Cryptocurrency exchanges can be a bit overwhelming at first. And mistakes can be costly. A slight oversight could damage or destroy your crypto portfolio.
Here are 11 things you do not want to do when using a crypto exchange.
#1 – Pick A Crypto Exchange Without Researching
Once you have your BTC and you’re looking for an exchange to trade for some altcoins, your first impulse might be to pick the first one that pops up in Google. However, you have a lot of options when it comes to exchanges.
If you’re starting off, it’s best to pick a popular, well-rated one to begin with until you grow familiar with them.
If you already know what altcoins you want to diversify your portfolio, you’ll need to make sure the exchange you have in mind offers those coins. You’ll also want to check fees to make sure they’re within a range you feel comfortable paying.
Exchange access varies widely depending on your country of residency, so start by looking at exchanges that do business in your area.
#2 – Leave Your Crypto on the Exchange
Don’t do this.
As elementary as this information seems, people still leave their crypto on the exchange and lose it when that exchange gets hacked.
MyEtherWallet has a general rule: don’t leave more than a week’s worth of wages worth of crypto on the exchange.
It’s unnecessarily risky to leave more than that.
Personally, I never keep more than enough capital for one trade on any exchange.
#3 – Be Impatient
If you don’t have any experience trading in general, then you bound to be overwhelmed the first time you log onto an exchange. Exchanges are busy, crowded places.
And most often, that’s the beginner’s version of the exchange. Many exchanges offer advanced platforms with additional tools to help traders.
These exchanges can overwhelm a beginner. The learning curve is high. Take the time to understand how to use the exchange. Try completing a few small trades until you grow more comfortable with the system before moving on to larger ones.
#4 – Send Crypto to the Wrong Account
Many beginning investors rush to start trading and making money. Mistakes happen.
It shouldn’t be surprising that there are several stories about investors who lost tens or even hundreds of thousands sending crypto to the wrong address or even mixing up numbers and creating costly mistakes.
These mistakes are easily avoidable with a little caution. Make sure you check, then double check. Then check again, because the only thing worse than losing money to a hacker is losing it to human error.
#5 – Constantly Obsess Over A Coin’s Price
If the current value of one BTC is fluctuating between 7-8k, don’t let this deter you from investing because you feel as though you need to buy one whole BTC. You don’t need to buy a full BTC for it to be an investment. “Position sizing” is the place to start when thinking about risk and portfolio management.
More importantly, a cheaper altcoin doesn’t make it a better investment. Most of the weaker coins fail. I expect over 90% of ICO’s to go bust in the next few years. This statistic is in line with other non-crypto startups.
Make sure you have a plan. Are you a long-term investor, swing trader, or short-term trader?
What are your long-term goals?
If you’re obsessing over price, it means you’re trading with too much capital or don’t really have a plan.
#6 – Ignore the Market Cap
People tend to focus solely on how much a current coin is worth rather than looking at other indicators of value like the market cap.
Market cap gives you an idea of community support and value in a cryptocurrency. It shows you the total capital invested in a particular cryptocurrency, and it is a good indicator of performance.
However, you shouldn’t solely focus on market cap either. Even though Bitconnect had a market cap of 2.2 billion, it turned out to be a scam.
#7 – Ignore the Trade Volume
Trade volume translates into a crypto’s liquidity. If you’re looking to trade, you’re going to want to make sure that your crypto has a high trade volume.
If not, your order may sit on the books for quite some time before someone picks it up, giving the market time to fluctuate. The higher the trade volume, the better your chances of having profitable trend trading opportunities.
#8 – Not Using 2-Factor Authentication
It’s not enough to have a secure password; you need to activate Two-Factor Authentication. It is a pain to set up at first, but it protects your account by requiring an additional method of verification.
Treat your investment like it has the potential to earn you millions. Protect it.
#9 – Violate Exchange Rules
Certain types of trading will violate exchange policies and ban you from the exchange for various lengths of time depending on the severity of the violation.
If you end up permanently banned from an exchange, you’ll lose any money left on that exchange. It’s always an excellent idea to read through the terms of service.
Exercise caution. Some violations include front-running, spamming orders (canceling quickly), and maintaining a low conversion rate. These practices are also illegal in many countries.
#10 – Trade Blindly
Patience, knowledge, and security are your best tools to increase your wealth on cryptocurrency exchanges.
When it comes time for you to begin trading, make sure you know your investments. Otherwise, you’re probably throwing money away.
One more thing, pay attention to the ticker for each cryptocurrency. These three letter identifiers make it easy to find the crypto you need, but there are a lot of them, and several are similar and easy to confuse. Always double check.
For example, don’t confuse Bitcoin (BTC) with Bitcoin Cash (BCH).
#11 – And finally, Do Not Trade with Emotions
Rage, FOMO, or “hunches,” as trading tactics will most likely result in a loss. When it comes to making trades, do so with a plan involved. Do your best to let emotions go.
It will help you make calculated decisions, reflect on poor trades, and sell at targets while cutting losses. You win some, you lose some, remember this, and your odds of earning profit from exchanges can increase.
Remember that none of this information serves as financial advice. These are strategies meant to help you mitigate risk. But all trading, especially volatile cryptocurrency markets, have big risks. And most importantly, you should only trade what you can afford to lose.