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Crypto Trading 101 – The Best Lessons For Beginner Crypto Investors

Many dive into trading joyfully, imagining themselves to be a character from the “Wolf of Wall Street”. They see themselves making endless successful trades, and sacks of money. Usually, reality catches up with them. Statistics show that around 70% of traders lose money. Despite the wealth of opportunities in the market, at the end of the day, most traders fail to make a profit. These are the best lessons for beginner crypto investors.

Why do Traders fail?

One of the main causes of failure during trading is stress. From the outside, it might seem like trading is only about buying low and selling high, but this is just a fraction of the story.

How to manage losses. When money is at risk, and you see the loss, you may get scared to manage your funds. Questions will puzzle your mind. Should I sell before it goes lower? Or will it rebound? Trying to find answers to those questions increases stress, especially if the loss is getting larger.

How to manage profits. Intuitively, a trade with profit is the trader’s ultimate goal, and it should not generate anxiety. Unfortunately, timing the best time to exit a position may be tricky. Maybe the coin is in loss and then increases back to breakeven. Can it go up more? The price reaches the original target quickly. Should the trader be more greedy? 

Both losses and profits can drive up the stress levels of a trader. 

Stay Rational

When we’re stressed our decision-making abilities deteriorate. Decisions in which we were previously confident – when entering the position – now suddenly seem unsure. 

Furthermore, despite the fact that all market participants should make decisions based on a rational thought process, that’s not always as easy as it might seem. Markets often behave in an irrational manner.

One of the biggest examples being the financial crisis of 2008, depicted in the movie “ The Big Short”, where a trader saw that many mortgage-backed securities were not backed adequately. As a result, the trader decided to open positions to profit from his belief that these assets were overvalued. According to the financial theory, he was making a rational decision.

On the other hand, those positions were expensive, and every day without a market collapse was deepening the loss for his portfolio.

Eventually, the crisis burst and he was lucky to remain solvent long enough to be proven correct. This is one of the best lessons for beginner crypto investors.

Don’t Overinvest

In finance, it’s common to see several analysts value the same asset differently, the cause of this being that there are way too many variables in play to all be evaluated correctly at the same time. It’s also very difficult to come to a consensus on the market, since different analysts take different variables into consideration, and weigh the importance of those variables differently.

This makes it very difficult to attain a complete and correct overview of the market, and even if you do have a full idea of the market, unforeseen events happen all the time and mess with your analysis.

Many wonder about the possible profit they could have achieved by investing even small amounts in Bitcoin years ago.

In theory, if you had purchased 100$ of Bitcoin in 2012, that would be worth approximately $870,000 today. However, you would have had to hold in your coins from 2012-2014 through the 50,000% increase and in the 87% pullback of 2015. Furthermore, remaining in the position after a 12,000% increase between 2015-2017 and another 84% pullback between 2018-2019.

Bitcoin’s price since 2012

Most people don’t have that much fortitude! 

Those that invested in Bitcoin in 2012 and were able to hold along all this time were not lucky, as some may think. They had a vision, an investment plan and managed their risk thoughtfully. They survived price spikes and drops of such magnitude because they invest only what they could afford to lose. Some of them didn’t know it, but they were already applying one of the best lessons for beginner crypto investors.

At the end of the day, you can only achieve profitability if you can remain solvent long enough to get there.

Learn from ‘Smart Money’

The best way to manage risk is to manage the size of your position. An example of this was when the news came out that Mass Mutual – a prominent insurance company – decided to allocate $100million to bitcoin. Many considered this to be crazy.

However, when you calculate the size of the position as a fraction of their $500billion fund, it only accounts for 0.02% of their assets under management. This makes the risk more than manageable. In the hypothetical scenario that Bitcoin goes to zero, they’re risking a very small percentage of their capital. On the other hand, if Bitcoin goes as high as $200K, the potential profit that the company could earn is $1billion.

This is why you hear so many talking about Bitcoin as having ‘asymmetric upside’ – a small allocation in your portfolio has the potential for outsized gains.

Insurance companies are traditionally conservative. They typically invest in very safe assets such as FED bonds that normally return 0.25%. To earn the sorts of profits that they could potentially earn from Bitcoin they’d need to invest around $40 Billion over 10 years, which is equivalent to 7% of the company’s assets. Now we can clearly see the profit potential of investing a small part of one’s funds in Cryptocurrencies. 

Use Simple Indicators

To now, we’ve only spoken about risk management. This is only half of the equation. Adding a bit of technical analysis and a very basic trading strategy to your holding can significantly increase your profit potential.

Beginner traders are tempted to try advanced and fancy indicators to get the best out of their strategies. Most of the time, more complex indicators need a proper understanding to translate into actions the trading signals.

The advantage of simple indicators is that they are straightforward to interpret and use without compromising their effectiveness.

Using the most intuitive technical indicator could have improved the result significantly. The moving average is a visual tool to smooth an asset’s trend, reducing short-term noise that may provide misleading information for the investor. In this article, you can read more about moving averages and how they work.

“Simple” doesn’t mean “less profitable”

Back to the previous example, if you invested $100 in Bitcoin in 2012, you would have around $1,500,000 today. How could you improve this return?

Moving Average Strategy on BTC since 2012


The buy signal from this indicator occurs when the moving average calculated on 9 periods crosses above the one calculated on 200 periods. The sell signal comes when the opposite crossing occurs.

Buying Bitcoin in 2012 and running this strategy since then would have left you with a position of more than 60 BTC, worth today around $2,500,000.

What is even more interesting is that the maximum loss on the position would have been around 40%, which is much lower than the loss that long-term holders had to suffer.


This is a very simple trading strategy that can be applied using tools like Coinrule.

Automated Trading Strategy On Coinrule

Key Takeaways

  • Don’t let fear, stress, or euphoria lead your investment decisions. Try to understand how you can profit from the market, give yourself some rules, and stick with them. Building an automated trading strategy with Coinrule can help because you set up the parameters, and then the bot trades regardless of any feeling interference.
  • Risk management has a key role in reducing the impact of stress and fear on your decision. Investing a large amount at the beginning makes you anxious about every price swing. The good news is that cryptocurrencies have an excellent risk-reward ratio, meaning that there is much more potential return than the risk you are taking. 
  • Play it simple. In the beginning, you need to understand completely how your strategy works. Only with a full understanding of how the trading system should run will you be able to successfully adjust and improve it over time. Common indicators like moving averages are a perfect guide.
  • Look at the right time scale for your needs. You can observe the market from countless angles. Each will provide a different view, suggesting a new scenario. That will only take you away from your original idea. Just like sticking with your plan, you should also evaluate conditions using the same unit of measure. Simply put, if you bought Bitcoin because you got a buy signal on the daily chart, is it really necessary to look at the 5-minute chart to decide when to sell?

Ultimately, be patient and never forget the best lessons for beginner crypto investors.

Trade safely!