3 major cryptocurrency trader mistakes
Cryptocurrency is in vogue these days, and its popularity continues to grow. With the frequent emergence of new cryptocurrencies and people with high social clout, such as Ilon Musk, scribbling daily tweets on the subject, the concept of digital currencies continues to gain momentum.
Subsequently, millions of people from all over the world are turning to the most famous cryptocurrencies such as Bitcoin, Lightcoin, Etherium and others to take advantage of lucrative investment opportunities and make quick money.
Cryptocurrency trading mistakes to avoid
While it's true that smart investments in cryptocurrencies can indeed yield impressively high returns in relatively short periods of time, it's also important to understand the volatility of cryptocurrency trading.
By having the necessary knowledge and information in advance, you can hedge against potential losses and only make investments that bring you returns. Here are 3 major mistakes that almost every novice cryptocurrency trader makes and that you should try to avoid in order to make better investments.
Mistake #1. Making emotionally motivated trading decisions
Even though cryptocurrency trading involves risks, trading decisions are usually made strategically with a lot of market fundamentals, trends and signals in mind.
With all the hype surrounding cryptocurrencies, people are often tempted to deviate from their strategies and make decisions based on emotion due to winner's syndrome, environmental pressure or similar biases.
People may even start panic selling as soon as they see an unexpected negative trend in the market. While people like to believe that deviating from their strategy and making decisions based on emotion can help them minimise losses in a falling market, this is not entirely true.
Even if things don't go as planned, it is best to review your strategy and develop a contingency plan instead of making decisions based on emotion. Using modern trading software and automation can help you minimise emotional biases in your trading strategy.
Mistake #2. Ignoring risk management techniques
Just like any other investment, diversifying your portfolio in cryptocurrency trading can go a long way in helping you mitigate risk. A good strategy to diversify your crypto portfolio is to trade in pairs. Popular cryptocurrency pairs include BTC/EUR, BTC/USD, BTC/BCH, BTC/ETH and BTC/GBP.
Another very effective method of risk management is the use of a stop loss. This tool allows you to automatically liquidate your investment as soon as the value of your asset reaches a specified price. You can use stop-losses after carefully analyzing your risk tolerance and incorporate this method into your broader cryptocurrency trading strategy.
Mistake #3. Using an unsuitable trading platform
Buying and selling cryptocurrencies largely depends on the type of platform you use to make transactions and track price trends. Using the wrong cryptocurrency trading platforms can make it difficult to track and analyse market trends.
This will deprive you of vital trading signals and information that can lead to a positive investment outcome. People are often inclined to use unsuitable platforms and end up making bad decisions.
In order to trade cryptocurrencies such as Bitcoins in the most efficient and effective way, it is important that you choose a legitimate platform.
Regardless of your expertise or experience, the platform should offer tools that allow anyone to engage in profitable cryptocurrency trading.
With the right information, knowledge and assistance, cryptocurrency trading can be seen as an incredibly effective tool for generating income and multiplying your start-up capital. If you manage to stick to best practices and avoid typical mistakes, positive results are almost guaranteed.