The erratic nature of cryptocurrencies means there is a great potential for both profit and loss in the market. Investing on the advice of a celebrity or a self-declared expert is a surefire way to lose money. So let’s discuss some simple rules to help you avoid common financial blunders and become a more informed trader.
When it comes to trading cryptocurrencies, experience is key. Anyone who wants to start trading cryptocurrencies can benefit from this comprehensive guide, which explains how to avoid the most common pitfalls and develop winning trading strategies from the ground up.
If you trade based on your emotions, you are not practicing crypto trading but rather gambling. Therefore, your emotions should remain in check when friends try to convince you to invest in something you have no idea about. Instead of following someone else’s advice, do what you think is right after proper research. It is best to ignore your emotions in favor of a well-informed decision, especially regarding investments.
Do not follow the advice of “experts”
Many newbies follow “gurus” on social media who only exist to provide content rather than conduct accurate market analysis on the cryptocurrency industry. The ideal approach is to double-check everything. For example, if you are trading bitcoin, check the bitcoin live chart regularly. Keep an eye on the market for any cryptocurrency you plan to trade. Although certain expertise will undoubtedly be valuable, you must still do your homework. Do your own research if you’re looking to make a long-term investment.
Using a market order to enter a trade is one of the worst blunders you can make in the market. This is the worst possible entry position because the price can rapidly turn against you, resulting in further loss and having to pay a premium in trading expenses. FOMO causes you to want to enter a transaction as soon as the price moves. FOMO and FUD have resulted in many investors losing their entire investment portfolios. FOMO stands for Fear of missing out, whereas FUD is Fear, Uncertainty, and Doubt.
The crypto market is open 24 hours a day, seven days a week. The best course of action is to remain calm and wait for another chance to present itself. Trading daily or weekly can be unpleasant for swing and arbitrage traders, but at least you’ve protected your capital.
Putting all your financial eggs in one basket increases your financial loss risk. The ideal method is to calculate your investment as a ratio. Then, you can invest in various initiatives or transactions by lowering your risk. Most competent investors want to hold numerous assets over the long term to diversify their portfolios.
Set realistic goals and always have an exit strategy
Since many individuals succumb to greed due to not having realistic goals, this should be a primary priority. Even if you had complete access to all relevant details, values could decrease due to a black swan event, a hack, or a tweet from a well-known individual. Therefore, it is crucial to plan and take safeguards to reduce losses in a sudden tragedy. Investors in cryptocurrencies should, if possible, plan their trading strategies and exit positions in advance.
Never invest in low liquidity cryptos
A cryptocurrency’s liquidity refers to how easily it can be bought and sold. If a cryptocurrency has poor liquidity, you may find it difficult to sell it when the time is right. And you’ll be stuck with it rather than making a profit.
Everything appears logical and rational when you look back in time. You might look back and wish you had purchased Bitcoin at $1,000 or sold it at its highest price. This regret won’t lead to anything. Do your research, and if you believe a certain cryptocurrency is undervalued, acquire it. Or, if you believe it is overpriced, you could sell it.
Start with a demo account
First-time traders are enticed to use the top cryptocurrency platforms to increase their investment. Exchanges like this allow users to wager on the cost of digital assets to purchase low and sell high. However, if you don’t understand the marketplace and have a strategy beforehand, don’t do this.
If you don’t have any prior trading expertise, a better option would be to trade crypto using a demo account before investing any funds. A good rule of thumb is that if you lose money on a practice trading account, you’re more than likely going to lose money on a real trading account.
Follow the “buy the rumor sell the fact” strategy
In most financial markets, this ideology is effective. Imagine that a specific cryptocurrency project is about to reveal some revolutionary new features. Buy the cryptocurrency when you first learn about this. The cost will keep growing as more people learn about this. The price will abruptly decrease once the feature’s actual implementation is announced! Why? Because those that purchase in advance will sell and make a profit. A word of advice: double-check the rumor’s authenticity!
Do you lose your money if you unintentionally uninstall your mobile banking app? No. You can just reinstall the banking app. That’s because a bank is in possession of your money. Cryptocurrency is pretty unique. You will lose all of your cryptocurrency if you delete your cryptocurrency wallet without a backup. Learn how to use paper, hardware, and software-based crypto wallets.
Cryptocurrency trading is a highly specialized trade that takes great patience and competence. Whether you are just starting out or have been doing this for a long time, if you are facing losses, the first thing you need to do is bak off. Sit back and evaluate what you are doing wrong, the mistakes you need to avoid, and how to make this a long-term investment for yourself. These are just some basic tips that can help you do so. Follow them and let us know if they were of any help!
Read more interesting articles at googdesk