Mar 21, 2023
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Table of Contents
While
there is a lot of potential for profits in the crypto market, it’s essential to
be aware of the mistakes traders and investors commonly make. In this blog, we
will explore some of the most common mistakes that crypto traders and investors
make and discuss how you can avoid them. From buying high and selling low to
failing to research before investing, we will cover a range of crypto trading
mistakes to help you make more informed decisions and succeed in the world of
crypto.
What Mistakes
Do Most Crypto Traders Make?
Ignoring
Trading Costs
As
a trader, you may make dozens of trades in a single day. But you also pay a
transaction fee to the exchange each time you make a trade. Over time, these
costs can add up and start to cut into your profit margins. Some payment
providers may also charge you for each time you deposit or withdraw funds from
your trading account.
Leverage
While
leverage trading is a strategy that can net you astronomical returns, it is
definitely not recommended for beginners. Just as your gains are higher with
leverage trading, so are your losses. One wrong trade can multiply your losses
and even trigger a “margin call” where you must repay funds or your positions
are closed.
Read
more: Futures Trading Vs Margin Trading
No Trading
Strategy
Trading
without a pre-set strategy can lead to significant losses. A strategy allows
you to systematically define how to pick tokens, when to buy and when to sell
them. This is also a reproducible method that makes future choices of
investments easier to make.
Read
more: Crypto Trading Strategies
Independent
Decisions
No
trader wants to lose money on any trade they make. However, you mustn’t let
losses in one trade influence your risk appetite in other trades. You may be
tempted to take on riskier investments to recoup your losses faster, but this
is a surefire way to lose even more money in the market.
No Effective
Tracking
As
a trader, you need to be able to track your portfolio effectively. This
includes a benchmark return you target, tracking your returns in percentages
and regularly studying the state of the market to better understand how your
portfolio compares.
What Mistakes
Do Most Crypto Investors Make?
Lack of Research
Many
investors enter the crypto market without adequate research, relying solely on
tips from others. It is crucial that you thoroughly validate any information
you come across before investing your money into a project. Failing to do this
can lead to falling for scams or pump-and-dump schemes.
FOMO Buying
Fear
of Missing Out is a common phenomenon seen in many financial markets. This is
especially true in a rapidly growing market like crypto, where tokens can rise
more than 100% in a short duration. But you must still analyse the project
before investing to understand where the project’s value comes from and if it
can sustain its growth.
No Benchmarks
Seeing
an investment’s value rise consistently feels very rewarding. But if you don’t
set a benchmark return, greed can set in and make you hold your investment for
longer than necessary. When you buy a token, decide on a price target at which
you will sell it. Any additional returns may be a nice bonus, but
overcommitting to it can lead to significant losses.
Losing Keys or
Seed Phrases
Your
crypto wallet is your key to the blockchain and your tokens. Losing your
private key or the seed phrase can be disastrous, as it means you no longer
have access to your holdings. Always store your seed phrases carefully to
ensure your assets are not compromised.
Not Studying
the Market
No
investor’s job is complete without understanding the state of the market at
large. While you must look into your invested projects in detail, it is also
essential to study general market trends.
10
Crypto Trading and Investing Mistakes to Avoid
Overconfidence
Making
large investments without proper diversification or risk management, and
overestimating your abilities is not advised. Always practice proper portfolio
management for stable returns.
Emotional
Investing
Allowing
emotions to drive investment decisions leads to irrational decision-making
during market fluctuations. Do not let how you feel dictate your investment
decisions, as this can lead to inconsistencies in your choices.
Lack of Patience
Crypto
is a long-term investment, and it takes time to see significant returns.
Expecting quick profits and panic selling during market corrections or dips,
without considering long-term potential can be detrimental to your
portfolio.
Holding all
your assets at one location
Always
store your assets in multiple locations such as exchange wallets, hardwallets and other safe online
wallets.
Ignoring
Technical Analysis
Technical
analysis can help traders identify trends, support and resistance levels, and
potential market movements.
Not Using
Stop-loss Orders
Not
using stop-loss orders to protect investments leads to significant losses
during market downturns.
Not Conducting
Fundamental Analysis
Only
seeing the price history of a token is not enough to decide on an investment.
You must look into the team behind the project, its features and community
engagement across social media to determine its worth.
Lack of Crypto
Knowledge
Trying
to invest in crypto without knowledge of how projects and tokens work is purely
speculation and will not lead to significant returns. You must learn about how
crypto works to understand why one project may be better than another.
Complicated
Strategies
Beginner
investors may be tempted by the opportunities presented by more complex trading
strategies like crypto options trading and multi-token
swaps to earn higher returns. But if you are not familiar with the market and
the tools you use, it can cause more harm than good for your portfolio.
Not Forming
Your Own Opinion
Finally,
the main benefit of equal access to information in the market is that you get
to form your own opinions. Thus, your belief of a token’s future may be vastly
different from that of others. But if your judgement is well thought-out and
based on facts, trust your decisions.
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