Top Common Mistakes to Avoid When Trading in Cryptocurrency

You’re ready to take the plunge and start trading in cryptocurrency, but you’ve heard some horror stories about investors who’ve lost everything. Investing in cryptocurrency is indeed riskier than other types of investments, but that doesn’t mean you have to lose everything. Here we highlight some common mistakes people make when they start trading in cryptocurrency and how you can avoid them.

Not Having Any Trading Strategy

When it comes to the cryptocurrency market, you need to have a trading strategy or plan before you start buying and selling coins. This means that you should have an idea of what kind of coin(s) you want to invest in and how much money you can afford to spend on them.

The best way to do this is by creating your trading journal where all your ideas are recorded and organized. You will then be able to keep track of all the trades that were successful or not so that these mistakes can be avoided for future trades.

A good example will be if someone wanted a long-term investment but ended up making short-term investments instead. Because they didn’t have a clear plan on how long their money should last before reinvesting into another project/coin. Then there wasn’t any goal set up from the beginning which led them down this path without even realizing it until afterward when looking over their journal entries from previous days/weeks/months.

Not Setting a Stop Loss

The most important thing you can set up on your cryptocurrency exchange is a stop loss. It’s a limit order that sells or buys a cryptocurrency at a specific price, which means that if the market drops below this price, your trade will be executed automatically and you’ll get out of the position at a guaranteed rate.

You can think of it as insurance for when things go wrong. If your position starts to tank and there’s no way to avoid it in time, at least you’ll be able to minimize any losses by selling out at least part way through the drop. Setting up stop losses is easy, all you have to do is go into your account settings and specify what level of movement triggers an automatic sale.

Putting Your Eggs in One Basket

One of the most common mistakes that new traders make is to put all their eggs in one basket. This can be a costly mistake and it’s important to make sure you don’t fall into this trap. In trading, it is always better to diversify your portfolio. So that if one asset collapses or becomes volatile, it won’t affect your overall portfolio too much because you have other assets which are performing well.

The same applies if you only invest in one cryptocurrency at a time and then try to exit once you’ve made enough profit from it. Just like with any other investment strategy, diversification is key. Not only do you need multiple cryptocurrencies but also multiple exchanges. So that if one exchange goes down due to technical issues or goes bankrupt (as we’ve seen before), then at least some of your funds will still be intact via other exchanges as well as wallets, etc.

Not Tracking Your Trades

Tracking your trades is one of the most important things you can do when trading cryptocurrency. This is because it allows you to identify patterns and trends, which will help you make more informed decisions about when to buy or sell.

There are a few different ways to track your trades, including using a cryptocurrency trading app, spreadsheet, bot, or platform. The choice of which method is right for you will depend on what kind of trader you are and how much time and effort are invested in monitoring activity.

Trading on Emotions and Bias

Emotions and bias are the two main factors that can lead to poor decision-making. Emotions can cause you to make impulsive decisions, whereas biases will cause you to rely on past experiences instead of considering the current information at hand.

You might also be tempted to trade based on your emotions, which is never a good idea. Sometimes your emotions will be telling you that something’s going to go up or down, but the market doesn’t always agree with them and ends up going in another direction than what your gut tells you it should do.

This can lead people down a rabbit hole of bad trading habits when they realize this has happened more than once in their trading history.

Making Decisions Based on FOMO (Fear of Missing Out)

FOMO (Fear of Missing Out) is a term used to describe the fear of missing out on an opportunity. For example, if you see an investment opportunity that looks too good to be true, FOMO may encourage you to invest in it. However, this can lead to rash decisions that are not in your best interest.

While some people are more susceptible to making rash decisions than others, everyone can benefit from being aware of FOMO when they’re thinking about investing in cryptocurrency or making any other financial decision.

Not Doing Enough Research

The first thing you should do before you begin trading in cryptocurrency is to do your research. Research the market, the coin, its price, and the exchange you are using. The more information you have about a particular cryptocurrency, the better prepared you’ll be to make a smart investment decision.

Don’t forget, good investments aren’t just based on luck or speculation. They require a thorough analysis of all aspects of an asset (or currency). This means that if there is one major mistake people make when buying cryptocurrencies it would be not doing enough research.

Trading in Cryptocurrency Can Be Risky – Other Common Mistakes Many People Make

Trading in cryptocurrency can be risky and there are common mistakes that many people make. The first mistake is not doing your research on the coins you’re investing in. You should take the time to learn about each coin, how it works, who created it, and what its purpose is. If you don’t know much about cryptocurrency then don’t invest any money until you do some research.

Another common mistake is buying at the wrong time. This means buying when prices are high or selling when they are low. You want to buy low and sell high so always try not to panic when prices fall because they will go back up again soon if you keep holding onto your coins until then.

The third mistake is trying too hard for quick profits instead of just holding onto long-term investments which will yield more profits over time than short-term trades would have done.

Bottomline – Use A Trustworthy Exchange

So before you deposit your money into any exchange, expert reviewers recommend that you do some due diligence. Read the fine print. Inquire about the security measures in places, such as two-factor authentication and offline storage policies. Lookup user reviews of your chosen cryptocurrency exchange to make sure there aren’t any major customer service issues or significant security breaches that have occurred in the past. The whole point of trading on an exchange is to make sure it’s trustworthy and secure—so don’t skip this step!