There are so many overnight success stories in the crypto industry and it has attracted several people to venture into the market. But, what many people are not aware of is the years of practice and learning to find valuable trade opportunities.
That is why many people who jumped right into trading without understanding the fundamentals can sometimes fall for scams.
Preparation and research is the key to avoid falling for fraud. Plus, the volatile nature of crypto trading can make unsuspecting beginning traders incur heavy losses.
What are the common mistakes that you need to avoid if you’re planning to start trading cryptocurrencies?
Common Crypto Trading Beginners’ Mistakes
There are low barriers to entry in the crypto market which makes it even more attractive for people to join in.
Unfortunately, many of these beginners don’t understand the volatility in the market, hence, they tend to dive in unprepared.
If you are a beginning trader who is still trying to explore the market, then you should avoid these mistakes or else you might make more losses than expected:
1. No trading strategy
Yes, it is true the cryptocurrencies are volatile, but if you know what to look for and have a trading strategy in place, then you can mitigate the risks.
Many beginners who have no strategy set in place tend to jump from one trade to another. As a result, they are often late when buying or they tend to sell too early.
Mistakes tend to happen every now and then but what matters is to learn from them. Study the situation surrounding the coin – news, latest tech, sentiment on social media – to get a good grasp on how you should build your strategy.
2. Fear When Seeing Volatility
Cryptocurrency is more volatile compared to stocks or commodities. You’ll see coins lose their value in a matter of minutes.
If this happens, don’t let yourself get carried away by fear. Instead, try to understand why it happened and the possible circumstances around it.
Also, take note that Fear, Uncertainty and Doubt (FUD) happens in the crypto sphere. It’s a strategy used to influence people to sell for lower prices. That way, buyers can buy the coins cheaply.
3. Buying Cheap Coins
Some inexperienced traders think that cheap altcoins have strong growth potential. That is not always the case. True, the coin will develop, but it might be a fraud.
This is where many could fall for scams. First-time traders tend to think that these coins are simply undervalued and are betting that it would suddenly grow in value.
Remember, that not all cryptocurrencies are profitable so it is important to research and analyze a coin before making the trade.
4. Investing money that they can’t afford to lose
Due to the overnight millionaire stories going around in social media, those who are new in cryptocurrency tend to put in most of their savings in their trading account. Sometimes, they would even take out loans to fund their trades.
This is not a good practice because, by the end of the day, cryptocurrency will always be volatile. If you can’t manage the risks, you’ll lose more than what you’d expect.
Trade only with the amount you can afford to lose.
5. Fear of Missing Out (FOMO)
This happens when there’s a lingering fear of losing profits and missing out on opportunities.
Experienced traders already know when to get out of trades when it doesn’t seem to be favorable. But, novice traders don’t have the confidence or the necessary expertise so they tend to follow the herd.
That is why a solid trading strategy is necessary before starting crypto trading. You’ll know what to do even if you experience a FOMO.
6. Not Using Stop-Loss
Losses will always happen in trading so it is important to accept it and move on to the next trading opportunity.
Also, there is a stop-loss system that will help reduce losses once a price reaches a specific value. This is a great tool since it automatically liquidates the trade when the price goes down.
7. Panic Selling
During price fluctuations, novice traders tend to sell. Although it is understandable to cut losses, they’re not yet losses until you sell. Sometimes, it is best to hold and wait for the price to go up again.
As much as possible, you have to follow ‘buy low, sell high’ or else it would be like throwing money away. You can improve your knowledge on trading by visiting sub-Reddit forums or Youtube.
8. Rely on Skill, not on Chance
Although the prices seem unpredictable in the crypto market, there are many tools to help you analyze trends and predict its movement.
Some of the newer traders see crypto trading as sheer luck and rely on chance to get profits. Be the type of trader who relies on skills and knowledge to make trades. That way, you can have more consistency in your profits.
Being impatient with trading leads to frustration and may result in trading decisions based on emotions.
Patience is essential when trading cryptocurrencies. It is inevitable to miss out on some trade opportunities but this is fine for as long as you can learn.
10. Not Using Crypto Trading Tools
Beginning traders may not be using essential crypto trading tools to help them analyze the market and make better trades.
Before starting crypto trading, find the best tools that you think you might use. There are many options out there, such as CryptoCruisers, that are designed for novice traders.
For example, the online dashboard of CryptoCruisers’ members shows market insights in a simple manner. This makes it easier to decide whether to place a trade or not.
Additional tips for Beginners
Since you’ve made it this far, here are a few bonus tips:
Use both hot and cold wallets
Hot wallets are online wallets where you can store your cryptocurrencies like Bitcoin.
Exchanges, like Binance, give you access to a wallet hosted on their platform which allows for faster access to your funds.
However, it’s not advisable to keep all your money in a hot wallet because of the risks involved.
If you don’t need immediate or instant access to your funds, it’s a good idea to store them in a cold wallet.
These are physical devices that aren’t connected to the internet and reduce many of the risks associated with hot wallets.
Learning when to use hot and cold wallets will make your crypto trading experience a little bit better.
Join Cryptocurrency Groups on Discord
Discord is a great place to find groups that can help aspiring cryptocurrency traders better understand the market.
Many professional traders actively provide tips and insights that can help newer members find success with their trades.
There are even channels that offer trading signals (signals are like a set of instructions that’ll tell you when to trade and when to sell a coin). But, depending on the channel, you might need to pay a premium fee to access them.
There are so many overnight cryptocurrency success stories around that it feels like you’re the only one missing out. But the truth is, if you want to start trading the right way, you have to put in the work. Start by reading reliable guides, ask questions from seasoned veterans and use effective trading tools.