[Day 4] Top 7 Costliest Mistakes Trading Cryptocurrency #4. Technical Analysis Done Wrong
When I first started trading stocks and forex I decided that this was what I wanted to do as a career. I spent 6-8 hours a day for months learning technical analysis. I thought there’d be some secret indicator I would find to help me become a millionaire. After months of research, I realized I had analysis paralysis which basically meant I was over-analyzing a situation and taking no action. Today I’ll be discussing technical analysis done wrong.
Table of Contents:
- FUD and FOMO
- Wrong Tools
- Wrong Entry Point
- Technical Analysis Done Wrong
- Not Understanding the Order Book Correctly
- Risk Management
- Is Day Trading Really For You?
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Technical Analysis Done Wrong
Technical indicators are helpful. However, focusing too much on them and not on the market conditions can be more dangerous for a day trader.
Let’s take an example to understand the impact of overemphasizing on technical analysis. As a day trader, you might be tempted to buy ETH as its price is considerably low compared to BTC which means more percentage profit. But, on the other hand, the prices are going down due to the market conditions and not only based on BTC-ETH price relationship. In that case, you may lose dollar value but increase in BTC value.
Using too many indicators can often overcomplicate your chart and make it hard to see entry and exit points. Also looking at the wrong time interval can impact your decision making skills. For example, if you’re a swing trader and only trade a handful of times a month then you should not be looking at the 1h or 30minute chart. You should be watching the 4H, 12H or 1D chart.
Also, as a day trader, you should always use stop-loss, a method by which you can auto-sell when the price of an asset drops under a certain value. Always try to minimize losses.