Crypto trading promises huge returns (and has been so in the past couple of years), but very few traders actually make sustainable profits. According to unverified reports, over 90% of crypto day traders lose money despite the market continuously witnessing mega gains. Why does this happen constantly? Are there solutions that can improve the win rate for crypto traders?
The stats regarding the amount of losses crypto traders make are shocking, to say the least. In every market characterized by dual possibilities, trading should offer a 50-50 chance of either a potential profit or potential loss. However, the volatility of the crypto market throws the fundamental 1:1 risk/reward ratio out the window, with over 90%+ of traders making losses.
According to a published report by Finansinspektionen, the Swedish financial supervisory authority, 53 percent of citizens who traded in crypto certificates (securities that include one or more underlying crypto assets that track the price of these assets) and sold off their entire holdings from January 2018 to March 2024, made a loss. A stark contrast to the gains the market made during the same period – with the total crypto market cap growing from $852 billion to $2.7 billion, or a 216% growth rate.
In a broader view, Tradeciety reports that 80% of all day traders, whether in crypto or traditional financial markets, quit within the first two years of trading. Furthermore, nearly 40% of traders only trade for one month before calling it quits, and in three years, the number falls to only 13% of day traders. Five years? Only 7% of the traders keep trading. More importantly, the average investor usually underperforms a market index by 1.5% per year, while the active traders underperform by nearly 7% per annum.
Across the crypto markets, these numbers drop drastically for profitable traders. This is caused by several factors from general inexperience, not understanding the crypto market, the false promise of “quick money” to emotional trading, lack of a trading system, overtrading, and a host of other rookie mistakes.
Luckily, platforms such as eToro and Revolut (in traditional finance markets), Binance, Coinbase, Mosaic Alpha (in crypto markets), and Polkadot, MakerDAO, PancakeSwap, and Uniswap (in defi markets) provide solutions to ease the entry of new traders into the wild west of trading. From education and practice trading to copy trading and trade controls, these platforms enhance a trader’s effectiveness, providing them with the needed skills to become a professional trader and become part of the top 5% in crypto and traditional finance trading.
Becoming Profitable As A Rookie Crypto Trader
A rookie trader can turn their trades from a loss-making position to a profitable one in several ways. Professional traders have constantly implemented these steps to preserve their capital and increase their profits.
The first step when entering the crypto trading world is to grasp the knowledge of the assets and technologies involved while considering the risks involved in trading these volatile assets. Additionally, the widely unregulated nature of cryptocurrencies makes trading them different from traditional finance markets, hence the need to employ more caution when dealing with them.
Luckily, several Web 3-based platforms are helping new crypto traders navigate the markets and become pro traders. Mosaic Alpha, a decentralized exchange, is transforming how novices navigate the crypto trading market, offering several tools to improve novices’ trade strategies.
Mosaic Alpha: Advancing Crypto Trading For Beginners
One of the biggest reasons new traders lose money is the lack of knowledge and proper education. While many traders are enticed into the market with the idea of making millions by trading cryptocurrency, very few take the time to understand what it is all about. This is a dangerous misconception that often leads to losses. If you understand the basics well, you tend to make well-informed decisions by researching and using appropriate technical analysis tools when necessary.
However, the process of learning in trading is long and, at times, tedious. This discourages many novice traders from learning about the intricacies of crypto trading. Mosaic Alpha simplifies the process by providing token baskets that allow new traders to trade alongside experienced traders, leveraging their expertise and strategies. The baskets are a collection of crypto assets selected by measuring the trader’s risk. Users can start small and grow big, trade in diversified crypto baskets with minimal capital, and gradually build knowledge and wealth over time.
Additionally, the platform provides additional educational resources to enable users to better understand their assets and make more informed decisions.
Better Your Trading Journey
To increase their chances of making profits in the crypto market, traders need to educate themselves and learn from experienced traders. They also need to implement effective risk management tactics such as setting stop-loss orders and diversifying assets. Additionally, creating a well-defined trading plan that outlines entry and exit points, risk tolerance, and profit targets can provide a structured approach to trading.
Lastly, crypto traders must maintain emotional discipline and avoid impulsive decisions based on fear or greed, which can help protect capital and minimize losses.