Most people believe that increasing your average position size will increase the amount of money you make trading cryptos. If you typically buy 500 coins when you trade BNB , wouldn’t increasing to 1000 coins automatically make you more money?
This might sound crazy, but you will probably not make more money by doubling your position size overnight. Adding size will make you focused on the money you are risking, and not on what the market is telling you.
You get emotional when a trade goes against you because you are afraid to lose the money that’s on the line. You will scalp for .10 cents and end up missing a 1 point move. You’ll be up all night because you are afraid of your Ethereum tanking while you sleep. Here’s why lowering your position size could help you make more money trading cryptos:
Less Emotions
Over-sizing your positions is the number one cause of trading emotions. The best trading decisions are made when you are trading small enough size to keep you unemotional. Risking a huge portion of your net worth on a trade will make you fearful. When you trade with fear, you cannot accurately interpret market information and make rational decisions. In order to eliminate this fear and stress from your trading, you should decrease your position size.
You should not be risking more than 1%-3% of your account size on each trade. Your life should be no different if the trade hits your stop loss and you are forced to take a loss. Knowing that the trade will not make or break you will allow you stay level headed.The best crypto traders I know do not mourn their losses, and they don’t celebrate their wins. They remain in a constantly neutral state.
More Patience
Patience is the difference between winning and losing traders in the crypto markets. Patience to wait for the right entry, patience for the right setup, and patience for the right exit. Trading big positions makes it tempting to sell too early, because you are up what you perceive to be a lot of money. You sell when you feel like you have made a big enough gain. What you should be doing is selling when the market tells you the trend is changing.
The market doesn’t care how much you are up or down on a trade. You have to be trading small enough size so that you can listen to what the crypto markets will do next. Every little dip in a crypto makes it feel like it is going against you big, and often you will panic sell, and end up missing the move you were anticipating. Trading smaller size allows you to hold your position through all the movements against your position, and allows you to participate in bigger picture trends in the crypto market.
Don’t Feel Chained To A Computer
If you are risking your life savings on a trade would you feel comfortable going to sleep knowing you could wake up almost broke? The answer for almost everyone would be no. Trading too much size makes you feel like that you have to be watching every tick of your trade. In a 24/7 market, trading too much size will consume your whole life.
When you are trading small size, you feel comfortable going to the bathroom, going to get a meal, and going to sleep at night. There is more to life than just trading. Keeping your position sizes under control is crucial for maintaining a healthy balance between your trading and normal life.
Kunal Desai is an American day trader (stocks and cryptos) and founder of Bulls on Wall Street and Bulls on Crypto Street, two online trading academies and informational publications. He has been featured in many high profile publications like Inc, Forbes, Buzzfeed, and Fortune. He has spoke at trading and business events all across the World.