Trading crypto is not complicated, but it’s also never easy. Focusing on a few simple ingredients for a successful trading system is the goal of this article. In addition to my personal trading experiences, this post explains why risk management, regular journaling and discipline are essential to long-term success. Without them, traders have no chance of consistent success. 

Discipline has – and often still is – my biggest focus area for improvement in trading. In other areas of my life – the gym, dieting, etc. – I can stay extremely disciplined. 

But somehow trading is a different ball game. 

I am confident other traders are faced with the same issue. But disciplined execution, risk management, journaling and analysis are essential for success. In fact, none of these can be excluded. All of them must be present together in any trading system. 

My Personal Trading Journey

For most traders, the best way to learn is to fuck up – multiple times. In fact, easy success at the start of a trading career is often one of the most dangerous things a trader can experience over the long term.

Making mistakes early crystalizes the importance of disciplined trading and avoiding making decisions based on extreme states of emotion (e.g., euphoria or desperation). Implementing this mindset into a trading system from the start is excellent. But mistakes will still happen. The only real way to learn the importance of these aspects of trading is to experience how trading without discipline feels – getting rekt.

Every honest trader will agree that there is basically no one who didn’t experience this at some point in their careers. Everyone loses money at some point.

For me, the first time experiencing this was in the middle of 2018. Crypto was in the middle of a bearish market period after peaking in late 2017, and I was bag holding everything from the cycle top. This was when I decided it was the time to learn how to actively trade and navigate the market so I wouldn’t make the mistake of holding through a top again. I discovered Bitmex, got some wins, took some losses, and eventually fell into a losing streak.

At this point, I decided to start upping my risk per trade to “make it back,” and of course this didn’t end well. Luckily, at the time, I ended up “only” losing about 30-35% of my total crypto portfolio. But I felt miserable and hated myself for being so reckless. This wouldn’t be the last time I lost money trading, but it was a key moment in my career that forced me to realize the importance of proper risk management.

On a similar note, it’s important for most people, including me, to remember that even though crypto often doesn’t “feel” like real money, it is. Traders are playing the market with real money. Personally, I’ve found myself reacting to buying something in a store for $100? No thanks. But aping $1,000 into a random meme coin? Of course! Remembering the funds in a trading account are real money helps bring some seriousness to a trading strategy. 

Risk Management 101

A few years ago, I published a basic and easy-to-follow Twitter thread on some risk management principles and questions traders can use to develop their own habits. This section explores a few of those ideas. 

First, a generally accepted rule is not to risk more than 1% or 2% of a portfolio on an individual trade. This fairly safe approach leaves room for a lot of mistakes while not going completely bust. But traders should realize this is just a guideline. Sometimes it may be appropriate to risk less than 1% per trade! Other times risking more than 2% may be appropriate. 

Also, having separate accounts for active trading and passive investing is recommended. Mixing these two accounts into one is generally not advisable because the two approaches to the market require different mindsets and forms of risk management. 

Lastly, traders who really want to learn from past trades and identify mistakes need to keep a journal. Journaling is essential to disciplined trading. 

Personally, I actively journaled all my trades in 2019 and 2020. But I stopped in 2021 because the market was in “easy mode.” But I wish I had continued journaling because I developed bad habits from that bullish part of the market cycle that I had to unlearn and correct in 2022 and 2023. Now I actively journal again with tools like Coin Market Manager and my performance continues to improve. Losses are easier to take, losing streaks are less intense, and my mental state is in a much better place. Trading in a choppy environment like the past two years have been for crypto requires much more discipline than the “up only” market of 2021, and a journal keeps me focused. 

Improvement is Inevitable

Very few traders don’t improve after integrating the basic principles of discipline, journaling, and risk management that are mentioned in this article. It’s almost impossible not to improve through careful execution and detailed review of all trades. Especially as a beginner, building strong habits is extremely important. Focusing on improving small areas of a trading system starts with a foundation of proper management, study and discipline. 

No trader is perfect, but these foundational elements are irreplaceable. 

The next trade is the only one that matters. The best any trader can do is try a little better next time and learn from past mistakes with a disciplined approach to incorporating improvement. That’s all it takes to succeed in this game.