The Crypto Market is still fresh and greatly predictable. However, it does not respect anyone, no matter the experience level or strategy, there is always a percentage of inherent risk involved with it, especially since there isn't any decade or century-old guideline to it.
The technicality in trading crypto is sophisticated and it's something that can be learned. But honest mistakes aren't forgiven, once made, it's gone. People always say, "the more you make mistakes in trading, the more you know." But most times, the reverse can be the case, some people tend to abandon trading cryptocurrency when they make a huge mistake and lose money.
When trading cryptocurrency, it's possible to make common mistakes that could diminish your investment. Most of these mistakes are avoidable when you follow through with some process. Knowing the mistakes common in trading cryptocurrency will help avoid them and save you a lot of money that would have been lost. It's no news that wealth has been created through the trading of crypto and people have lost their fortune to it. Without wasting much of your time, here are common mistakes crypto traders make and the best ways you can avoid them.
1. Trading with Real Money instead Of Starting with Paper Trading
There's no skill you wish to acquire that doesn't take long to master. Trading crypto isn't left out, you need hours of practice and patience to master the trading skill. Crypto trading has some ground rules that must be adhered to, and one of these rules is making use of paper trading before putting your money into it
Although it's known as the most boring part of learning to trade, it is the most important aspect of trading crypto that shouldn't be skipped. Most traders, especially beginners, prefer the gambling mindset, making use of real money to trade before mastering the skill, some don't mind losing their money though.
You need to understand that the cryptocurrency market isn't vanishing or depleting anytime. It's here to stay, therefore there is no need for rushing or skipping the learning process. You can prepare yourself with paper trading for two months, with this, you won't lose anything. You will be able to learn strategies and master effective trading that will reduce your loss to gain ratio. Using the paper trade helps you prepare for the bigger platform, where you use real money to trade.
2. Not Making Use of Stop Loss
Risk Management is always advisable especially for beginners in crypto trading, and other investment types. Using Stop loss aids you in minimising the loss you receive from a trade that has gone wrong. No matter your confidence in crypto trading, always make sure to use a stop loss, because not using it could be extremely devastating. You might lose all your portfolio to a single trade. I believe you won't like that.
This is the number one mistake most traders make while trading crypto, and mostly it's about massaging their ego, or either they don't know about stop-loss at all. Virtually all the crypto exchange provides stop-loss techniques. If you have been trading without stop loss, you should start adding it to reduce your loss in an unstable market.
3. Paying Extremely High Brokerage Fees
Though brokerage is a good asset for traders, paying high brokerage fees can eat deep into your trading profit, and make it seem like you are earning next to nothing. The best step to take is to use a broker that offers a low fee for its charges to trade, and also has high volume and liquidity. You end up making more money from your trade when you do this than paying high brokerage fees.
4. Ignoring profit or loss as a percentage
This mistake is quite common among traders; not seeing their profit or loss as a percentage. Some traders just see their profit or loss as an absolute increase or reduction rather than looking at it from the perspective of percentage. Trust me, if you make it a habit of viewing your profit or loss as a percentage, it gives you a clear image of your profit and loss, it also shows your growth process. Platforms like the 3commas help view your profit and loss of each trade on a percentage basis.
5. Ignoring The Use Of Fundamental Analysis
The Common path most beginners follow in the crypto market is to begin by buying a known cryptocurrency and start trading the currencies. Sometimes, they end up making cool money for a long period, but when the cryptocurrency market decides to dump to the deepest part of the ocean, you can lose all you've stored in your portfolio.
There are ways to avoid huge losses like this. The best thing is to carry out a fundamental analysis of the coin you have the intention of trading. You can carry out fundamental analysis by learning about what the coin does, the management team, the future of the coin, and the token economy.
6. Trading Crypto based on Dump or Pump Calls
There are lots of groups on various social media platforms that claim to provide signals for buying and selling crypto. But are these signals correct and trustworthy, sure they aren't, it's not even advisable especially for beginners, you would be better off without those channels.
Those groups created might work when it was just starting, but not when there are over a thousand traders trading on a single signal, it surely won't pay off. While experts have traded and closed trade immediately, the beginner is left to his trading call, which will later incur his loss. The beneficial groups that give at least good signals are the paid ones where there are only 20 people and fewer on the group page. But it's advisable to only use these signals as indicators and not make actual trades on them.
7. Embarking on Revenge Trade
While trading cryptocurrency, it's inevitable to incur a loss. Not all traders have built a hard skin against loss. Most of these traders end up doing a revenge trade, so they can compensate for the previous loss. This type of trade is always based On frustration from the traders and fear, which is very toxic in a trader's trading journey. A trader must note that it's not every trade that wins, there are ups and downs, you must be mindful after a loss, not to perform a revenge trade.
With this compiled list, you should know what mistakes to avoid and how to limit your risk exposure in trading cryptocurrency. Make sure to adhere to the advice given and watch your growth process in the world of cryptocurrency improve.