7 Crypto Trading Mistakes Investors Should Avoid
The massive returns of cryptocurrency have attracted a great number of investors, However, not everyone who invests in will get a profit. Unfortunately, most new crypto traders are making mistakes that could have been easily avoided. In this article, Tokenize Xchange will help you with the 7 crypto trading mistakes of most newbies. Let’s find out!
1. Choose the wrong crypto exchanges
Before trading cryptocurrencies, one of the first things to look out for is to find a reliable cryptocurrency exchange. There are many scamming exchanges out there, so it’s necessary to put your security first when making a choice. Among several crypto exchanges, Tokenize Xchange is such a great choice to help you seamlessly buy and sell crypto assets.
2. Think that Crypto is easy money
Though this sounds obvious, thinking that Crypto is easy money is one of the most common crypto trading mistakes of new investors.
Instead, there’s nothing simple or easy about financial investment including stock, forex, or cryptocurrency. Whoever says different must be trying to take advantage of your gullibility to trick you into a crypto scam.
Investing is a skill that takes time to learn and understand. Most investors have to experience failures to have lessons learned themselves. Why do you think that joining some crypto signal channels on Telegram and Discord would help you become a veteran investor?
In fact, the cryptocurrency space is extremely complicated and innovative with numerous concepts that cannot be explained by a single comment from a stranger on the Internet.
If you truly want to get involved in this market, you’d better start to do your own research. Now we move to the second mistake in crypto trading.
3. Not doing fundamental analysis
A lot of beginners start their investment journey by buying in a popular digital crypto coin like Bitcoin or Ethereum or following suggestions from experts. However, at the end of the day, you are the only one who takes responsibility for your investment, your profit, and your loss. In doing so, you need to arm yourselves with investment knowledge and market news to make a fundamental analysis yourself before making any decision.
Also, make sure you double-check any information that seems fishy since most traders are biased to their crypto portfolio and keep saying only the good things about the digital coins they are owning. Make your best effort to stay objective and keep an unbiased view when accessing any news sources.
Below is the checklist of 5 criteria to check before putting your money in any project:
- White paper
- Developer team
- Community activities
- The business position
- Total supply
4. Borrow to invest
In Top 5 crypto investment rules, we mentioned the first rule: Never invest more than you’re willing to lose. We have such a reason to put this rule in the top 1 position. Investment is supposed to help you potentially build your wealth, not to make you broke.
The global crypto market has recently experienced strong fluctuations, making it riskier than ever.
When the market is exploding, it seems so attractive to invest in. When everyone around you is talking about which digital coin will reach ATH this week, “The fear of missing out” may drive you to keep buying in instead of sticking to your budget. When the market is down, you may lose everything. And by borrowing from your family, your friends, or your credit cards, you would fall into a debt trap and become broke.
People make mistakes all the time, but remember, some mistakes cannot be fixed.
5. Follow herd mentality
Everyone has a unique style of trading and investing, and so do you. Copying other traders’ portfolios and investment strategies regardless of your funds and financial condition may lead you to failure.
However, a beginner is likely to follow other crypto traders. It is undeniable that the crowd has invisible power. You join a crypto investment community or group and might see many people investing in a certain digital coin with a rumor that it would be Lambo in the future. If you follow the crowd and decide to buy in without doing your own research, then you may get herd mentality bias. In other words, you are having FOMO.
Having FOMO might drive you to have biased behaviors, one of them is to take an increased risk without thorough consideration and much strategy. Instead of making fundamental analyses, traders with FOMO would decide to buy or sell crypto just by reading news or some rumors on the market or simply following a crowd.
6. Going all-in
No need to say more, going all-in violates our golden rule in crypto trading: Never put all your eggs in one basket!
By diversifying your crypto portfolio, you can spread the risks in crypto trading and protect your fund during market fluctuation. The diversifying strategy will save you from getting a huge loss even when some of your portfolio items are experiencing a slump.
7. Revenge trading
Remember, losses are inevitable in trading.
However, not all crypto traders are able to accept the truth that they may lose and end up getting trapped in revenge trades. Often, traders would attempt to get riskier trade, hoping that they would save them from the previous losses. Those behaviors are known as revenge trading.
Such kinds of trading are based on fear and frustration which would be harmful to your investment and mentality. When the market does not work as they wish, they might trap themselves in continuous losses.
Do you find this article helpful? Which crypto trading mistakes have you made? Keep following Tokenize Blog for more crypto trading knowledge and information!
Cryptocurrencies are subjected to high market risk and volatility despite high growth potential. Users are strongly advised to do their research and invest at their own risk.