One of the big dangers about learning to trade is that you will naturally look to certain people to learn from. However, there are two types of teachers. The best teacher will show their students how to make their own decisions. The worst teachers will encourage their students to follow them blindly. The problem is that when a market moves quickly like crypto markets have recently, those people can often get caught out. Here are the red flags to watch out for.

Outsized returns

Often the people who get the most attention are those who made outsized returns. The problem with this is that even an outsized return can be a red flag. Why? Because a very large return only comes from making a very large risk. The same risky behaviour that causes excessive gains can, you guessed it, cause excessive losses.

High leverage

There is a time to use leverage and the best traders know when to raise their risk. However, if people use or encourage the use of high leverage then beware that disaster may be coming.

Life is uncertain

It’s true but unsettling. There is some part of us that always wants certainty and looks to people to give us that certainty. The reality that we actually know is that life is full of uncertainty. The financial markets are exactly the same. Unexpected events can and do happen. So, there is never ever a ‘can’t lose’ trade or a 100% risk-free investment. All investments have risk. All trades have risk.

The summary

If you are looking for ways to navigate markets you need to find resources and people that will do these three things. Firstly, they must show you how to make your own trading decisions. Secondly, encourage you to use low levels of leverage, and thirdly to be prepared for uncertain market reactions. Risk must be always defined and managed. There is no place for teaching people to put all their money into one trade or investment. In an uncertain world, it just does not make sense.

At the start of every week, we prepare traders for the upcoming economic events so we can spot in advance some of the best potential tradable opportunities for that week. So, if you have not joined us before on one of our HYCM’s look-ahead webinars, why not register and catch the next one?

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