Kevin Zhou is head of trading at Galois Capital, a crypto hedge fund.
We asked Kevin about the top 5 high-level trading tips for crypto traders. Here are his answers.
1) Don’t Overtrade
One of the biggest mistakes that traders make involves getting overzealous with the whole process of trading itself. According to Kevin, instead of staring at charts and executing trades all day,
“You should be spending most of your time researching.”
This simple statement contains a lot of wisdom. Very little time needs to be spent executing trades. It’s all about knowing what coins have potential and why.
Just how often should you be trading if you have a day job? The answer is probably a lot less frequently than you might imagine.
“I mean like once a quarter…one trade a quarter.”
2) Seek Out High Liquidity Markets and Beware of Slippage
Liquidity is important for traders. Simply put,
“Liquidity really matters.”
Markets with thin liquidity make you a victim of slippage, meaning you don’t get the best asking price for all of your trades.
3) Take the Contrarian Perspective
This point is commonly talked about but not widely understood.
Kevin puts it well when he says,
“It pays more to be a contrarian. You always want to be the first optimist or the first pessimist. The key is really to be one step ahead of the average person.”
Being the first to contradict prevailing market sentiment means that you will be ahead of the game and enter trades with better timing.
4) Trading is a Full-Time Job
Kevin reminds us that there is always another person on the other side of any trade. You have to consider what that other person is thinking. Do they know something you don’t?
“I don’t think you want to go up against someone who spends their entire life doing this stuff.
That’s why it’s best to keep in mind tip number one and invest for the long-term.
5) Be Humble and Rational
Another important thing, according to Kevin, is to be disciplined, humble, and approach everything from a rational perspective rather than an emotional one.
If you make a few winning trades, don’t get caught thinking you’re the next Warren Buffett. This mindset will land you in the red most of the time.
“It’s hubris that really blows traders up.”
In summary, when trading crypto, be mindful of five things. Do your research, trade long-term and infrequently if you have a day job, go where the liquidity is, be a contrarian, and don’t get too prideful or emotional.