More Than Just Riches: Mistakes That All Crypto Traders Should Avoid
Unless you’ve been living under a rock for the past half-decade or so, cryptocurrency is all the rage. Bitcoin, the world’s most renowned cryptocurrency, at its peak, was worth a staggering $63,000. Only time will tell if it could go any higher; all we can do is sit, wait, and hope for the best.
If you’re like most folks, you’re eager to jump on the cryptocurrency bandwagon. Tales of people reaping a fortune overnight only fan the flame. However, as many crypto traders will tell you, it’s not as easy as it seems.
While it’s true that crypto trading is a potential goldmine, there are many risks and traps to the trade. That’s why it’s super important to educate yourself before you invest in Bitcoin or any other cryptocurrency. The good news is that all it takes to trade crypto is a laptop, phone, and a stable internet connection.
Mistakes are part of the learning process, but with cryptocurrency, there are some mistakes you can’t afford to make. Join us today as we highlight a couple of mistakes you should avoid if you chose to invest in crypto.
Trading Without a Stop Loss
One of the most common crypto trading beginner mistakes is trading without a stop loss. It’s easy for beginners to trade with emotions and let logic take the back seat. No matter how lucky you think you are, you’re not immune to losses.
The most essential skill a crypto trader should pick up is accepting a loss and moving on. So, one of the first steps you should do when creating your trading account is setting a stop loss and not moving it when the trade goes against you.
Moving a stop loss gets addictive, and if you do that a few times, you’ll most likely blow up your account. To be on the safe side, set a stop loss and don’t move it, regardless of how lucky you think you are.
Trading With Real Money as Opposed to Paper Trading
With endless paper trading platforms like Tradingview, there’s no use trading with real money. Becoming a seasoned crypto trader takes time, practice, and consistency.
Most skilled crypto traders have a solid set of guidelines for entries, exits, and risk management. Once you develop those guidelines, you’re now ready to use real money.
Failing to Keep a Trading Journal
One of the best things you could do as a crypto beginner is maintaining a trading journal. All successful crypto traders maintain a crypto journal to keep track of their trading activities. This crypto journal records all trades, losses, and profits you make.
Maintaining an accurate journal is the best way to learn and avoid mistakes. Of course, you can only do that if you refer to your journal every once in a while. Spend about five bucks on a decent journal and use it to record your trading activities.
If you look at the price of Bitcoin, you get that the bigger the risk, the greater the reward, but this isn’t always the case. Stories about how some of the biggest crypto traders made millions overnight make most people want to invest their life savings into crypto. This could be one of the worst and regrettable mistakes you could ever make.
Unless you have a considerable amount of cash, reaping fortunes out of crypto trading in one night is near impossible. Going all-in is never a good idea because of the volatility of cryptocurrencies. You’ll need a boatload of luck to invest everything and reap big.
A wiser approach would be to invest what you don’t fear losing. That way, when you make a huge loss, you still live a comfortable life. Don’t invest everything so that, at least, you can still handle daily expenses without tapping into your crypto cash.
Using Indicators and Signals That You Don’t Understand
This is a rookie mistake that could leave you high and dry. It’s normal for technical analysis to be a bit confusing and hard to understand. Most patterns that beginners use don’t exist or are based on incorrect context and chart placement.
As a rule of thumb for beginners, start with simple support and resistance, then create a system that takes the two into account. You can also use elementary indicators like exponential moving averages. Steer clear of complex indicators and patterns that you don’t fully understand.
Adding to a Plummeting Trade
Cryptocurrency investing and trading are two different things. Trading is a continuous process that requires consistent analysis, monitoring, and your full attention. On the other hand, investing is averaging down positions of promising assets with a long-term promise of considerable returns.
Increasing to a losing trade isn’t trader behavior. For crypto traders, once the trade hits stop loss, it’s time to abandon the trade and start a new one. For traders, averaging down only slows you down and blocks your future prospects.
Using Too Little Capital
You’ve probably heard the saying; it takes money to make money. If you want to make it big in crypto, you better invest a considerable amount into it. Just as long as you don’t invest your entire life savings, you’re good to go.
Being a professional trader means that the profit you make off of trading is enough to support your entire lifestyle. That means the profit should cover all your living expenses, including rent, utilities, food, and the rest. If you’re not willing to have that level of commitment, trading is just a hobby, or you’re a cryptocurrency investor.
Crypto trading is profitable, but the number of crypto traders who’ve abandoned the trade is nearly uncountable. Don’t expect to make a killing with only $100. If you’re looking to win big, you’d better up the ante or reinvest the profit you earn into cryptocurrency.
Be One of the Top Crypto Traders
Being a professional crypto trader takes a lot of practice and commitment. If you keep at it, you’ll be earning a considerable amount in a short time. Just remember to avoid the above mistakes to be among the richest crypto traders.
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