Common Mistakes in Crypto Trading
Let’s face it; cryptocurrency trading is profitable. But of course, the money only comes to those who know what they’re doing. Or better still, traders or investors who are wise enough to avoid some of the most common mistakes out there. For the most part, crypto gains have never failed to attract investors who are willing to pump more money into the growing crypto market. But hey, not everyone is hitting up their bankroll and even worse, some newbies keep making quite a number of “easily avoidable” mistakes. And of course, this post will explore up to 7 of them!
But first — What Exactly is Crypto Trading?
This form of trading is basically focused on exchanging one cryptocurrency for another. Crypto trading shares similarities with Forex in the sense that you can trade coins like Bitcoin or altcoins for fiat currencies like USD and Euro. Of course, this is one of the easiest ways to enter the crypto world without having to mine coins yourself.
Now let’s dive into some common mistakes you’ll want to avoid in the course of your journey.
1. Failing to Do Your Own Homework
This is perhaps one of the biggest mistakes new crypto traders are most likely to make. Yes, at this point, we’re basically talking about the rush to join Telegram groups and follow Twitter traders for signals. Trust us, doing this is perfectly normal, but it only gets worse when you fail to do your own research. Speaking of which, as a new trader, it’s always in your best interest keep yourself from falling for shills. In fact, we’ll recommend you brace yourself for countless shillings across every social medium out there!
For instance, you’re likely to meet people who’ll sing the praises of a particular coin, but of course, all they want is your money. The thing is, a significant number of these shills are paid promoters or even worse fake accounts. So yes, listening to them is perhaps the surest way to lose your hard earned money.
So what’s the point?
Well, it’s pretty simple — never fail to do your own research before entering any market. Yes, you need understand basically everything about a coin and of course, get a better understanding of what you’re getting into. In a nutshell; don’t fall for shills!
2. Paying Less Attention to Basic Charting Fundamentals
What’s the first thing that hits your mind when you hear charting or technical analysis? Well, chances are you see them as complex or overrated, but hey, you still need them for the journey. Yes, for the most part, both market movements and coin prices feature patterns that traders can identify and use to increase their chances of making successful trades. At this point, we also think it’s worth mentioning that nothing is certain in the crypto market. In other words, there are times when charting and technical analysis may fail to meet your trading expectations. So yes, if you’re really serious about trading, you won’t be wrong to get familiar with the basics including candlesticks, support and resistance levels and trend lines.
Support and resistance levels? Well, it’s pretty simple — resistance zones are price ranges which a coin has repeatedly failed to break through. And on the flip side, support levels are areas where the price often bounces back. Once you figure out how to identify these zones, you’ll be able to get an idea of where the current price stands. And that, of course, will make it easier for you to know if it can actually go higher or drop further.
What about trend lines? These are also pretty easy to understand. At this point, you should be looking at uptrends and downtrends — the former is reflected by price making higher lows while the latter is indicated by lower lows.
3. Failing to Take Profits at the Right Time
Do you have exit plans? Or are you just a trader who keeps holding regardless? As a beginner, it’s always in your best interest to have an exit plan for every trade. Yes, it’s never a good idea to just wing it as you go along — you might actually end up losing your profits or go into a loss. In a nutshell; you should always have an exit plan if you’re trading — get into the habit of booking your profits and moving on when the time is right.
Note: As a trader, you should be aware that there times when the price goes higher after you take profits. And yes, that can be really annoying, but it is what it is!
It’s however important to note that you can beat the market by selling in stages instead of selling all your coins at once. Pretty sure you get the point!
4. Panic Selling at the Bottom, Then Buying Back at the Top
Volatility — the necessary evil of the cryptocurrency market. Yes, as a beginner trader, you should expect price swings and learn how not to get spooked by them. Trust us, doing this will cut down your chances of losing money along the way and that’s huge. For the most part, you should avoid the mistake of selling on panic. It’s basically a situation where you sell when faced with a sudden/unexpected drop.
So what’s the problem with this approach? Well, the thing is, panic selling actually causes you to lose money. In essence, you basically lose money when you sell. And oh, you should be aware that the whole idea of cutting your losses might not be all that great in this regard. The thing is, most coins are likely to bounce back in a pretty short time (even in hours) and you may eventually buy at higher prices. Of course, buying high and selling low is as bad as it sounds — it’s basically the surest way to go broke!
5. Ignoring the News
Here’s the thing; there’s actually more to being a successful trader than understanding price movements, charting and market analysis. Yes, it’s also incredibly important to follow crypto news and keep up with the current and future developments in the market. Remember, the crypto market is speculative and uncertain. The market, for the most part, responds strongly to not just positive but also negative news. So yes, it’s highly recommended for you to always be in-the-know — follow the news!
And that’s it! These are top 5 common crypto trading mistakes you won’t be wrong to avoid in the course of your journey. As mentioned earlier, there’s money to be made in crypto trading but of course, only wise traders get to stack up. Finally, you should be aware that there are still other mistakes to avoid including putting all your funds in one coin, getting emotionally attached to a coin, looking for the next big cryptocurrency and more. The key takeaway; be a wise trader. Good luck!