Cryptocurrency trading is one of the key ways to make money from the comfort of your home. Just like forex trading, all you need for cryptocurrency trading is a laptop, strong internet connection, and power supply. Most importantly, you need to have basic knowledge of how trading works. You can indeed get some of this information online but most articles online focus on advanced trading tips. Few articles talk about the common mistakes new traders make and how to avoid them. Learning about these mistakes will help you avoid them as a new trader.
Top 7 Mistakes Every New Trader Should Avoid
1. Avoid Panic Selling
The cryptocurrency market is extremely volatile. A cryptocurrency can fall by up to 20% within 24 hours. So, it’s easy for a new trader to start selling off when the prices drop significantly. This panic sell-off isn’t always a good idea, especially when you’re interested in long-term trading. The volatility of cryptocurrencies is a blessing as much as it is a curse. So, a panic sell-off isn’t ever a good option. There is always a chance that the coin will bounce back. A sell-off during a bearish wave is going to cost you money.
2. Avoid Diversifying Without The Adequate Information
Diversifying is a good way to secure your portfolio. Rather than investing in a single large market capital cryptocurrency, you can expand your portfolio by investing in other small market capital coins as well. However, always remember that the price of altcoins often correlates with the price movement of Bitcoin. So diversify with coins with less correlation. A typical example of that is Ripple’s XRP. Another reason to diversify is that you are going to enjoy profits when altcoin season comes. From time to time, altcoins rise at the expense of Bitcoin allowing traders to make massive gains.
3. Avoid Depending On Chance
Most traders think that cryptocurrency trading purely depends on chance. While chance can affect your gains or losses from time to time, the most important thing is a skill. It takes trading skills to observe opportunities and take full advantage of them. You need to have updated knowledge about the entire cryptocurrency industry. Read daily news updates about the industry as they can affect the price of tokens. Learn as much as you can about the underlying technology before you invest in the token. For example, don’t rush into partaking in an ICO without reading the white paper.
4. Avoid Sentimentality
Most cryptocurrency traders who are investing in long-term profits believe in the underlying technology. Some buy tokens weekly, monthly or bi-monthly. These don’t ever sell short term. Some others buy whenever the market is bearish. Buying during a price deep is a good way to make a profit but you need to make sure you’re buying based on logic rather than sentiments. You need to know when to jump ship or at least stop buying and holding. If you don’t, you’ll get stuck in the sunk cost fallacy. This means that you’ll continue to buy because you’ve already spent so much money investing and you can’t cut your losses.
5. Avoid Being Overconfident
So you started cryptocurrency trading for a few months and you’ve made cool cash because of your skills. That’s great but you shouldn’t get too confident. You’re not a cryptocurrency trading oracle. There isn’t any cryptocurrency trading oracle. The cryptocurrency market is the most unpredictable asset trading market at this time. So, no matter how good you are, you should never forget that. Apart from being too confident in your skills, you should also not become too confident in the information provided by the so-called cryptocurrency gurus online. Study the entire market and analyze the information of everyone involved not just a single person.
6. Avoid Falling For Peer Pressure
Each cryptocurrency has a community backing it. This community is made up of loyal traders who always make predictions. While it’s a good thing to be part of a cryptocurrency trading community, you should not follow the bandwagon all the time. Make sure that the predictions they make aren’t purely out of speculation. There should be hard-core facts to support every premise. Peer pressure can also affect you when you learn about a new coin a little too late. The worst thing you can do is buy when the prices are soaring only to sell at a lower price.
7. Avoid Trading On The Wrong Platform
There are several cryptocurrency trading platforms online but not all of them are legit. When you’re looking for a cryptocurrency trading software, make sure you go for a secure option. An example of a cryptocurrency trading app that you can use is the Bitcoin Era Pro. The software can be used for automatic trading. This way, you can make profits on the go.
These are the top seven mistakes new traders make and how you can avoid them. The more mistakes you avoid, the more profit you are likely to make.
Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.
