Many people believe that their account was liquidated due to a "manipulated" market. This only tells half the story, however, the true enemy is behavior.
Here are the reasons why 99% of people lose everything:
Addiction To Leveraged Trading:
Most people in crypto don't want to earn a little bit of money over time, instead they want to be able to make 100X their investment instantly. They want to see the value of their account go up quickly, and even though most people know that this type of thinking will cause them to lose money, it is very hard to avoid. When you are using high levels of leverage (such as 10X) and the price drops by just 1%, you lose all of your money. Impatience will always win out over discipline when it comes to leveraging trades.
2. Trading Without A Plan:
Without an entry strategy (a way to determine where and when to enter a trade), without an invalidation strategy (a plan for what you need to see in order to consider closing a trade early), and without a well-defined risk/reward profile (the amount of profit you want to take from a trade compared to the maximum amount you are willing to lose per trade), you have no way of knowing whether you are making smart decisions or not. Most people use a combination of social media trends, the opinions of others, and the desire to see profits to guide their trades. This is simply gambling and not trading.
3. FOMO at the top and panic at the bottom:
When the market is going up, many people buy every green candle that forms (when the price goes up). Conversely, when the market is going down, many people sell every red candle that forms (when the price goes down). Once again, we find that greed drives buying decisions and fear drives selling decisions. Smart money always sells into the greed of others and buys into the fear of others.
4. Revenge/Aggressive Trading after a Loss:
A person loses money and then reacts emotionally to try to recoup that loss. They increase the size of their next trade in hopes of getting back what they lost and end up losing even more money. Ego is punished by the markets faster than ignorance.
5. Ignoring Market Structure
The majority of people trade with the trend, against the trend, against momentum, and against volume. Price does not act randomly - emotions do.
6. No Stop Loss Mentality:
Some people are focused solely on how much money they can potentially make while others are concerned about both the potential gains and losses. Those who only worry about their potential gains are less likely to protect their capital and therefore are at greater risk of being liquidated.
Truth Me That Most People Don't Want to Hear That Crypto doesn't liquidate people, people self-liquidate.
The 1% who survive in crypto do three things:
Low Leverage
Risk Management
Emotional Control
You can either get rich slowly or you can get liquidated quickly. There is no third option.
