How do I make money with Bitcoin? Where’s the money in the crypto world? The answer: You need rules. We have collected the tastiest wisdoms from countless trading literature, sifted them and baked them into 11 golden rules.
1. there is no win-win situation in cryptotrading
Remember the rocker on the schoolyard? Two children rocking up and down. There are two states: Either one child is down and the other is up. Or they balance quite strained in the middle. That’s how trading works. Sometimes nothing happens and the courses balance tense in the middle. But every time one trader makes a profit, another one suffers a loss. The rocker cannot be up on both sides. Simple physics. The question is: Why do you think you are better than your counterpart?
2. cryptotrading is war
In state-organized struggles there is the term “fog of war”. The general does not see the entire map, but only what is in front of his eyes. He has to make decisions with incomplete information. That’s the same in trading. Individual traders are always on the wrong side of asymmetry. There are so-called whales – they have so much crypto that they can change the price significantly with a trade. But only the whale knows when he’s doing it. If a (real or fake) message drives the price, then we usually find out too late. In trading, those who have essential information beforehand win.
3. 50 plus 1
The rocker again. There are only two relevant states that a price can take: rise or fall. That’s a 50/50 thing. If we let a monkey trade, then the probability is exactly 50 percent. Nobody’s 100 percent right. There is no system that can correctly predict an irrational and repeatedly manipulated market. The goal of every trader is to be at least 51 percent correct. Every trader needs the frustration tolerance to lose in 49 out of 100 trades.
4 Faith is (unfortunately) Everything
No matter how mathematical the system, our belief in magic and fate keeps getting in the way. Example: A coin is being pumped and reaches dizzying heights. We know it’s already too late to get in, but we do it out of fear of missing something (FOMO). Or we can see patterns where there aren’t any. For this purpose, there is a separate field of research in psychology: bias. Result: Nobody is rational. To believe that we act rationally in the market is a mistake.
5. the mistake is you
The market is always right. If the market does not behave as you have calculated, you are wrong. Always and forever. Amen.
6. 80/20 rule of cryptotrading
The good traders make their money with 20 percent of their trades. The rest is either a draw or a loss. If a good trade brings 16 percent profit, then a worse trade may bring -4 percent on average. This ratio is achieved with a stop-loss. In this way, you can also calculate whether you make a profit in total. You can also see that a trade with a profit of three percent is not really a profit.
7. Beginners lose at cryptotrading because they:
trade without knowledge, i.e. play the lottery
Hold positions too long
trade with cheap shitcoins
gamble with someone else’s money
never get their profits out
trade too often, so also try mediocre trades
8. invest in what you understand
Check it out before you buy coins. What are they doing? Does that make sense? Or at least understandable? The better the product, the sooner the price will rise in the long term. This advice also includes not to trade Shitcoins.
9. Differences between crypto and other markets
Crypto markets don’t sleep, they’re open 24 hours a day.
The cycles between euphoria and depression are shorter by a factor of X, cryptotrading has warpspeed. When a stock market is bearish, you can take a few weeks and months off. In Krypto it will be different next week.
The volatility – i.e. price fluctuations – can be as much as 30 percent in one day for smaller old coins. Traditional media, for example, are too slow. If it is said that a certain old coin has fallen by 30 percent in the last few days, the situation has already changed when the editor puts the article in print.
Stock traders think in percent. Kryptotrader think in x (in the form of x-fold).
Illegal things like insider trading are happening everywhere. But in the unregulated crypto world it happens more often and the effects are greater. Knowledge advantage pays off even more in Krypto.
Technical course analysis can work well in cryptography because the market is small and many analysts are on the move. If many act according to the same results, then the prognoses come true.
Outside the top 20 you should not make large purchases or sales (more than 1,000 euros). If the trading volume is low, the price between the first and the last euro worsens.
10. make 100 bad trades fast
The only way to increase your chances of winning is to have real trading experience. Reading books doesn’t help. Don’t trade with play money either. Only real trading with real money brings experience, insight and success (if any). Start small. Start with 100 Euro. If you have doubled it, you can add another 200 euros. When the 400 have doubled, you repeat the game. And always only trade with so much money that it does not increase the pulse. Nervousness is bad for business.
11 Less technical analysis (TA) is more
Learn: Moving Averages, Stochastic RSI, Trend Lines, the basics of Candle Sticks, Upwards & Downwards Channels, Bull Flags, Breakouts and Wedges. TA can be “zoomed”, they can be formed from daily, hourly or minutely values. The shorter the period, the more error-prone the pattern. Do not search in minutes what you cannot discover in hours.