The cryptocurrency market doesn’t forgive even an honest mistake; every crypto trader needs to understand this mantra if they have any hope of achieving long-term success in this volatile market. There is no denying that fortune has been made in the world of crypto trading and fortune has also been lost. You can find plenty of people who have made their riches from this space and obviously, everyone wants to follow in their footsteps. In order to do so, you have to be careful and avoid the common mistakes that most people end up making.
If you learn to avoid these blunders during crypto trading, you can boost your chances of success. What are they? Check them out below:
Blunder 1: Starting with real money
Cryptocurrency trading is a skill and just like every other skill, it will take countless hours of patience and practice to master it. There are some ground rules and one of them is to not invest real money before practicing paper trading. Sure, this may be boring, but it will prepare you for what to expect. You have to bear in mind that the crypto market is not going anywhere and even if you spend two months on paper trading, you don’t lose anything. But, going without paper trading and diving it with real money can result in losses.
Blunder 2: Not using stop losses
Risk management is essential in crypto trading and the holy grail of risk management is stop losses. With the help of a stop loss, you can minimize the losses when your trade goes south. It doesn’t matter how confident you are about the trade going in your favor, not opting for a stop loss is an egoist mistake and it can set you back. This feature can be found on almost all online trading platforms and you shouldn’t hesitate in using it.
Blunder 3: Paying high fees
You have to be cautious when you are choosing a brokerage because if they have a high trading fee, it will end up eating a significant amount of your profits. When you are doing all the hard work, why would you let someone else enjoy a big portion of it? The key is to do your homework and choose a broker that offers you their trading services at a reasonable fee and can offer you high liquidity and volume. This will enable you to make more money through cryptocurrency trading.
Blunder 4: Not doing fundamental analysis
Many beginners begin their crypto trading journey by choosing popular crypto and there is a chance that you will be able to make good money for quite a while. But, there will come a time when the coin starts falling and a single big loss can wipe out your portfolio. The best way to avoid this massive blunder is by doing a fundamental analysis of the coin you want to trade. This means figuring out what the coin does, the future potential of the cryptocurrency, the token economy, and the management team. Keep these parameters in mind when you are choosing the cryptocurrencies you want to trade.
Blunder 5: Not maintaining a trading journal
One of the biggest blunders that many beginner crypto traders make is not writing down why they are taking a trade and then doing an analysis of them later on. You need to find out why some trades are giving you spectacular results and why others are losing you money. Over time, maintaining a trading journal can play an important role in helping you improve your strategy.
Blunder 6: Revenge trade
Losses are inevitable in crypto trading, no matter what you do. But, there are many people who are simply not built to accept losses and they end up making revenge trades that can harm them in the long run. Such trades are usually based on frustration and fear and can turn out to be very toxic for traders. Many people take riskier trades in order to reduce their losses and this kind of trading is known as revenge trading. Once you lose a trade, you need to be mindful and understand that nobody ever wins 100%. As long as you have a proper risk and reward ratio, you can afford to lose some trades.