Common Mistakes Of Crypto Trading and How To Avoid Them
Last year crypto business increased the market to more than $0.5 trillion. However, many beginners of the crypto trading cannot earn money. Obviously, they make similar mistakes, which can be easily avoided.
1. Lack of personal market research
Beginners often join Telegram groups or follow leading traders on Twitter. These sources are useful, but investors often do not conduct their own market research and just follow the others. Many companies promote their coins and cryptocurrencies in social networks, presenting their projects as successful. However, many startups may be scams. Their temporary gains can be explained only by a good marketing strategy. Making personal researches is an important step for beginners before they start actions on stock exchanges. To be sure, it is necessary to study the position of the cryptocurrency on the market, its volatility, and the development history.
2. Misunderstanding the basic principles of diagramming
Most traders believe that the charts are extremely difficult to understand. However, the market and the volatility of a cryptocurrency can be explained by certain patterns. If you understand them, you will have more chances to make a successful transaction. Nevertheless, there are no guarantees in the market. Many tendencies depend on the trader’s attentiveness and calculations. To make approximate forecasts, it is necessary to understand what the support and resistance zones, candlestick and trends are.
Resistance zones are the price ranges, in which a stock meets resistance and starts trading downward. In support zones, a stock finds support and is trades. Identification of these zones helps investors to predict the growth or fall in prices.
The trends definition is a fairly easy process. The "higher lows" determine an upward trend and the "lower lows" reflect a downtrend respectively.
3. Panic sales and purchases
The cryptomarket is extremely volatile. Newcomers often make a typical mistake, giving in to panic when the price suddenly collapses. They sell the cryptocurrency when it loses in value, then buy it back when they notice it growths again. The problem is that reducing losses in this way does not make any sense. This is a meaningless cycle of buying and selling. In most cases, the price of coins grows again. It is necessary to ignore pumps when the currency has grown by 50% in a short time.
4. Exit plan absence
Most of the newcomers who have successfully entered cryptomarket have no idea what to do next. It is extremely important to think out the exit plan and patiently follow it before entering the big game. One very effective strategy is to sell coins in stages, not at once. This model allows you to withdraw a part of the profits and get a chance for the further growth.
5. Hope that the cryptocurrency will be new bitcoin
This year bitcoin impressed everyone by rising from $1,000 to $20,000. Ethereum and Litecoin are also known for price spikes. Not every cryptocurrency will behave in a similar way. The hope in the cryptocurrency success is a false strategy. It is necessary to study the coin specifics, gather information on the market to make plausible forecasts and plan deals.
6. Overconfidence in the one cryptocurrency
Crypto space is constantly changing and evolving. Every coin is experiencing moments of ups and downs. If investors have long-term plans to make a profit, then sticking to one cryptocurrency is a good solution. Still, if we talk about earnings at the exchange, we have to analyze many cryptocurrencies presented on the market broadly. It is necessary to understand that if bitcoin falls from $ 20,000 to $ 10,000, it is unreasonable to keep it further.
7. The desire to spend all the money at once
Many newcomers try to spend the entire amount they have on their accounts instantly. It is always necessary to check whether the strategy you choose is successful. To do this, you need to invest a small part of the existing capital and monitor the further development. Even if the coin falls after a purchase, it is always possible to stabilize it. This will protect the newcomers’ position and prevent large losses.
8. Investments in one cryptocurrency
Even the most successful cryptocurrencies suffer from major failures. It is impossible to predict which cryptocurrency will remain afloat, as the crypto market is constantly developing. Diversification and the management risk are the key to good deals.
9. The cheaper, the better
The cheapness of the cryptocurrency does not guarantee its success. The key point here is not just the valuation of the price a profitability indicator. It is necessary to investigate the reasons that formed the prices, and collect information about the factors that may affect its growth in the future.
10. Ignoring the cryptocurrency news
It is not enough just to follow the movements of prices, draw up charts and analyze the market to become a successful trader. It is very important, among other things, to monitor the news and to stay informed about the latest events. There are a lot of speculative views and sharp reactions to any pumps in the cryptocurrency world. Successful crypto traders follow the news to see what the community thinks and to work out their own strategy.