Bitcoin and cryptocurrency in general has become a major disrupting force on finance and banking. Many people are looking for ways to invest in crypto but often don’t know how or where to start. There is a lot of information out there online, but all of it is helpful or even accurate.
This means that a lot of beginner traders fall into some common traps that end up losing them money. Since a lot of these mistakes are common, knowing about them can help you avoid making them yourself. In this article, we will go over several mistakes to look out for when starting out trading.
1 – Not researching
If you lack the right knowledge when you are just starting out then it is very likely you will make some missteps. It’s always a great idea to get as knowledgeable about the subject of cryptocurrency and blockchain as possible to avoid doing something wrong.
Start out by understanding how your preferred cryptocurrency works. Then, look into the best platform to trade on to make sure that you are protected. For instance, if security is your concern, then trading on a Peer-to-Peer network like Noones is your best bet.
You should also learn how to analyze the market. One of the biggest factors in the success or failure of traders is the volatility of cryptocurrency. If you can figure out how the market trends tend to go for your preferred coin, then you may be able to buy low and sell high which is the ultimate goal.
2 – Emotional trading
Trading Bitcoin can be a thrilling yet nerve-wracking experience due to its notorious price swings. Often, emotions run high, and traders can easily get swept up in the excitement or fear that comes with these fluctuations.
Fear is a very strong emotion that can affect many traders. The fear of missing out and the fear of losing everything makes a volatile mix that can easily wipe out your investment due to bad trades.
If you see the value peaking, the fear of missing out can make you buy when the price is too high. If the value is dropping, you may sell out of fear and then miss the rebound that comes after. Try to keep a level head and stick to a strategy without emotions dictating your next move.
3 – Overtrading
Overtrading is easily done by beginners who are a little too enthusiastic to trade a lot and make a lot of money. However, overtrading can lead to significant financial losses.
It mainly occurs due to chasing losses. This is when you make little trades that lose money and then try to chase any bounces in the value or by trying to mitigate those losses with purchases of other coins.
The best course of action when trading is to create a strategy when you get started and stick with it. Make adjustments as needed, but refrain from going overboard with your trades.