Crypto trading can be a great way to earn a profit. However, easily avoidable mistakes can wreck your portfolio, destroy your capital, and leave you stuck in that job you so eagerly want to leave.
The mistakes people make are often easily avoidable with a little know-how. In this article, we’ll discuss the common mistakes you want to avoid when trading or investing in cryptocurrencies.
Mistake #1 – Jumping Into Crypto Trading Before You’re Ready
Crypto markets are hyper-volatile roller-coaster rides that move 24/7/365. You need to be prepared before you climb on because it is a wild ride. The markets are still relatively new, and as society adjusts to the prominence of cryptos, it’s even more susceptible than before to huge swings.
If you don’t know when to jump in with crypto trading, you could find yourself washed out before you know what happened.
Why get in them at all if they’re so volatile? Well, volatility is a savvy trader’s best friend.
These risky markets provide high rewards for those who are prepared, become educated, and develop their skills. When you know how to make calculated risks in the market, you can take the steps necessary to potentially earn those high returns.
If you’re new to trading cryptos, it’s best to start with a much smaller portfolio and build experience trading and storing coins. Many people rush in and throw all their money into the market and believe they’ll figure it out along the way.
You cannot learn anything when you lose all your capital other than the fact that you made a mistake. Start small. Build confidence. Invest more.
Mistake #2 – Not Doing Your Own Research
Most people who are ready to trade have done some form of research, but the quality of research is what’s more important here. Those age-old skills your high school teachers taught you apply here: find your own primary sources when researching.
There are a lot of people putting together poorly edited YouTube videos talking about which coins to invest in and why. Many of them are not credible sources or have their own agenda.
You’re going to need to look into coins on your own and read up on them, build an understanding, and make your own decisions. Doing your own homework is the best way to guarantee the highest possibility of return.
Mistake #3 – Assuming You Can Out-Smart The Market
Markets are incredibly complex. You can have a strategy based on technical charting patterns and fundamental analysis, but the one thing you can’t take into account is how people are going to respond to price movement.
Fear and greed move markets. And news stories, tweets, and general beliefs cause the market to shift unpredictably. This doesn’t even factor in that whales can manipulate the markets with their huge portfolios, causing prices to rise and fall dramatically.
Humility goes a long way with trying to understand how and why prices move when trading cryptos. Know that you’re trying to make the best guess, but there’s no guarantee that your hypothesis will play out how you expect.
Mistake #4 – Being Unrealistic
Markets don’t continuously rise. They are cyclical, moving up and down through time.
Success all boils down to understanding how to trade in a bear market and how to manage profits in a bull market so you can walk away with a profit.
Thinking that every trade will succeed is delusional and will only set you up to fail in the future. No matter how smart you are, some trades will lose. The goal is to make sure that your wins provide you with more profit than the losses take away. Do that, and you win over the long-run.
Mistake #5 – Letting Greed and Fear Control Your Decisions
Everybody knows “buy low, sell high”.
But there’s a reason 95% of traders do the exact opposite – EMOTIONS.
Learn how to control fear and greed. Letting them control you can cause you to chase highs or sell in a premature panic.
Taking a small loss is much better than becoming stubborn and losing it all. You have to keep a clear head and trade with a strategy in mind.
The more you can distance yourself from these emotions, the easier it will be to think clearly and make consistent decisions.
Don’t let FOMO push you to make emotional decisions.
Mistake #6 – Not Removing Ego
Traders and investors that let their ego get in the way will eventually destroy their trading accounts.
Ego is the need to be right.
The market doesn’t care about what you have to prove, who you are, or where you came from.
It doesn’t care about anything. It is an accumulation of variables reflecting the general state of mind of those involved.
In other words, “the market” visualized on a chart is just a visual representation of all actions from all market participants.
Don’t be the person who NEEDS to be right. You’re going to make bad trades. You’re going to miss certain variables. You will make mistakes. You will be wrong.
It happens. Manage your losses and come back with a fresh mind for the next trade.
At the end of the day, trading isn’t about being right or wrong on any SINGLE trade – it’s about being profitable over time. That’s how you win with trading.
Mistake #7 – Not Learning From Your Mistakes
The crypto market may be new, but investing isn’t. Human nature isn’t.
A lot of preparation goes into finding the next trend, but there are several strategies you can learn to be prepared to make the best decision.
It’s important to take a step back after each trade to reflect on the strengths and weaknesses of your strategy.
We all make mistakes. The difference between those that fail and those that succeed is winners LEARN from their mistakes, where losers stew in their own misery.
Think about the daily growth rule – improve and learn a little every day.
To recap, make sure you prepare the right way before risking your capital because trading cryptocurrencies is very risky.
Also, understanding and avoiding these common mistakes will help improve your chances of being a successful trader. And remember: only invest what you can afford to lose. If you take unnecessary risks, the odds of you making a mental mistake go up exponentially.