Cryptocurrency is a hot topic right now and it’s clear that there are a lot of people who want to make some money by investing in it. However, it’s not that easy that is seems to get started in cryptocurrency trading. The market of crypto is very much complicated and there are a lot of pitfalls out there you need to be aware of before getting started. Most of the time beginners do mistakes by entering the market before collecting proper knowledge. Once you’ve done the research you need, you should also make sure that the trading platform you’re using is reliable. A good example is Crypto Trader, a trading platform that offers a decent mix of security, quick trades, and UX features to make your trading easier.
We’re going to walk you through exactly what things to look out for when trading cryptocurrency and what are the ways to avoid the mistakes.
Cryptocurrency Mistakes and ways to avoid them:
1. Not Using Risk Management Tools:
Risk management tools (like stop-loss) are the beginning, middle, and end of being smart with your cryptocurrency ventures. Simply put, a stop loss is a tool that automatically sells your assets of a particular asset once the market price has lowered to a certain value that you have previously set in the trading platform. In the case of cryptocurrency, a stop-loss tool sells your digital currency once the market price of that token has plummeted to that certain set level. It will save you from huge losses and minimize the amount of loss or it might also make you secure a high profit. At least, successful investors will tell you this.
2. Not Doing Your Due Diligence:
Let’s say there’s a new coin out, and everybody’s talking about it. Everybody’s saying it’s going to go up in price, and it’s going to be the next Bitcoin. Excited, you buy it only to find an SEC case against the developers the next month, and the price of the coin in the drain.
The only way you can avoid hopeless investments while also picking out the ones that have a future is by doing your due diligence. There are hundreds of factors you have to look into if you don’t want your portfolio dying overnight. Here are some most important questions to ask among them.
- What can this coin be used for?
- Are any professionals talking about this coin?
- What do the developers of the coin look like? Are they a professional company, or like two guys in a basement?
- What is the current economic condition? Is the market in the right position for a new coin to become famous?
3. Using Margin Trading Way Too Soon:
Margin trading is the practice of taking out a loan from the exchange to finance your trades. As you can already see, if you play your cards right with such a loan, you can end up making nothing short of a fortune just from that alone.
The downside comes when you try to use margin trading without having a head for trading cryptocurrency. Even if you invest the money into a coin like Bitcoin or Ethereum or any other coin that has high volatility but is already established and will probably go up in value sometime soon, it could take years to get there, and by then you’ll have had to pay the loan in your own money. So, unless you’re an experienced trader who’s been trading cryptocurrency for quite some time now, we’d say it’s better to stay away from margin trading.
4. Giving into Herd Mentality:
Herd mentality is the exact thing that’s going to screw up your crypto ventures if you’re not careful. For a beginner, it’s more common than not to give into herd mentality. They hear about how good or profitable a new coin is and forget about diversifying their portfolio. As a result, when this miracle coin crashes harder than the moon rocket, their crypto venture goes belly up.
We’re not saying you should hate every single popular token out there. Instead, don’t take anything at face value, and do the research you need to properly understand how a coin is going to perform.
The Takeaway:
We listed some of the most common mistakes people have made when investing in crypto, and as long as you’re on the lookout for these simple but all-too-common blunders, you have a reasonable chance of making a good profit from crypto trading.