South Africs, 21st July 2020 (Wiredrelease) According to Bill Hermann, CEO of investment firm Wilshire Phoenix, “crypto trading is a zero-sum game with clear winners and losers”.
There are many self-proclaimed traders on social media who have claimed to make millions in mere weeks of starting their trade journey, most of which have reported that they had little to no previous trading knowledge, yet they have managed to secure their financial freedom and others a new stream of steady income.
The burning question is whether this happens by luck for amateur traders or whether trading in the cryptocurrency market is just that easy?
Most Traders Fail at their First Attempt
Crypto trading is much like mainstream stock and forex trading in a number of ways. Potential investors use indicators, price charts and fundamental drivers for trade rationale. Trading strategies are then developed after hours of testing. There is no cut and dry strategy. Trading in the cryptocurrency market is complex. Many new traders rely on automated technology to execute trades on their behalf. This is usually done through a series of algorithms that scan the markets and extract the most profitable trade. New or potential investors should equip themselves by reading up on these technologies, such as the bitcoin revolution review and others.
Unlike sports and other events, when potential investors conduct trades they enter into a very competitive ring, where they are up against the very best in the industry. It can be likened to an average Joe, competing in the Olympics with no formal physical training and expecting to win gold. The outcome would not be successful.
Perhaps amateurs interested in trading still visualise the crammed trading floors where participants yell for traders. Since trading has gone digital, crammed trading floors have disappeared.
The Professional Traders versus the Self-taught
Professional traders usually place trade orders on behalf of individuals or companies, using funds allocated to them. These professional traders usually manage large sums of money. They have the guidance, tools and technology of the company they employed by. Companies who trade on this scale usually recruit “battle-tested traders” with a proven track record of high successes and hold significant programming knowledge.
Retail traders, on the other hand, do not have this advantage. They usually consist of individuals who have an active internet connection and money to invest. According to a Tradeciety article, “Profitable day traders make up a small proportion of all traders-1.6% in the average year”. The barrier to entry for retail traders venturing into crypto trading is many times lower than traditional market trading. Potential investors can jump from exchange to exchange, funding their own trades with cryptocurrencies or bank account transfers.
Retail traders are either individuals looking to expand their income streams or gain financial freedom utilizing their own capital. There is a large body of information that exists for self-starters interested in trading. However, it is advised that potential investors separate the fake news from factual information. Using a trusted website as a source of information is a great way to start. There is no one-size-fits-all solution to start trading successfully. What may work for one person is not guaranteed to work across the board.
Retail Trading Can Be Effective
Retail trading will involve a number of different charting indicators, strategies and techniques. There is no guarantee that all these methods may work but it is possible to gain profits as a retail trader, it may just be a bit complex to navigate initially. The key to successful retail trading involves effective risk management. A potential investor must make sure that they have a plan in place that details the amount a trader can possibly lose on any given trade, while still keeping up with his or her odds of success for the future. Using a trade journal to learn from failed experiences or trades is also important.
As cryptocurrency trading grows in popularity, many newcomers may try their hand in trading the asset class. Success will be determined by how much knowledge the trader has, their strategy and an effective risk management plan, to manage expectations. Trading is as complex as it is rewarding.
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