Crypto trading is a process of selling and buying of cryptocurrencies in the crypto market place with the motive of gaining profits associated with the digital coins. The community of crypto traders is expanding day by day as crypto space provides excessive opportunities for investment. But the fact cannot be ignored that cryptocurrency is highly volatile, so as a trader you can strike gold overnight but can also hit the bottom in the twinkle of an eye. Thus, trading in crypto markets need improved skills and careful analysis of trends. Also, you need to prepare yourself to avoid the common mistakes and learn from the past experiences of crypto space to become a successful trader. This article is based on experiences of a number of crypto traders over the past few years which would help you in identifying mistakes to avoid while crypto trading.
Common Mistakes To Avoid While Crypto Trading
In the following section, we tried to mention the common mistakes which you need to avoid while crypto trading:
- FREE FLOW OF FUNDS | LIMIT YOUR INVESTMENT
Before starting the crypto trading, you must be clear in your mind about the funds you wish to invest in cryptocurrencies or at least calculate the amount you can afford to lose. Losing or winning is part of crypto trading. But investing more than your affordability to lose just to gain a few more profits might not sound a good idea. So, just account for the money or deposit in the wallet only that sum of money, you wish to spend.
- LACKADAISICAL ATTITUDE IN TECHNICAL ANALYSIS
Newbies or beginners generally lack the efforts to properly analyze the market trends and to strategize the investment plan. Whether you are involved in long term investment or short term speculation, you need to calculate the risks and analyze the markets dedicatedly. You can take the help of OTC brokers, trading bots, analysis tools, trading charts, and many more available in the crypto sphere.
Unrealistic profits expectations are the result of lacking in the practice to interpret the technical data available for analysis, which will end you up in losing most of the funds. You might be involved in the practice of “Holding” your coins on the basis of expectations for better prices due to inappropriate or not even studying the history of trends, experiences of veterans, past practices, and many more.
Thus, you can avoid the practice of buying or selling the currencies on the basis of opinions shared on Twitter, Medium, or any other websites unless it has analyzed the data based on several factors.
- PRICE OVER MARKET CAP? | DON’T DO THAT!
Many of the newbies just try to buy as many coins as they can when the crypto coins are following the downtrend. They just forget to understand the reasons and extent of the falling prices. Also, many of the traders invest in the altcoins just because they are cheap without estimating the future prospects of the growth of that particular coin. Thus, while trading in crypto, you need to overlook the prices and assess the market cap (number of shares multiplied by one share price) of a specific coin or company. Also, cheap coins might be fraudulent at times due to ease of launch of ICOs in crypto space. So, just be careful! You can also take the help of CoinMarketCap Website, which can give you the figures to examine the best coin for investment.
- IGNORING VOLATILITY | TIME IS MONEY
Unlike traditional stock markets, the crypto market space is highly volatile in nature where holding the coins for a week means holding stocks in traditional markets for three months. Many traditional traders when turned into crypto traders, just buy the coins and forget them to study for months, which increases their chances of losing due to opportunity cost incurred. Thus, you need to consider that time is money, more time and effort you put into studying the trends, possibilities of profits will increase more. And if you cannot give much of your time, so you can always start with small amounts and try to understand the market.
- ONLY BITCOIN! | DIVERSIFY PORTFOLIO
You must be well aware that unpredictability is an inbuilt characteristic of cryptocurrencies. You never know that the currency which is almost touching the peak might fall in the next few hours and hit the rock bottom. Novices sometimes end up buying similar types of coins( like “only” BTC) with all of their money. Investing in one coin (not the amount but type) always increases the risks to lose. Warren Buffet quoted once “ Don’t put all your eggs in one basket”, similarly you should avoid investing in one coin and instead diversify your crypto basket or portfolio with different coins (different kinds and types both) to balance the profit and loss.
- IGNORING SECURITY | MANAGE PRIVATE KEYS
As cryptocurrency is based on Blockchain Technology, many of the crypto traders considered it as highly secured. But, as the industry is growing, sophisticated processes of cyber crimes are also increasing. You need to be extra conscious about the scammers and hackers who are constantly keeping an eye to your funds. You can assure the security by completing the two-factor authentication process while registering on any exchange, transferring your private keys from online exchange wallet to your own hot or cold wallet, keeping your recovery or seed phrases up to yourself only, installing the antivirus and anti-malware to your system (either phone, desktop or any other medium) and many more.
- OVERFLOW OF EMOTIONS | BE RATIONAL
Emotions like fear of loss, gut feeling, over-optimistic growth, regret for lost profits, and many more do not have any place in the crypto trading. Being emotional is just not a quality of a successful trader. You just cannot buy or sell the coins, just because you feel likely. You can avoid this mistake by setting up the plan for your goals, rechecking the data analysis, and reconciling the past experiences. Fear and greed are two of the emotions which might turn your profit into loss but placing the target sell demand and stop loss to initial level to the particular might save your massive funds.
- FEAR OF MISSING OUT (FOMO) | ENDURANCE IS THE KEY
FOMO! All the young traders might read this modern term on social media posts. But in crypto markets, how can FOMO be a common mistake to avoid while crypto trading? In the crypto space, Fear of missing out is linked to a situation where traders used to sell an asset early due to fear of losing profits and buying at maximum while missing out the insider information. But, FOMO can be avoided if you follow the certain set rules associated with markets and limit the possible allowed losses and profits. Also, endurance is the key to the problem of FOMO. You just need to keep and don’t be anxious about slipping any deal and rely on your analysis.
Crypto trading can help you in enjoying the financial freedom if you can successfully avoid some common crypto trading mistakes. Advanced successful traders are continuously involved in trend analysis and in enhancing their knowledge to earn the profits wished. Thus, to become the millionaire from trading cryptocurrencies, you certainly need to focus on mistakes to avoid while crypto trading. Be patient, don’t be greedy, and try to learn from your own and others mistakes while launching the rocket of crypto trading.
Have A Safe Crypto Trading!!
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Tarulika is an engineering graduate and an eloquent crypto blogger. Being a digital economy supporter, she keeps herself updated with the course of the latest innovation in the crypto industry, Blockchain Technology, and the Internet of Things. Currently, she is dedicatedly curating the simpler and interesting content for crypto guides for beginners to accelerate the movement of the financial revolution. If you want to learn more about the cryptocurrencies, latest trends of blockchain-powered AI applications, you are free to follow her on LinkedIn.