Every person’s dream is to earn millions without leaving home and without physical exertion. Big money goes to people who know how to use their brains effectively and do not stop at difficulties. One of the few ways to realize this is trading, where the profit from one transaction can be unlimited.
Many people have become interested in asset trading, but only 5-10% realize how difficult it is. Below, every New Zealander will be able to find a list of trading features that are not obvious but important before buying assets.
Commissions that imperceptibly reduce profits
Newbies only look at the change in the price of an asset, but experienced market participants also remember the commissions that accompany each transaction. The exchange charges a fee for buying and selling shares or cryptocoins, but it rarely exceeds 0.1–0.5% of the transaction amount.
New Zealanders may encounter the concept of spread, which means the difference between the purchase and sale price. A trader can receive a smaller amount without changing the market rate if he decides to sell the asset immediately after the purchase. You can notice this when checking coins with no popularity or feedback.
Costs may arise when withdrawing funds from the exchange or transferring cryptocurrency to another wallet. Each platform sets its own commissions, while their size depends on the chosen cryptocurrency and the load on the blockchain network.
Users can pay significantly more for transferring Bitcoin during periods of high activity than for transactions with other digital assets. The total commissions per month can amount to tens or even hundreds of New Zealand dollars if a trader buys, sells, and withdraws funds regularly.
Success statistics similar to playing in a casino
All beginners in the field of trading start trading cryptocurrency with the hope of quickly getting a big profit, but statistics show that the costs are much higher.
Data on cryptocurrency and CFD platforms show that 90% of traders in the long term suffer losses because of improper risk management and emotional decisions. Trading and casinos have different natures, but failure will occur in both cases if there is:
- Lack of a clear trading strategy;
- Desire to quickly win back losses;
- Excessive use of leverage;
- Buying assets under the influence of emotions and news.
- Investing more money than they can afford to lose;
- Constantly changing the trading plan during market volatility;
- Holding losing positions for too long, hoping the price will recover.
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Emotions interfere with trading, while the desire to quickly return lost funds and excessive self-confidence after several successful transactions are the main enemies. 10% of traders succeed, while the victory rate of gamblers is 12-17%.
However, trading is not a game of chance because it is based on market analysis, economic indicators, and a decent strategy.
Risk Management
Risk management and discipline are the first things you need to add to your trading strategy because even experienced investors can’t predict the outcome of every trade correctly. The main task of a trader is to limit possible losses.
The number of losses can reach as much as 70%, but with the right profit factor, 30% of successful trades can make a trader profitable in the long run. One of the most effective ways to reduce risk is to spread your capital between different cryptocurrencies or assets.
A stock’s value can drop sharply, but losses can be partially offset by the growth of other investments. Market participants need to set a stop-loss order, which automatically closes trades after reaching a predetermined level of losses.
New Zealanders need to choose the right position size for each trade. 80% of experienced traders don’t risk all their capital at once, which allows them to survive a monthly or annual series of unsuccessful trades without major financial losses.
Traders should analyse their own mistakes in order not to repeat them in the future. Small nuances form the overall picture, which affects the success of trading and possible profit.
You should not register on the platform if you plan to get rich quickly, because only discipline, methodical technical analysis, and cleaning up past mistakes will help you achieve success.
Trading Psychology
Psychology is no less important than technical or fundamental analysis. Traders’ decisions are influenced by greed and fear.
Greed leads to opening too risky deals or holding a profitable position longer than the strategy suggests, while fear forces them to sell assets prematurely or even abandon promising deals after several failures.
A study by the National Bureau of Economic Research involving 80 day traders showed that participants with a more pronounced emotional reaction to profits and losses showed worse trading results. Excessive emotions can reduce the effectiveness of financial decision-making.
A common psychological problem is the gambling effect, when after several successful or unsuccessful deals a person begins to try to quickly increase profits or win back losses, like in a casino. New Zealanders make these decisions without market analysis, which contradicts the trading plan.
Experienced traders recommend determining entry and exit points in advance, using stop-losses, and not changing the strategy under the influence of emotions. Market participants can keep a trading journal, where they can record their own mistakes.
A study based on data from 189,530 retail investors confirmed that previous experience of profits and losses affects traders’ subsequent decisions.
Outside opinions and recommendation sites
Newbies look for advice on thematic sites, social networks, or YouTube because they hope to find investment solutions. However, not all sources of information are objective, and 80% of them may pursue commercial gain.
The authors of forecasts are not responsible for possible financial losses of their readers or subscribers. The most common sources of dubious recommendations are:
- Paid signals with promises of guaranteed profits;
- Influencers and bloggers promoting individual cryptocurrencies;
- Posts and comments on social networks with unverified forecasts;
- Anonymous Telegram channels and closed communities;
- Sites publishing advertising reviews under the guise of independent analytics.
Check twice the information that promises quick money without risk or calls to urgently buy an asset. These messages create artificial hype around the cryptocurrency to increase its price. Successful traders recommend independent analysis of both the online casino for play and the stocks.
Independent analysis takes more time, but helps to make more informed financial decisions.
