Cryptocurrency has generated a lot of buzz over the past several years. There have been countless stories about how it will change the financial markets and help regular people make money. That’s why over half of crypto investors aim to create an income in the cryptocurrency market.
One of the ways to do this is trading, but it won’t be easy. You’ll need to learn how to do it right to avoid wasting your money.
There’s a lot of money on the line when you start a cryptocurrency trading strategy, so you can’t afford to make simple mistakes. Below are 14 of the most common cryptocurrency trading errors that every new trader needs to know.
1. Starting With Real Money
Trading with cryptocurrency is complicated if you’ve never done it before. There are a lot of signals you need to look at if you plan to trade back and forth. It’s easy to make a small mistake and lose your money.
It pays to test trading platforms before you start with real money. Luckily, some test platforms offer trading functionality with fake cryptocurrency coins. Test these platforms before you trade for real to ensure you know how to read trading charts and make successful trades.
Ideally, you’ll keep testing trades until you develop a strategy that gets results.
2. Trading Without a Strategy
You don’t need a trading strategy if you buy and hold cryptocurrency coins. You aren’t going to sell, so you don’t need to worry about buying and selling at the right time. All you need is a strategy for how often you want to invest your money.
The same isn’t true if you plan to trade daily or weekly. You’ll need to know how to look for trading signals that signify that it’s time to make a trade. On top of that, there are many strategies to learn that have different trading windows.
You’ll need to learn about these strategies before you start the process. If all you do is look at the price of a coin, it’s hard to make wise choices, and you’ll increase the chance of losing your trading money.
3. Getting Emotional
It’s easy to get emotional with money. You worked hard for what you have, so you don’t want to see it vanish before your eyes. However, there will be times when trading your options for cryptocurrencies when your holdings will go down.
It’s hard for some new traders to reign in their emotions during those times. People panic when they see their holdings go down and panic sell their holdings. All you do is cement your losses when this happens.
Most experienced traders put stop losses for these situations. You’ll automatically sell your holdings if a price goes below a certain amount. Rely on these stop loss features to avoid making emotional decisions and selling your holdings too soon.
4. Not Accounting for Fees
You won’t need to deal with the typical transaction fees for cryptocurrencies when trading on platforms, but that doesn’t mean you’ll trade for free. Most crypto trading platforms have trading fees that trigger every time you make a transaction.
You need to account for these fees when creating a crypto trading strategy. Take a high trade volume strategy, for instance. You make a lot of trades for a small profit every time in the hope that the profit adds up.
However, trading fees can cut into your profit and make that strategy not worth pursuing. These fees will vary based on where you trade, so make sure to learn the fee structure of your chosen platform.
5. Picking the Wrong Platform
The platform you trade on plays a big part in your success. It’s not necessarily because of the coins offered on each platform. It’s the reliability of the trading platform and the security measures they take.
Reports show that billions of dollars were stolen in cryptocurrency in 2021 alone. A lot of those funds were stolen from smaller platforms that didn’t do enough to make things secure.
Make sure the platform you trust your money with has a track record of success. They should have invested enough into security and not have a history of leaving security holes open that cause their customers to lose money.
6. Betting on Cheap Coins
There are numerous cryptocurrencies on the market. Some of those coins are priced high, while others are incredibly cheap. Unfortunately, many new traders make the mistake of thinking cheap coins are a great deal.
A coin being cheap doesn’t mean it’s worth buying. In most cases, there’s a reason why those coins are priced low. There isn’t enough demand for that coin to make it worth much.
Stick with coins that have high volume and have real value on the market. If you waste your money on cheap coins that don’t offer value, you’ll end up betting on scam coins that will likely head towards zero.
7. Letting Staking Coins Sit
If you’re making long-term plays, you don’t have to keep your cryptocurrency on trading platforms. There are other things you can do with cryptocurrency platforms that will help you make more money while waiting to trade.
One thing you can do is stake proof-of-stake cryptocurrency coins. This transaction verification mechanism rewards people who stake their holdings on staking servers. You get a percentage of the transaction fee when others make a transaction.
Most staking servers let you see what interest you can expect when you stake your holdings. It’s also easy to withdraw your holdings from a staking server and trade again once you’re ready to make another trade. Many coins offer this ability now, so research which ones offer the best rates and put that into your profit calculation.
8. Only Holding on Platforms
Even if you do your research and hold your cryptocurrency on a secure trading platform, that doesn’t mean your holdings are safe. You don’t have total control of your holdings in this situation. All it takes is a mistake on the part of your trading platform or a higher-up deciding you are a risk to lock you out of your holdings.
You don’t have this problem when you put your holdings on a private wallet. Nobody else has your private keys, so someone can’t access your holdings unless you fall for a phishing attack.
This is a great way to secure your holdings until you’re ready to sell again. There are both hardware and software cryptocurrency wallets, so investigate each one to figure out the one that makes the most sense for your needs.
9. Following Pump and Dump Groups
It’s tempting to go for easy profits when you start investing in crypto. You hear about people getting rich quickly, so you look for the quickest path possible to success.
That’s why some people create pump and dump groups. They want to take advantage of people who look for quick wins and play on their emotions.
What happens is a scammer will post signals in an online group telling people to buy a coin at a specific time on a platform. That person buys the coin ahead of time to take advantage of other people buying. While a few people will make a profit, most will buy too late and lose money when the people sending the signal sell their coins and make a profit.
You’re most likely to see success by following proven trading strategies that don’t rely on these groups.
10. Buying Based on Influencer Advice
Cryptocurrency influencers are more prominent than ever. Countless people turn to YouTube and other social media outlets to learn the latest news about their favorite coins. Unfortunately, many of those people use that to take advantage of people.
Many influencers get paid by cryptocurrency companies to promote coins and aren’t honest about their assessments. This allows them to make a lot of money while leaving their fans holding a lousy product.
While not all advice you see from influencers on the internet is terrible, you must do your due diligence before following their advice. Make sure you research the coins you hear about from non-biased sources. Doing this will ensure you avoid making bad trades on a whim from the recommendation of someone who doesn’t have your best interest in mind.
11. Not Following the News
Things change fast in the cryptocurrency world. A single news story can drive the price of a cryptocurrency up and down quickly and catch everyone by surprise.
You’ll probably miss these signals if you aren’t paying attention to the news. You can lose money because you don’t hear about a bad story. On the other hand, you may miss a great opportunity because you don’t hear about something new.
Learn about reputable cryptocurrency news sources and subscribe to them. Make it a ritual to follow the news about the products you invest in, and you’ll have what you need to make more informed choices.
12. Having no Exit Strategy
You never know when the cryptocurrency market will take a turn. Things may appear great at the moment, but the market can shift and cause almost every coin to lose value.
You don’t want to get caught at the bottom when this happens. Making a profit isn’t worth much if you lose everything because of bad market conditions.
That’s why you need to have an exit strategy. Don’t keep all the profit you make in the market. Regularly withdraw some of your profit for cash to ensure you can make use of what you earn.
There are also other offramps like crypto cards and Bitcoin ATMs. Search here to learn more about finding a place to withdraw your Bitcoin.
13. Adding to Bad Positions
It’s not uncommon for some traders to double down when they’re in a losing position. They’re so confident that a coin will go back up that they put more money in the investment to get more profit. However, that doesn’t always happen.
Most trading strategies don’t advise this practice. Even if a position comes up over time, you never know when that will happen. You may end up holding on to a cryptocurrency for a long time and not be able to take advantage of more profitable trades.
Keep your holdings liquid, and don’t add more money to a losing position. Follow your strategy and keep looking for other potential trades.
14. Making Huge Bets
There will be times when you’ll hear about a unique new coin. It’s supposed to offer a lot of value to change how things are done.
Unfortunately, that doesn’t usually happen. At best, it will be an average product that does things the same way as other products. It may have a unique feature, but that’s about it.
Unfortunately, this hype gets people excited about products that don’t deserve praise. They then invest most of their money in these products hoping to strike it rich.
This usually doesn’t happen. At best, you’ll make a small profit or break even. In many cases, you’ll lose most of the money you put in.
It’s fine to bet on these products, but don’t make it a huge bet. Only put small portions of your portfolio on trades like this.
Always Guard Against the Common Cryptocurrency Trading Errors
You can’t afford to make many mistakes when trading an asset as volatile as cryptocurrency. You never know what direction a cryptocurrency will take when buying. If you make too many bad choices, you’ll end up losing your money.
Luckily, there are many common cryptocurrency trading errors you can learn about before you start trading. Keep them in mind when you trade to increase your chance of seeing crypto trading profits.
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