When it comes to blockchain and cryptocurrencies, the most talked-about coin is Bitcoin.
That is because it has changed the way the financial space operates by making it decentralized and giving more power to the people.
Additionally, it has made the early investors of bitcoin rich through the massive price rise it experienced since its launch.
Today, most people holding and buying Bitcoins are doing so to trade.
It is where they buy and sell bitcoins in exchanges, just like how stocks and other currencies are traded.
While some people have been successful in this endeavor, many have not, generally because they commit beginner mistakes.
Therefore, if you’re new to trading or are thinking about giving it a go, here are five mistakes you should avoid:
Not Having A Strategy
One of the most common mistakes that many beginners make is a lack of a trading strategy.
Without a plan, it’s easy to get caught up in the excitement of buying low and selling high without actually making any profits.
Additionally, a strategy will help you control your emotions which can be an obstacle when trading.
It is because fear and greed often drive people to make mistakes such as selling too early or holding on to a losing position for too long.
Also, decide on what trading strategy you’re going to use.
For example, are you going to be a day trader, a swing trader, or are you going to practice Bitcoin arbitrage for long term profits?
Some things you should consider when developing your strategy include:
- Your risk tolerance: How much are you willing to lose?
- The time frame: Are you looking to make short-term gains or hold for the long term?
- Your goals: What are you hoping to achieve through trading?
When you know these things, you can ensure that you can establish a well-informed decision to implement your trading strategy and earn profits.
Not Doing Enough Research
Another common mistake beginners make is not doing enough research.
It includes researching Bitcoin, the market trends, price movements, current news, and the exchange and other tools you’ll need to trade.
For example, most people want to use trading bots such as Coinrule without researching whether the bot is legit, the offered features, and pricing plans, among others.
Failing to research can make bad decisions such as using the wrong tools, buying at the wrong time, or selling too early/too late.
So, before you start trading, make sure you understand what you’re doing and the risks involved.
You can also research the latest news trends that may impact price movements to help you stay in winning positions.
Researching before investing is crucial to equip you with the proper knowledge on how to go about the volatile market of cryptocurrencies.
Doing so can avoid losing your hard-earned money and helps you earn from your investments.
Not Diversifying Your Holdings
Diversifying your holdings is a great way to ensure that you’re not putting all of your eggs in one basket.
If you invest only in Bitcoin and the price tanks, your whole portfolio will take a hit.
Instead, trading multiple cryptocurrencies will reduce the risk of investing heavily in one particular coin.
Additionally, diversification can help protect against fraud or hacking on single exchanges by spreading your assets across various platforms.
There are plenty of ways to expand its scope beyond just Bitcoin: trade other coins like Litecoin or Ethereum, different trade exchanges, and try a combination of trading strategies.
Doing so helps mitigate the risks of trading Bitcoins and ensures your portfolio remains healthy.
Not Choosing The Right Crypto Exchange Platform
As a beginner, you should never settle for any crypto exchange platform that comes your way.
Not all platforms are the same, and therefore, one of the most important things to consider when trading your Bitcoin is finding a reputable and reliable exchange platform.
It’s vital to read reviews of different exchanges before selecting one. It will help you understand other users’ experiences with them and whether there have been any issues with the platform.
You should also check the exchange’s security system as it will determine how safe your investment is.
Lastly, the platform should have competitive fees to allow you to keep most of your profits.
Not Knowing When To Exit and Take Profits
The most important thing to remember is that you should prepare before starting.
You need to know when to exit and take profits, or there’s no point. If you can’t do this, you shouldn’t trade.
There are two types of exits in trading: the technical and the other is the psychological.
The technical exit is when the price has hit your stop-loss order (a predetermined level where it will close out your position).
The psychological stop refers to what goes on inside your head rather than what happens outside; these are things like greed or fear taking over our emotions so much that we make wrong decisions based purely on emotion rather than logic and reason.
In the world of cryptocurrency, there are undoubtedly many tricks and tips that you can employ to help increase your gains. In the middle of those tricks, there are also fraudsters waiting to pounce on your ignorance to win.
Knowing the best ways to venture into cryptocurrency with minimal loss as a beginner is upon you.
Ensure that you are keen on the finer details of cryptocurrency and get enough education to help you earn from it rather than counting your losses.