Gone are the days when only brokerages, trading houses, and big financial institutions could actively trade cryptocurrencies. Everyone can get in on the action. Besides initial coin offerings (ICOs), there are seral blockchain investment products, such as non-fungible tokens and decentralized finance. If you haven’t already invested in the digital currency space, start now. Trading cryptocurrencies isn’t as tough as it looks, but it’s not exactly easy. It can be daunting for beginners because of the jargon and processes involved. Since you’re new to the crypto investing scene, get a better understanding of the market and how to trade it.
As a trader, you have to keep yourself accountable when you take action. In cryptocurrency trading, you’ll make mistakes. Learning from these mistakes is an important part of the learning journey. You can learn from your mistakes or learn from the mistakes of others and accelerate your progress. In this article, you’ll discover the most common mistakes in cryptocurrency trading. If you want to make the most profitable trades, make sure to avoid these mistakes.
Not Choosing the Right Crypto Exchange Platform
Before you begin trading, sign up with a cryptocurrency exchange. You can use the platform to buy or sell cryptocurrency using a fiat currency, such as the US dollar, or with another cryptocurrency. For instance, you can buy Ethereum with US dollars and the other way around. Many of Binance’s assets are purchasable with USD, which saves you money in conversion fees. Find the right cryptocurrency exchange for your investing needs. Reputation counts. So, before you create an account, take the time to do some research. Read customer reviews, look into the exchange’s history, and look for stories that might provide valuable insight.
You’ll want a reliable cryptocurrency exchange. But with so many options, how are you supposed to choose the best one? Take into consideration the specific details of each cryptocurrency exchange. There are many factors to examine, such as:
- Ease of use
- A broad selection of cryptocurrencies
- Exchange fees
- Platform security
- Reliable customer support
- Useful trading features
As you can see, there are many factors that can influence your decision as to which cryptocurrency exchange to choose.
Trading Without a Stop-Loss Order
In cryptocurrency trading, there’s the risk of losing the invested funds. To manage the inherent risk of trading, place a stop-loss order. It’s a tool used by many traders to limit losses and reduce the risk of exposure. Almost all cryptocurrency exchanges offer this option. If you’ve never used a stop-loss order, there’s no better time than now to start. Calculate what position size to take and how much money you’re willing to risk in a single trade. Your order will be fulfilled at the specified price. Always use a stop loss when entering a trade to reduce risk exposure and make trading cryptocurrency easier.
Not Knowing What a Good Investment Looks Like
A good investment is the one that gives you the highest possible return. With some research and due diligence, you’ll be able to find good investments, regardless of what cryptocurrency you’re trading. Speaking of which, more and more coins are available. To determine if a cryptocurrency is worthy of investment, see if it has:
- A particular use case or function
- A dedicated community of backers and investors
- A reputable team of developers
- A good whitepaper that educates with in-depth information
- A roadmap for future development
Equally, you should take into account the cryptocurrency’s market cap, trade volume, and, last but not least, past track records.
Following The Herd and Buying High
Herds charge into risky ventures without enough information or appreciation of the risk/reward ratio. What others do impact your decision; you go from not investing to making the investment. That’s because you have an intrinsic preference for conformity. Herding is significant during up-markets, low volatility, and high-volume days. It’s a behavior that’s not fully rational. What is more, momentum investment can exacerbate price movements and add to volatility. Your decisions shouldn’t be influenced by the actions of acquaintances, neighbors, or relatives.
If everyone is buying cryptocurrency high, that doesn’t mean you should do the same. To buy high and sell low means losing money. The idea is to buy at a low price and sell your digital assets at a high price. The price of cryptocurrency at any given time is based on the supply and demand at that moment in the market. On a cryptocurrency exchange, you can get the latest prices. If you want to trade Ethereum, you’re fortunate because it can be bought and sold for fiat currency, i.e., ETH to USD. The Ethereum price USD is updated in real-time.
Don’t subscribe to the herd mentality. It’s not always a good idea to follow and copy what other cryptocurrency traders are doing. Rely on your own independent analysis. Don’t make an investment for fear of missing out, especially if you haven’t done your due diligence. Make decisions based on sound, objective criteria and don’t let your emotions get the best of you.
Using Margin Trading Much Too Soon
Margin trading involves borrowing money from the cryptocurrency exchange and using it to make a trade. You can magnify your returns owing to leverage. Nonetheless, you can incur losses if the trade doesn’t go as planned. It’s possible to lose significant amounts of money in a short time period. Your trade may be liquidated at a loss before you have the chance to react. When it comes to margin trading, near-perfect timing is required. Cryptocurrency trading on margin is a risky exercise and shouldn’t be tried by novices. Even if you have experience, you should exercise caution.
Cryptocurrency brings about opportunity and makes it possible for the average individual to enhance their investing skills and earn profit along the way. Focus on making fewer mistakes with each trade. If you don’t want to set yourself up for failure, avoid having unrealistic expectations. You’ll be prone to making mistakes that you wouldn’t otherwise commit. To be successful, approach cryptocurrency trading as a business, not a hobby or a job.
