The sad thing is that not everyone is lucky enough as most people end up learning their lesson the hard way. It is very common that you perform a trade and lose all your money. Trading in cryptocurrencies is very unpredictable. Unless you are very cautious, it is possible to gamble away your last coin.
The crypto market can be very unpredictable and volatile. Even so, some traders lose their investment because of their own mistakes. There are certain things that a cryptocurrency trader must keep in mind. Failure to do so will lead them to losing their investment, or worse go broke.
Things to avoid when trading crypto
- Staking more than you can afford to lose
The first thing to avoid as a crypto trader is a temptation of trading more than you can afford to lose. The greed to make a big score should never tempt you to invest your rent, pension, or money that is not yours. This is because the crypto space is very volatile, losing everything is a reality.
- Buying high and selling low
The primary goal of a successful crypto trader is buying low and selling high. A trader can buy a coin right before its value drops by a huge margin. To save themselves from serious losses they sell this coin at a lower price compared to the buying price. In doing so, they end up losing a lot of money when they could have waited for the value of the coin to recover.
- Trading in the absence of a stop loss
A trader must always have a stop loss. This is a point of loss beyond which they abandon the ship. Most traders attach emotions to their trades. When this happens they are unable to quit the trade even when they are incurring serious losses. Among the most important skills for a trader is knowing when to accept a loss and moving on to another trade. Traders lose their investment because of this inability. One must have a stop loss and remain disciplined enough to stand by it even when trades are against them.
- Over-reliance on luck
Some traders depend on luck when they trade. Despite them not knowing how the crypto market works, they still hope to make as much money as those around them do. Skill is necessary for one to make a profitable trade. Luck is completely out of it. Over-reliance on luck will blow your account. Learning how the system works should be the first step for anyone trading crypto.
- Purchasing cheap coins
While this may work sometimes, it is very rare. Some traders buy cheap coins as a shortcut to becoming crypto millionaires. Their hope is that the coin’s value will rise. There are many shitcoins among the altcoins in the market today. A trader can destroy their cryptocurrency portfolio by investing in cheap coins.
- Failure to diversify
Putting all your trading capital in a single trade can wreck your investment. Experts advise traders to diversify their investment portfolios. This means that they should split their portfolio by investing in different trades. If one collapses, the others might balance off the loss. There is more profit to gain when you diversify your portfolio. This is because there are chances of you gaining compared to losing.
- Ignoring the circulating supply
Market capitalization and supply are critical considerations when trading crypto. A trader must always check the circulating supply of a coin they are trading. It is risky to trade a coin whose circulating supply is as low as its total supply. In such a situation, investors dump the coin by selling their holdings. You should also check the price of a coin in reference to its market cap and total supply. When a coin has a huge supply and high market cap, there is a very low probability for value increment.
- Following empty hype
Many traders believe in the theory that when a public figure talks about a coin, its value increases. You will lose all your money if you invest in a “pump and dump” cryptocurrency. The only thing you can capitalize on is your own market research about a coin.
- Not having a trading journal
As a trader, accountability to oneself is important. Good traders plan for their trades by keeping a detailed record. The record helps them learn from their past moves. It also keeps them from repeating past trading mistakes.
- Trading with the wrong exchange
Using the wrong exchange platform is another thing to avoid. The wrong platform can wreck your trading experience forever. Other than affecting your gains, you could also lose your whole cryptocurrency portfolio. As such, it is important to vet your chosen exchange for safety, reputation, and security.
Crypto trading is a risky affair and may be challenging at first. One must remain focused, well-capitalized, and keen to follow basic trading principles. There is no shortcut to becoming a crypto millionaire other than through skillful trading.