Common Mistakes Rookies Make when Trading Cryptocurrency
Crypto assets are some of the most promising financial technologies of this century and an attractive financial revolution and investment. For instance, Bitcoin’s volatility makes this asset perform better than many other financial assets, hitting almost $33 000 in January 2021. According to many experts, bitcoin has a fair chance of outperforming gold. Some other assets in the crypto world are also doing very well, attracting millions of investments every year.
However, high profits come with high risks, and the risk is especially magnified when it comes to beginner traders. Because of lacking experience, some traders end up making mistakes that cost them fortunes in their investments. Keep reading to find some of the common mistakes of beginner crypto traders.
Inadequate Proper Personal Research
Some investors do not focus on researching and analyzing the market before investing. Most investors don’t analyze the assets or tokens they want to trade; they do not check the historical and prevailing statistics.
Instead, many investors depend on information received from other investors and experts. For instance, some buy BTC and ETH because of the experts’ opinions about prospects. Others choose to find their information on social networks like Medium, Twitter, or slack. Buying coins based on other people’s opinions is a serious drawback since it means the investor will need the same expert’s opinion to sell the coins.
To be on the safe side, rookie investors should do their research and buy based on their information. As a rookie, understanding the basics of crypto and every coin is necessary to ensure good future profits.
FOMO Trading and FUD
FOMO, Fear Of Missing Out, is another mistake that will lead to detrimental losses to any rookie traders. A trader notices price shoots of tokens and the market and does not want to miss out on the opportunity and, as such, blindly invests without second thoughts.
Although occasionally FOMO works for traders, in many other cases, it leads to losses when the tokens start plunging.
FUD, Fear Uncertainty Doubt is a fear implanted in beginner crypto traders when negative, either (Fake or true) news or blogs circulate in the crypto world. Reacting fast to FUDs could have a detrimental impact on traders’ investments.
Sending Wrong Coins to Exchange Wallet
Some crypto traders could send coins to the wrong exchange wallets; for instance, an investor may send bitcoin cash to a bitcoin wallet. Since it’s an individual’s responsibility to check and confirm their wallets before sending funds to them, some platforms make it impossible to reverse the process.
When setting up prices, some investors make mistakes and set up super low prices for assets in some instances.
A slight mistake, like placing an extra zero after the decimal place, will devalue the asset ten times. An asset devalued to that low extreme will trade out faster, and as such, causing the trader to lose in a matter of seconds.
Mispricing issues arise from the lack of double-checking the prices set before executing them, and it’s a common mistake for crypto rookies.
Poor Selection of Exchanges
As they are newbies in the crypto market, rookies may fall into the trap of using exchanges with a bad history or with supernormal trading fees. Using an exchange platform that charges supernormal fees means the investor gets lesser profits. An investor should, therefore, select an exchange platform with favorable charges.
Moreover, some exchange platforms have poor security history; others are full of market manipulation. Using exchanges with a bad history can be catastrophic, especially for long term traders.
Revenge trading arises from the trader’s inability to accept losses, but instead, conducts continued trading attempts to reduce losses. That causes traders to make a series of wrong moves leading them to losses, sometimes even higher propositions.
Every rookie should understand that losses are inevitable in all trade forms since no one has a perfect business run.
Investing in Multiple Pairs
A beginner trader may decide to invest and trade in multiple pairs. Doing that is risky since the trader will not sharpen their skills and will end up confused by the many pairs.
To perfect the long term trading skills, any investor should first focus on a single pair, learn the ins and outs of trading, and later indulge more pairs.
Although the crypto market has a world of opportunities, some new traders often make mistakes that have severe consequences for their wealth. The write-up has discussed some of the major mistakes investors make, such as going into the market with a blind eye. Instead of conducting personal market research and asset analysis, some investors focus on expert opinion, which is misleading.
Another mistake includes fear of missing out by taking advantage of all pump and dump tokens. Some other rookie investors don’t double-check the exchanges and coins they are dealing with, thus setting low prices and posting coins in the wrong exchanges. Due to fear and frustration after losing, some investors start revenge trading and lose even higher margins.
A rookie trader should be extra careful of what, when, and who they are dealing with to avoid some of the mistakes mentioned above and ultimately avoid losing a large portion of their wealth.