13 Reasons Why People Lose Money in Crypto Trading

Some of those concepts are applicable in stock trading as well

Probably you have asked yourself this question. It makes you feel like you are the only one losing while the rest are getting rich. Another common narrative we have heard: “look, x person did this much, I have not done it yet but I will follow their strategy..” Narratives like this are really dangerous and those might be the reasons that keep you away from profits.

Let’s dive into the most common patterns on why this might be happening.

You don’t have long term goals. — Deep down you know ‘get rich quick schemes” don’t work, yet that’s the strategy you apply. You read a single piece of information from a biased source and then you degen into that project. Your long term hold understanding is one day, at most two days. That’s not a trading strategy you can win from. Yet, you have heard or seen Twitter threads where x person did a quick flip and got xETH from a single trade. While cases like this might happen once, it does not really mean this strategy works for the overall portfolio. The good thing about blockchain is that the ledger is public. You can deep dive into specific portfolios and you will realize it is not great as they make it seem.

You FOMO buy and Panic Sell. — Someone tells you, look “it went up 40% today, THEY SAY it is gonna go up 200% next week..”. And just like that, based on only that sole source of information you decide to degen into a project. Why this happens? Because of FOMO (Fear Of Missing Out). You feel like your friend is doing it, if you don’t do it, you will be left behind. Same thing goes when it comes to selling. Your friend decided to sell, and of course he will be biased to share only the reasons on why you should sell too, that is why you panic sell. Deep down you know that your friend is not qualified to do any sort of basic analysis or really understand a specific project, yet you chose to believe them.

Your only source of information is Twitter or Discord. — There is a say that the best way to learn about your religion is reading from sources and people who do not have the same religion. Algorithms on Twitter work in a way religions does. It will serve you content based on the things you look for. You follow people who are known in the space of crypto, who are involved in specific projects, who have a stake in a project (i.e. they make money by shilling you projects), and your entire trading strategy is biased on the information you consume from the very same people. Which brings us to another important reason on why you keep losing money, celebrities..

You buy on projects shilled by celebs. Most of those crypto celebs shill a lot of projects and not just one. Remember, they are involved in that project, whether that is a % stake in the project or a paid promotion. They are getting rich from that specific project, whether it fails or not. If it fails, they move on to the next project. Internet forget things quickly. If you were smart enough to due diligence on their behavior, you would figure out that projects they were involved are dead already, yet they are shilling a new one. If previous projects are completely abandoned, guess what..the new one will be abandoned too. It is people like you who believe them again that makes them money. Check this out What happened to these Celebrity NFTs?

You are quick to call “Blue Chip” any NFT project that floor price rises.- Oh boy, this is a big thing. It especially happened in those projects who were pumped by celebs. Most of the people don’t really understand the term “blue chip” and what it means. Don’t be that person who learns a word from someone else and never really takes the time to read about it and actually understand the meaning of it. Good NFT projects are yet to come, we have not seen them yet. Or even if we have seen them, they are not popular enough for now as they are working behind the scenes.

You don’t DCA. - First of all, if you are not familiar with DCA (Dollar Cost Averaging), check out this article we wrote previously on it. You buy all in with no clear goals and expectations besides hoping that prices will go up. If it does not happen the next day, you sell it at a loss and then you jump into the next one. DCA might be profitable in long run only. Which brings us to the next reason on why you are losing money.

You aim for the head and toes, not shoulders and knees.- I have heard this say from somewhere and I think it is really important in trading. We get caught into the idea of trying to hit the high highs (when we sell) and the low lows (when we buy) when trading. That is why we get caught into traps where we lose money because we either have sold too early or have held too long. Instead of aiming head (high highs) and toes (low lows), aim for the shoulders and knees, you will realize if you will be able to make more profits in that way. 

I have failed miserable myself in this one specifically. I have held for too long in some projects in which I should not have done that.

You trust too much in technical analysis and indicators. — You have taken a course in technical analysis (which course you bought from an influencer which makes money by selling you courses on how to trade crypto and not from the actual trading itself), you have learned complex terminology which your friend is not familiar with such as moving averages, trend lines, support and resistance, RSI, Bollinger bands..yadda yadda yadda and boom, your entire trading strategy is based on your ability to stare into a chart and you will already be able to predict the future of the project. Come on bruh.. Focus on fundamental analysis instead. Try to actually understand the project you are investing in. Which brings us to another important topic on why you are loosing money.

You don’t read about the founders and their past projects. - If we ask you about the founders of that crypto project/token you are buying, chances are high you know nothing about them or their previous projects that they have built. Don’t get me wrong, there might be builders who can develop valuable projects in the space as first time founders, but the issue here is your ability to do a proper due diligence on the team and actually understand if they will be able to deliver on what they promise. There are founders who scam people and abandon their past projects, yet you decide to call their project a blue-chip and degen into it with thousands of $. You have heard of Azuki most likely..

You keep jumping around from project to project. — You already know your friend is losing money just like you if not more, yet he shills you projects everyday and yet you buy into it. Both of you realize that none of you are fully familiar with the space, your whole trading strategy is based on the crypto prices volatility and not the underlying technology that comes with that project. Next time, challenge your friend and see if they actually understand that project that they are shilling. If not, sit together and do a proper DD. Chances are high you will move on without investing into it, but guess what, next time you will have a better trading strategy for the next proposal to invest that you will get.

You buy when a crypto token/project becomes mainstream and already valued 100x. - There is an unwritten rule about trading: If your neighbor comes to your door and shills you a project, RUN, run away as much as you can. If they got the news, everyone got the news. If I were you, I would quit trading for a bit. I would spend some time on reading a Behavioral Finance book and try to actually understand the psychology behind trading.

You have not realized yet that trading happens on news and not on actual happenings. - Crypto markets are considered to be efficient markets, there is almost no arbitrage opportunity in most of the cases, just like it happens with stock market. You need to realize that information travels fast, if you got the news about a specific development in any particular project, guess what, so the other person did. That ‘increase in value’ because of that added feature is already reflected in the price. You don’t just have to be on the correct side of the trade. You also have to time it perfectly.

Trading is not your strength. — This is actually a really important topic, although we left is as the last but not the least. You have not realized yet that you are emotionally unstable and probably trading is making you miserable. In most of the cases, people tend to lose even more money trying to recover their previous investments than actually getting involved with new investments. It is okay to give up on trading if you feel like it is not your strength. Do not FOMO, instead focus on things you are good at. If you are really interested about the space, trying learning on how to develop stuff in the web3 space. In our previous article, The 12 Richest People In Crypto, we realized that all those billionaires listed there made billions by actually building platforms and not from trading.

List goes on and on..How about we stop it here and leave room for another article as a continuation of the same topic. Let us know your thoughts on this.

One more thing, none of it is a financial advise.

Cheers!