It's no news that the crypto market can be extremely unpredictable. Unfortunately, beginner traders experience countless pitfalls if they are not careful. Losing money is never a good feeling; for many, it can be why they quit trading altogether.
Today, we lay down the most common mistakes that new traders make so that you can avoid them!
New to crypto? Here are a few things you should avoid doing if you want to be profitable:
Before gaining a solid understanding of how cryptocurrency works, it is not uncommon for people to gamble with their money. But it is crucial to control your emotions so you can make calculated decisions. Being a profitable crypto trader is not as easy as some may make it seem. You must know exactly what you are getting into to ensure the rewards are plentiful.
Are you putting money into a coin because you've heard so-and-so make easy money? Not so fast. Build a strategy and make sure that your risk management is spot-on. Do this first and thank us later. This means:
Having a grasp of how the market works
Knowing how to leverage technical analysis to make informed trades
Determining how you will divide your portfolio to maximize gains and minimize losses
Researching assets you are eyeing: What is the use case? Who are the backers?
Never go into a trade blindly. Doing homework beforehand helps you:
Understand the risks and opportunities
Get a feel for what and how news affects prices
Learn the best strategies for crypto trading
One of the biggest mistakes new crypto traders make is chasing trends. You hear all these YouTubers raving about $DOGE. The next thing you know, you ape in too, hoping to be the next millionaire. Does this scenario sound familiar? If so, then you know by now that it isn't as simple as that. If it were, we'd all be on a fancy yacht in Dubai!
The last thing you want to do is jump on the bandwagon when a coin is hitting all-time highs. Be careful because it is hard to know when a trend will stop or reverse until it has already happened.
Chasing trends can result in significant losses for day traders who cannot recognize when their trades go wrong. To be a successful trader, you must know how to identify trends and determine the best time to enter and exit a position.
Greed is dangerous, especially in the world of cryptocurrency trading. Many beginner traders stay in a trade for too long because they might have heard "HODL, HODL, HODL!" The problem with "holding on for dear life" is, that coins are not on uptrends forever. There is a limit before things go the other way. If you don't sell on time, you may be stuck holding onto the coin at a loss for years. Even worse, it may never recover.
The best way to avoid this is to set pre-determined profit targets for each trade and stick with them. If you hit your target, start trimming. You can leave a moon bag so that if the trade keeps going well, you aren't missing out on extra gains. If you can take your initial investment out, you're golden! And remember, if things don't go as planned, don't be afraid to cut your losses. Reallocate that capital somewhere else with more upward potential.
Fear of missing out (FOMO), greed, panic selling, panic buying. These emotions are natural and hard to avoid. Even seasoned traders fall victim to them sometimes. But it's essential to keep emotions in check because otherwise, you may be prone to making bad trades. If you find yourself making emotional plays, take a break for a few hours or days.
The key to trading with confidence is avoiding these common pitfalls. Make sure you allow yourself enough time to research your trades, have a concrete plan and take control of your emotions. If you can keep a level head when a lot is happening in the markets at once, you are well on your way to becoming a profitable trader.
It is normal for newbies to feel lost as they try to maneuver cryptocurrency trading. That's why we created AR Collective, an educational resource and tight-knit community where people ask questions, share their trades, and make new friends in the space. Join us today and enjoy seven days for free!