Investing in cryptocurrencies can be thrilling, but many novice investors make typical mistakes when trading and purchasing cryptocurrencies. Without a doubt, crypto is a continuous learning and not something you can master overnight.
There are several things to be aware of when navigating the cryptocurrency market, regardless of your level of expertise or experience with investing. Although buying cryptocurrencies is riskier than buying other kinds of investments, you do not have to lose everything.
In this post, we’ll show you some frequent mistakes investors make when trading cryptocurrencies and how to avoid them.
Basic cryptography knowledge is lacking
Research is the first thing you should do before you start trading cryptocurrencies. Study the market, the coin you plan to use, its value, and the exchange you plan to use. You will become a better investor if you take the time to educate yourself on various cryptocurrency projects and the objectives of each cryptocurrency business.
Remember that successful investments do not solely depend on chance or speculation. They demand a detailed examination of each component of an asset (or currency). This indicates that the biggest error consumers make when purchasing cryptocurrency is not conducting enough research.
Complex Trading Strategy
For example, On May 9, 2022, TerraUSD dropped by 84.5% from previous highs and lost its peg to the US dollar. Afterwards, Terra revealed that its community had approved the proposal for the forking of the blockchain, USTC experienced its first insignificant gains by about 67.5% on May 25.
A good run, however, did not last long as the token’s value kept falling. The platform, according to Kwon, has also been dealing with a lot of “misinformation,” which could have contributed to the decrease in USTC price in June.
To avoid this, you must have a trading strategy or plan in place before you start buying and selling coins. Create a trading journal so you’ll be able to keep track of all the trades.
Deciding based on FOMO or Fear Of Missing Out
The phrase “FOMO” (Fear of Missing Out) refers to the anxiety associated with passing up an opportunity. For instance, FOMO might tempt you to take advantage of an investing opportunity that seems too good to be true. This, however, can result in hasty choices that are not in your best interests.
Selling too soon, buying at a premium (because you fear losing out on an enormous increase), or even investing in a doubtful enterprise surrounded by hype and lofty claims are all examples of how FOMO develops.
Long-term success depends on your ability to stick to your strategy even when the market is irrational. It’s crucial to realize that there are always new chances in the world of cryptocurrencies, so calm down and stop worrying about missing out.
Failing to set a stop loss
A stop loss is the most crucial setting you can make on your cryptocurrency exchange. With a limit order, you can purchase or sell a cryptocurrency at a set price, and if the market falls below that price, your trade will be immediately executed, allowing you to exit the position at a fixed price.
Selling out at least partially through the drop will allow you to limit your losses if your position begins to tank and there is no way to stop it in time. Simply go to your account settings and define what amount of movement results in an automated sale to set up stop losses.
There are numerous ways to purchase cryptocurrencies, but novice investors can just do so without understanding how exchange gas costs operate. Long-term savings will come from learning which cryptocurrency exchanges have cheap costs and the most efficient way to buy and trade cryptocurrencies.
Neglecting cybersecurity and falling victim to fraud
Cryptocurrency scams can be carried out via email or messaging services, with the culprits posing as working for you. Simply connecting an online wallet to an application and granting it access to your funds can endanger your wallet.
And while this is standard procedure for many crypto apps, con artists can utilize this method to steal money from cryptocurrency wallets. Keep the majority of your cryptocurrency funds in offline hardware wallets to prevent these scams, and never link your online wallet to an untrusted program. Never divulge your wallet’s password, seed phrase, or private keys either.
An all-at-once large investment
Placing all of one’s trading eggs in one basket is one of the most frequent errors made by novice traders. Make sure you avoid falling into this trap because it can be a costly error.
Diversifying your portfolio is always a good idea while trading. Because you have other assets that are performing well, your portfolio won’t be significantly impacted if one item falls or becomes volatile.
In addition to having various cryptocurrencies, it is also advisable to have multiple exchanges, particularly with so many well-liked trade pairings available including BTC / ETH, USD / USDT, and XRP USDT.
To ensure that at least some of your cash is still available if one exchange is down due to maintenance or goes out of business.
Even with these suggestions, you’re still going to make blunders. That shouldn’t demotivate you because it happens to everyone. Learning from those errors and avoiding repeating them is a necessary step in the investing process. The goal should be constant improvement.