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The 6 Most Common Mistakes in Technical Analysis
Technical Analysis (TA) is one of the most common methods used to analyze financial markets. TA can be applied to all types of financial markets such as stocks, forex, gold, or cryptocurrencies.
Technical analysis is one of the methods used when analyzing financial markets. However, certain factors need to be considered while doing technical analysis. If these factors are not taken into consideration, the buying and selling transactions made as a result of the analysis may cause serious losses. All the mistakes made by people who set out to learn how to do technical analysis will contribute to the learning process. Of course, efforts will be required to keep these errors to a minimum.
Instead of suffering the consequences by making all the mistakes that can be made, we have brought together the 6 most common mistakes so that you can see what these mistakes are and avoid them.
Focusing on Earning Without Conserving Capital
People who start buying and selling transactions usually aim to make money in the first stage. However, the most important factor in protecting capital. It would be a much better decision to carry out buy-sell transactions with lower amounts in the initial period. After starting to earn money regularly, it will be the right choice to make larger investments by increasing the capital.
The use of the system called stop-limit in buy-sell transactions is a very accurate strategy in reducing losses. Not all buy-sell choices made may be correct. Using the stop-limit order is one of the best moves for investors to keep the loss at a minimum when a wrong decision is made.
Executing Very Frequent Buy-Sell Transactions
People who perform their technical analysis before buying and selling transactions begin to wait for the right moment to come. In some cases, the right time will be quite late. In such a situation, buying and selling transactions made in order not to be idle would be a big mistake. It is one of the reasons that lead investors to loss. It is necessary to wait patiently for the right signals to arrive.
Often, traders base their technical analysis on a short process for trading. However, the longer the technical analysis is done, the more likely it is to reach the right conclusions. In the short term, buy-sell transactions made for profit will drag people into chaos. It is not recommended especially for new investors and is among the mistakes made.
Executing Revenge Trading Transactions
Major mistakes made in the cryptocurrency market lead to serious losses. After such a situation, investors enter into an emotionally challenging process. It will be very difficult to make the right decisions in this process. It is one of the biggest mistakes to make buy-sell transactions right after the losses that occur after the mistake. These transactions, called revenge trading, will often result in frustration.
After the losses, it is always necessary to get away from emotionality and continue to think analytically. If necessary, it would be right for investors not to make a new transaction until they are psychologically ready.
Not to change your mind, to be stubborn
It is very difficult for people who are afraid to change their minds and who are stubborn to be successful investors. Conditions in the cryptocurrency market can change in an instant. It is necessary to adapt to changing conditions as quickly as possible. Changing or adjusting the plans according to the new order are the steps that a successful investor should always take.
Although it is important to stick to the plans prepared before investments, it may not be right to persist in them. Even a plan opposite to the one made should be considered. Keeping up with the changes in conditions is the most important factor on the way to success.
Ignoring Unusual Market Conditions
Technical analysis is not always the most reliable option. In some extraordinary situations, investors' decisions based on technical analysis alone can cause great losses. To give a simple example, if the RSI value for any cryptocurrency falls below 30, it can be said that the sellers are in weight in the market and the coin is in a downtrend. In some cases, the RSI value approaches the extreme zero value. However, this does not indicate that the coin will enter an uptrend again. For this reason, trading in such a situation can cause great losses.
In such an unusual situation, decisions should be made by using different methods without relying only on technical analysis and evaluating the results together.
Forgetting That Technical Analysis Is A Game Of Probabilities
While performing technical analysis, many different data are checked. It is created with a plan as a result of long efforts. However, it is not possible to reach a definite conclusion as a result of technical analyzes using many data. Even the world's best analysts cannot come to firm conclusions. Although the results are highly probable, they are not conclusive. This should be kept in mind while making investments.