Ten Common Trading Mistakes, And How To Avoid Them
Oct 21, 2021
In the world of cryptocurrency, mistakes are inevitable, even for a pro crypto trader! As the crypto world is full of volatility and abrupt price movements nobody can avoid mistakes completely. With the necessary knowledge & experience, you can avoid some of the most common mistakes.
Successful traders agree that you can become a good trader by minimizing your losses as much as you can. In this article, we have listed 10 common mistakes people make when buying cryptocurrency.
1. Fear of Missing Out (FOMO)
This is probably the most common and easiest mistake traders make while trading cryptocurrency. You purchase a coin when it’s already surged by 30-35% in a few hours. Now, you don’t want to miss the next 30% increase in the next few hours but that never happens, unfortunately! By the time you hear about such a ‘hot’ coin, it’s already too late.
2. Lack of Diversification
New traders are so reluctant to diversify their portfolios which is a big mistake. Usually, having an 80/20 blend of large, stable cryptos to mid to small cryptos is recommended. This will minimize any liquidity issues of your portfolio as well.
3. Not staying safe online
Another common mistake is falling for a bitcoin email scam—also known as a phishing scam. It’s a frightening concept that uses emails to steal sensitive information from a trader including (but not limited to) passwords, credit card details, address, bank accounts etc. As a crypto trader, you must stay wary while trading crypto online.
4. Not using cold storage wallets
A crypto wallet holds your assets and private keys thereby keeping your crypto safe and accessible. There are basically two types of wallets: hot wallets and cold storage wallets. Hot wallets are connected to the internet and vulnerable to online attacks. Therefore, it is always advisable to use cold storage wallets.
5. Lack of security awareness
Many traders fail to keep their private keys safe. As a crypto trader, you must keep your keys safe—losing access to private keys will lead to losing all your assets available in the wallet.
6. Do Your Own Research (DYOR)
You will hear a lot of news and rumors. Frankly, it is difficult to distinguish the truth-tellers from the hype-salesmen. DYOR is crucial. News articles, Investopedia, mainstream crypto websites, YouTube, Twitter, Reddit and other trustworthy websites are a good place to start your reading. The more you read and watch the more knowledge you will gain.
7. Make your own decision and strategy
Most traders don’t have a strategy when entering the crypto market. Hence, their decisions remain volatile and heavily influenced by market rumors. Set your own strategy prior to investing and stick to that so you can make informed decisions.
8. Know about regulations
Different countries & states have different laws and regulations regarding crypto trading. Before entering the crypto market, you should know all the regulations of the community you are living in.
9. Panic buying and selling
Price swings are a normal phenomenon in the crypto market. New traders tend to panic when they see sudden price changes. This leads to panic buying or selling of a coin which ultimately leads to incurring losses.
10. Investing more than you can afford
Start with a small amount and test the waters with a few trades. Once you feel comfortable feel free to invest a bigger amount. Do not invest more than you can afford to lose. We strongly discourage the use of debt to purchase cryptocurrency. It is a high risk asset, and increasing your mortgage or using your credit card facility is an unwise investment choice for any kind of high risk asset.
Remember, proper diligence and sound judgement should be used in evaluating the risks associated with these activities. Trading cryptocurrency carries significant risk and losses can exceed deposits. Refer to our Terms and Conditions and disclosure material