Crypto is a volatile market and anyone who has ever dipped their toes in it will know that. It is not uncommon to see virtual coins fluctuate by double-digit percentages in a single day, let alone an hour. But with that volatility comes opportunity, so the best traders can use those fluctuations to their advantage. Unfortunately, there are plenty of new traders out there who entered the crypto market without doing their homework first. As a result, many of them have suffered from losses as a consequence of making common mistakes when trading crypto. Let’s take a look at some common crypto trading mistakes and how you can avoid them;
FOMO (Fear of Missing Out) trading
If you’ve ever tried your hand at crypto trading, then you’ll know that one of the most difficult things to do is to remain calm when the market is on a tear. If everything is going according to your trading strategy, you’ll make money, but when there’s an unexpected sudden spike in the market, you could easily miss out on profits that could have been substantial.
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FOMO trading is a common mistake among traders who see their peers making a profit with a particular coin and want to get in on the action before it’s too late. The problem with FOMO trading is that it’s hard to predict when the market is about to turn, so you could end up buying coins when they’re at their peak and then holding onto them as they plummet in value.
Lack of research
Hasty decisions will often lead to regrettable consequences, and the same is true of crypto trading. If you didn’t do your homework and you invested in a coin that was a dud, then it’s unlikely that you’ll ever get to see your initial investment again. Most crypto traders will tell you that proper research is the most important thing that you can do to protect yourself against making poor trading decisions.
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More often than not, the best way to research a coin is to study its chart. By analyzing a chart, you can see the coin’s past performance and identify notable price patterns that could indicate an upcoming price move. When trading, you should always have a list of coins that you want to buy and sell, and you should only buy a coin when it is listed on the chart.
Trading too many coins
Some traders fall into the trap of believing that they should buy a stake in as many coins as they can because they assume that they will all increase in value. Unfortunately, that’s not how the market works. Because of the low barrier to entry in the crypto market, hundreds of new virtual coins can appear each month.
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Unfortunately, not all of them will increase in value, so you could be wasting your money buying coins that are unlikely to increase in value. To make matters worse, if you’re investing in a wide range of coins, then it’s likely that you’ll incur trading fees on every transaction. Studies have shown that diversifying your portfolio is an effective way of reducing risk and lowering the volatility of your investments. However, you don’t want to diversify your portfolio too much, as you could end up with a very small stake in a handful of coins.
Incorrect trading pair selection
This is another common mistake that new crypto traders often make. It’s important to understand that you don’t buy coins in the same way that you would buy stocks. One of the first things that you need to do when you start crypto trading is to select a trading pair.
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Choosing the correct trading pair is important because it will determine the price at which you buy or sell the coin. If you buy a coin that is listed against the dollar, then you can expect the price of that coin to rise and fall with the movement of the dollar.
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Similarly, if you buy a coin that is listed against another virtual coin, then its price will be more volatile than a dollar-listed coin. Because of the importance of selecting the correct trading pair, you should always do your research before you start buying and selling coins.
Lack of discipline
One of the most common mistakes that new traders make is to trade according to their emotions. It’s easy to watch the market and see it go up and down like a roller coaster, and it’s tempting to try to jump on the bandwagon and ride the highs and lows.
Unfortunately, riding the highs and lows of the market is not a sustainable way to make money. If you want to make a living through crypto trading, then you need to stay disciplined and follow a trading strategy that will allow you to profit from short-term price movements while minimizing the risk of incurring long-term losses.
While the crypto market is volatile and unpredictable, it is also highly profitable for those who know what they’re doing. By avoiding these common trading mistakes, you can make better trading decisions and protect yourself against losses.
