6 Common Mistakes That Every Crypto Trader Must Avoid
In the cryptocurrency market, you should take every step carefully. When it comes to trading, the mistakes people make are more, resulting in profit loss and can be harmful to the investor’s portfolio. In this article, we will be listing a few common mistakes crypto traders make and how to avoid them.
Making decisions influenced by emotions rather than logic
It is easy to get influenced by the rapid price fluctuations happening in the market. Most of the time, unpredicted market movements can drive the traders to make decisions entirely based on their emotions. This is not a good idea, especially if you lack experience in the field of crypto trading. Trading driven by emotions is a big mistake, and people tend to make such mistakes only to fall prey to unpredictable market movements. You can avoid this mistake by understanding the price movement patterns using analysis tools. Trading chart patterns like the morning star candlestick pattern, offer information about the right time to trade and when not to. Making decisions based on emotion can never help increase your wallet size faster but can reduce it considerably.
Not performing adequate research
These can be counted as the most common mistakes done by the traders. It is mandatory always to know what you are getting yourself involved in. therefore, it is vital to perform extensive research about the crypto trading methods, techniques, and the efforts you need to put in. For better insights about this, you need to research the history of cryptocurrency price data and later utilize this information in the future. It is also essential to compare the present growth of cryptocurrency with the past development.
Not following a proper strategy
By conducting proper research, you get the idea of how trading works and what technique and amount of effort the market demands. The significant advantage of having a well-planned trading strategy is that you already know what step to take next. It will also help you calculate your success. Having a good plan is reflected in the traders’ confidence and enables you to achieve the goal much faster. A strategy can also provide you a clear-cut idea about when is the best time to trade, purchase or keep the cryptocurrencies on hold.
Going in with a huge amount of cash
Another common mistake made by crypto traders is investing their entire wealth in the crypto market. If you are a beginner and investing a considerable amount of money in the market increases the risk of loss manifold. Even after getting the hang of crypto trading, you must not go in with everything you have earned so far. Experts advise keeping aside some amount because not every time investments can go as predicted. And if you are new to the game, start with smaller amounts and later increase little by little.
Not having a backup plan
Not just in the crypto market, investing in any field required a well revised backup plan. When it comes to trading, the chances to earn profit and lose are equally high. It’s similar to playing at even the best bitcoin casino. Therefore, without a proper backup plan, a single unfavorable situation negatively affects your entire investments. A perfectly sorted backup plan prevents you from panicking and effectively responding to unexpected situations.
Here are some examples of this strategy:
- Permanently save an emergency fund so that whenever the market takes a downturn, you have something in store for support.
- In case of inevitable coin price dips, you can consider purchasing cryptocurrencies from another market.
- Not being aware of trading or transaction fees
Most beginners are unaware of the fees that one has to pay to convert fiat currency into cryptocurrency or the opposite. These charges vary with the type of exchanges you are involved in. Avoiding fees can result in Turing your profits into loss after a while. You can prevent this from happening by not ignoring the fees but trying to keep them low.
These are some of the most common mistakes made by newbie traders. However, there is no need to fret as you can prevent them with logical thinking and self-restraint. You might also seek professional guidance for an investment strategy that suits your targets.