Trading requires nerves of steel. Cryptocurrency trading makes you learn how to gain a clear state of mind in order to choose the right trading strategy and be able to predict the market movements. The highly volatile nature of the crypto market may either bring you significant profit or loss.
Changelly continues to provide learning materials about cryptocurrencies and blockchain technology. If you are new to crypto trading, keep on reading as we have collected six common cryptocurrency trading mistakes that should be avoided.
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Cryptocurrency Trading Basics
If you are new to the cryptocurrency industry and have never traded anything on the stock market, it is important to start with essentials. Visit a cryptocurrency exchange of your choice and learn more about its features and tools. Check out the trading terminal. Try to get into all the nuances of a crypto platform.
It also recommended starting with basic trading definitions. We’ve recently gathered the most relevant crypto trading words and their meanings so you can briefly get into them.
Among common cryptocurrency trading mistakes are as follows: not using stop-loss orders, not DYOR, not calculating risks, trading those assets that currently have an uptrend, following the pump and dump schemes, and not diversifying a portfolio. Let’s take a closer look at them.
#1. Not Using Stop-loss
Setting up a right trading order may save your funds. If you are a newbie in crypto trading, it is recommended to set up a stop-loss order. As soon as you learn how to deal with it, you may start using a wide range of other trading orders.
A stop-loss order is an order that sells/buys an asset once the market reaches a determined price.
The sooner you understand and accept the fact that the loss will always be a part of your trading, the easier it will be for you to become an advanced trader.
#2. Investing More than You Can Afford to Lose
Trading more than you can afford to lose is a common trading mistake. If you feel you got lucky and your trading has never been better, there is a great temptation to put more money into it. It will be great if you have spare money to continue the trading game. It will be a disaster if you decide to sell your car/house/dog/etc., to keep on reckless trading.
Not calculating risks and rewards may lead to negative consequences. Ask yourself: how much am I ready to lose? For instance, you are ready to risk $100 in order to make $200. In this example, the risk/reward ratio will be $100/$200 or 0,5 (the risk divided by reward). At least at the start, a novice trader should keep an eye on a risk/reward ratio. The risk/reward ratio should not be more than the potential reward.
Read also: How to Avoid Crypto Trading Fiasco: Tips from a Professional Trader
#3. Not DYOR
Taking the first steps in any field might be tough, not only in the cryptocurrency industry. To facilitate ‘the crypto entrance,’ it is necessary to do your own research about pretty much everything. How and where to store crypto funds? What are the best cryptocurrency exchanges for crypto novices? And many other general and important questions. The digital space is full of bad actors. The crypto industry is crawling with scam platforms that are willing to enrich via your inadvertence.
Doing your own research is vital. Secure and robust trading must be a priority. Besides, some of the crypto exchanges might be too complex for newcomers. Searching for Your exchange, Your crypto wallet, and so on, might take a little while.
#4. Chasing Only Uptrend Currencies
Once you notice the uptrend of certain cryptocurrency, don’t rush to follow it. To be able to know when it’s a perfect time to sell or buy crypto, one should spend hours learning the price trend, analyzing charts, candlesticks, and many more.
Fundamental and Technical Analysis are integral elements of pretty much every trader’s strategy. These are difficult but efficient ways to master the art of trading. While searching for useful advice from advanced traders, remember: anyone who knows how to earn big money will never share his/her secrets with you. However, professional traders may sometimes provide basic ‘trading wisdom’ that can be fundamental to your future trading style.
#5. Following the Crowd: Pump and Dump
Every market has its manipulators. During the ‘rich’ 2017, when the cryptocurrency market was stuffed with various new altcoins, BTC hit $20,000, and so on, there was (and still is) a popular pump/dump scheme. One could encourage others to sell or buy a particular cryptocurrency at a certain time. Such market manipulations usually work for experienced traders that know exactly when to close and open a position to profit.
#6. Not Diversifying Your Portfolio
The proverb that tells us ‘not to put all eggs in one basket’ is as old as time. Portfolio diversification means you invest in several assets and not just in a single one. If you fail with one asset, there are always a range of others.
However, there is a tricky situation. It also not recommended to trade too many trading pairs for obvious reasons. A new trader might be confused with an amount of information that should be taken into account. Moreover, trying to monitor all the pairs at the same time will not upgrade trading skills. On the contrary, constant distraction leads to failure and can provoke you to make mistakes.
Trading is an art. But just like everything else, it should be mastered. It is crucial to remember that there will be mistakes and losses. Don’t be afraid of taking risks.
Changelly has been providing seamless cryptocurrency swaps for five years straight. We glad to announce that we’ve been maturing together with our users. With the intuitive trading terminal, strong account security, and 24/7 dedicated support, Changelly PRO might be a perfect place to start your trading path. Trade safely!
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.