Mistakes To Avoid While Crypto Trading | Safety Guide For Crypto Traders
Trading is far more an art than a science, despite what chartists and technical analysts may claim. This is especially true for cryptocurrency trading, which occurs in a developing and often volatile market where values can change abruptly due to market volatility, manipulative whales, and individual behaviour influenced by social media.
Cryptocurrency trading follows good rules and procedures that all investors, especially beginners, must stick to, just like any other kind of trading.
Those with money to spare and those without are both interested in cryptocurrency at the moment. Everyone wants to trade cryptocurrencies because they have become a sensation and, more crucially, because they are so easily accessible.
Cryptocurrency trading follows good rules and procedures that all crypto traders, especially beginners, must adhere to, just like any other kind of trading. There is one more thing you should be aware of before we dive further into this subject.
You might never return to cryptocurrency trading if you commit a lot of errors in a short period of time (unaware trading). Trading and investing in cryptocurrencies has produced both financial gains and losses.
The simplest way to cut your losses is to learn how to trade cryptocurrency as a system and from your trading mistakes. Keep in mind that while learning from your own failures is intelligent, wisdom comes from learning from others.
Trading Mistakes which should be avoided while trading in Crypto
● Trading without a definite goal
Why do you want to trade cryptocurrencies, you might ask yourself? Is it because everyone else is doing it, do you see it as an investment opportunity, or is it just a quick way to become rich?
Although the goal's validity can be questioned, it is crucial to have one in mind before beginning to trade cryptocurrencies. A trading strategy without objectives is comparable to driving a car without a GPS when you don't know where you're going.
● Direct entry into trade
Direct trading is not recommended due to the global volatility of cryptocurrencies. You may improve your trading skills using a variety of trading simulators, which is also known as "Paper Trading."
One of the basic principles is to engage in paper trading before investing real money. Although many people find this section boring, it is the most fundamental part of trading cryptocurrency. Beginner traders who don't mind losing money (gambler mindset) frequently make real money trades before developing their expertise.
● Not having a solid trading strategy
Most inexperienced traders don't know entry and exit points prior to entering any deal. They begin trading based only on faith as a result, which leads them to repeatedly seek for price peaks. Before engaging in the transaction, it is all but crucial to have both entry and exit locations.
● Short-term planning
Given that it is new and many aspects are still being tested, trading in Bitcoin or any other cryptocurrency at this time is a very volatile activity. The cryptocurrency market will occasionally simply explode upward for hours before dropping dramatically in a matter of minutes. Therefore, when investing in cryptocurrencies, it is preferable to have a long-term perspective.
● Absence of fundamental analysis
Numerous beginners decide on a well-known cryptocurrency and start trading in it. There is a probability that you will continue to make good money over time. A single large loss would, however, cause your portfolio to go into the red for an extended period of time if the currency suddenly dumps like there is no tomorrow.
By conducting a basic examination of the coin you plan to trade, you can avoid this rookie crypto trading error.
Safety precautions should keep in mind in cryptocurrency trading
● Risk Management ( Stop Loss)
The ultimate goal of risk management is stop loss. When your projected deal fails, a stop loss might assist you reduce your losses. No matter how certain you are that a trade will succeed, failing to use a stop loss is the largest egotistical error you can ever make.
● Diversify your Portfolio
It is not wise to invest large amounts of money in one cryptocurrency. Similar to how you would with stocks and shares, distribute your money among various digital currencies.
This suggests that you don't run the risk of being overexposed should one of your investments see a value fall, particularly given how volatile the market values for different investments are.
Always have a proper Trading Strategy
Before starting any trade, a strategy is necessary. You must be aware of your entrance and exit strategy, initial investment amount, and maximum loss tolerance.
Beginner traders frequently lack a trading strategy and are content to stay in a losing transaction for an extended period of time. Making rookie trading errors can be avoided by having a trading plan before you execute.
● Avoid Revenge Trades
Users who lack the strength to accept defeats frequently engage in trading in revenge. Such trades, which are motivated by frustration and anxiety, are extremely harmful to your trading career. Such traders frequently try to take riskier trades to reduce the losses. It's called "revenge trading."
After every trading loss, you need to exercise caution. Know that no trade has ever resulted in a 100% win. Even winning 40% of the time with the right risk-reward ratio can keep your cryptocurrency portfolio in the black.
Be prepared to commit some of these beginner's trading mistakes and acknowledge them. Less mistakes should be your main goal with every trade. You can master the art of trading in this way.
Some of these blunders are truly timeless advice as you advance in your road to being a crypto trader. Depending on your specific circumstances, you may be able to adapt some of the aforementioned advice. Minimise losses, concentrate on victories, and develop your individual style should be your objectives.
One and last line which I believe while trading is that “ always follow data not your gut ”.
If you like this blog do share with your friends and colleagues who have recently started crypto trading or planning to do so.