Crypto Trading Mistakes that Could Leave you Broke
The cryptocurrency market has seen an influx of traffic in the last few years. Of course, people are intrigued by these digital currencies, but it is also because there are very low barriers to entry. This means that anyone who has a computer, or a smartphone, an internet connection and a bit of starting capital can start crypto trading. Nevertheless, this doesn’t mean that they will be good at it. As a matter of fact, a lot of these beginners have to learn some hard lessons and end up losing their money. Do you want to go broke? Probably not. Then, it is best to know the common crypto trading mistakes that could result in this outcome in order to avoid it.
Some of the prominent ones are highlighted as follows:
Mistake 1: Starting with real money
A beginner crypto trader shouldn’t be using real money when there are endless platforms and resources for paper trading. If you want to become a professional trader, you should first come up with a system based on a set of guidelines for risk management, entry and exit. But, you shouldn’t be doing this with real money. Go for paper trading until you think you have gotten the hang of it.
Mistake 2: Adding to a losing trade
Trading and investing are two different things. Investors can average down positions on assets for the long term, but traders tend to have defined levels of invalidation and risk for their trades. When traders hit their stop loss, it means the trade is now invalidated and they should move to a different asset. Traders should never think about averaging down.
Mistake 3: Trading without a stop loss
Every trader tends to be emotional during crypto trading, but beginners are even more so and this could push them in refusing to accept losses. Traders need to be able to accept a loss and then move onto the next trade. Not doing so is the primary reason they end up losing money. Therefore, you need to set a stop loss and not move it, even if the trade is going against you because this will end up blowing your account.
Mistake 4: Not keeping a trading journal
Successful crypto traders are those who have a trading plan. This crypto trading plan also includes holding yourself accountable for whatever decisions you make. The only way you can do this is by making a record of the trades you are making. This is an excellent way for you to identify the mistakes you are making and then learn from them so they are not repeated. You can do this by making a trading journal and recording your trades, their results, your thought processes as well as your emotional state. This will help you significantly in the long run.
Mistake 5: Failing to stay balanced
If you want to succeed in crypto trading, you need to maintain a balanced portfolio. This means that you shouldn’t invest everything you have in a single financial market, particularly one that’s as volatile as cryptocurrencies. Just because one asset class is doing better doesn’t mean that you should put your all into it. The market can change in seconds and you could be left empty-handed if you don’t maintain balance.
Mistake 6: Risking more than what you can afford
The biggest lure of cryptocurrencies is the high profits which can often push people into putting everything they have in the market. But, you have to remember that crypto trading is not very different from playing the lottery; there is a strong possibility that you might not win. Therefore, it is not smart to risk more than what you can afford to lose.
It is vital for people to learn to avoid these crypto trading mistakes if they don’t want to see all their investment go to waste and want to achieve success in the long-term.