Lots of money can be made trading cryptocurrencies. Investors have moved into cryptocurrencies as a result of massive gains cryptocurrency trading offers. This can be seen as the crypto market has grown close to $1 Trillion last year. Unfortunately, not everyone is making money as a result of simple mistakes that could easily be avoided.
Long-term traders are best holding their investments; day traders can also be profitable in the short term, allowing them to increase their investment much faster. If you are a newbie to cryptocurrency trading or just exploring your way in the exciting new market, here are ten mistakes you should avoid entirely.
1. Selling at the bottom, buying back at the top
The cryptocurrency market is liable to change and the cryptocurrencies can be easily manipulated. As a result, price swings are regular, and investors get caught up in this often which makes them lose money. Panic selling is common among newbies in cryptocurrency trading especially when they first get their hands on trading without prior research and when faced with sharp drops.
The problem with this technique of trading is once you placed a sell order, you will lose money. Though selling to cut losses is a wise decision in some cases, most coins will spike again in days, if not hours and then such people seeing a spike in price will buy back at a higher rate; repeating the cycle over and over again. This is a common case in which beginner traders lose their funds.
2. Getting attached to a particular coin
No coin will continue rising forever, not even Bitcoin. You are bound to see good days, or even months and also experience some terrible days as well. The crypto space is evolving with opportunities presenting themselves daily. If you believe in a coin, holding for long-term gains would be considered the best approach, if you are looking to make quick money trading though, you cannot have any emotional attachment for any coin.
Seeing a drop in Bitcoin price from its all-time highs of $20,000 to below $10,000, the best approach would be to hold long term. However, there are many traders which sold it between $10,000 and $20,000 and bought back lower – between $6500 and $10,000 – guaranteeing themselves some extra profit in BTC.
Also, f the price of a particular coin sees a spike as a result of a significant announcement, it’s easy to double or triple your investment this way. Though you need to check the price and evolution, to make sure the spike in price didn’t already happened. Otherwise, you may lose money and feed the ‘whales‘ .
3. The cheaper, the better
A coin below $1 doesn’t mean it is the best time to invest in such currency. Though it’s true that a coin at 5 cents could easily hit 20cents in a short period likened to a coin at $100 hitting $500. A $0.05 coin could drop to a cent, making you lose a chunk of your investment.
The major thing is not to buy coins because they are cheap, that doesn’t guarantee profitability. It’s important to find out why a coin is cheap and what developments are ahead that promises a boost in price shortly.
4. Looking for the next big coin to hit the cryptocurrency market
Last year, we saw bitcoin go from $1k to $20k which is quite impressive. Also, Ethereum and Litecoin have also seen massive gains. It’s important to note not all coins will record such profits.
Due to abundant supply and some other factors, some coins are regulated to specific prices, an example of such coin is Ripple. Investing in such coins and hoping to make over 2000% gain is not a good idea.
As a trader, it’s essential to get a deep understanding of every coin you trade; this includes price history and future projections. This will give you a better insight into planning your trades properly.
5. No need to follow current events in the crypto market
Technical analysis is never enough if you want to be successful with cryptocurrency trading, you need to follow cryptocurrency news and stay up-to-date with current events/developments. The crypto market is highly speculative and swings to both negative and positive events. Getting informed is highly required to be a successful trader.
At UseTheBitcoin.com, we cover every detail in the cryptocurrency world and present our readers with latest updates as they happen. To get these updates instantly, please subscribe to our mailing list.
6. Investing all you have all at once
This is another expensive mistake newbies make, investing all they have on a particular coin. If you find a right spot to buy on your favourite coin, it’s necessary you purchase with a percentage of your money, up to 50%, then hold the rest to see if such coin drops following your purchase. If that happens, you will have more to buy the dip. On the other hand, if there is a continuous surge in price after your purchase, you can always place more buy orders as the market continues on its uptrend. This secures your trades and prevents you from going all-in on a position that goes the opposite direction.
7. Falling for every coin endorsement and not doing proper research
Every newbie joins a telegram group or follows a top crypto trader on social media for signals. Though there’s nothing wrong with that, it’s also important you do your research. There are tons of people promoting coins and market moves across different social platforms for their gains.
If you listen to these people and invest your money in those coins, you are likely to lose out on your investment. Most of these guys are paid promoters who create unnecessary hypes to get lots of people to buy what they are selling.
Proper research is vital before investing in the cryptocurrency market. You need to understand a coin’s use case, price movements, and development stage of such coin. Investing in a coin as a result of price movement is very disastrous.
8. Investing all you have on a coin
Even the best coins have been seen to experience significant dips while other coins stay green. Cryptocurrencies are unpredictable which means no coin; not even Bitcoin is guaranteed to survive long term.
If you are a long-term investor or just a day trader, you can’t afford to put all your funds on one coin. Investing in multiple cryptocurrencies is the key to successful trading and finding good entries in divers coins will increase your profit.
9. Not knowing when to exit
After buying a coin at a reasonable price and you’ve seen a considerable profit, the question now would be “what next?” Most newbies don’t have points at which they take profits from the market. They hold as the market go along, ending up losing all the gains they’ve made with time and will have to stay till they break-even.
This plan may be beautiful if you are a long-term investor, but if you are trading, you need to have a point at which you’ll sell off for some profits. Though you may see price continuously going higher, that’s expected. A good strategy, however, is to sell off in stages and not all at once. This way, you make some profits instantly and still benefit if the price goes higher.
10. Not having basic knowledge of technical analysis
Many traders think technical analysis/understanding price actions are complicated. There’s no doubt that market movements and coin prices have patterns that when identified can be taking advantage of to increase chances of successful trades.
Though there are no guarantees in the crypto market and given the highly speculated and emotion-driven market, charts fail sometimes.
Nevertheless, it’s crucial for anyone who’s serious about trading in the cryptocurrency market to understand the very basics of charts such as candle formations to determine support and resistance levels.
As an essential requirement, you should understand resistance levels and price ranges which a coin has struggled at or failed to break through. Support zones, on the other hand, are areas where prices have been spotted to bounce back. Identifying these spots on the chart will significantly improve your trading.
Trendlines are also quite simple, it’s indicated by price making higher lows and higher highs, and a downtrend is indicated by price making lower lows and lower highs.
If you have any trading tip or feedback to share, feel free to use the comment box below.