait for pullbacks or consolidations to enter the market.
8. Thou shalt stay informed: A pretty straight-forward one here, although it has to be said that there is a big difference between staying informed and reacting to all the information you get. Being unregulated, the crypto market is especially sensitive to any sort of news both real and fake, and if you make your trading decisions based on everything in the headlines, you’ll be taken for a ride more often than not.
9. Thou shalt enjoy the ride: If you’re just starting out, it is inevitable that you will succumb to some FOMO or greed, read a price chart wrong and make a wrong move. Don’t get discouraged if not all of your trades are profitable. The best traders are not those who never make a mistake, but those who learn from their mistakes, and get better from there.
10. Thou shalt not overlook personal security measures: What’s the use of making profits if you’re gonna lose it to hackers? Educate yourself on common crypto hacks and scams, and remember, if it’s too good to be true, it probably is. Better to be safe than sorry.