If you have heard about the meteoric rise of bitcoin from its early days of being worth mere fractions of a cent in 2009 to its most recent peak to over $61,000 in March 2021, then you are probably lamenting over not having enough foresight to be one of the early adopters that managed to profit from the incredible surge in crypto prices. However, as the crypto sphere becomes ever more mainstream, it’s definitely far too early to throw in the towel. There is an increasing number of investors who opt to diversify their portfolios through trading cryptocurrencies on exchange platforms. If you are looking to start investing or trading cryptocurrencies, you should be mindful of these 8 most common beginner mistakes that you should avoid at all costs.
#1 Making ‘getting rich quick‘ your top priority
A common mistake is to get into crypto trading with a fundamentally wrong mindset, thinking you can make a super quick profit. Before you even consider buying your first coins, you should set your expectations straight – it will take time, patience, and practice to be able to turn a profit.
If getting rich quick is your number one priority, you are in for a rude awakening. As with anything in life, you have to enjoy the process, not just be aiming at the result; and to do that right, it is very important to be properly informed. You wouldn’t buy a car just by looking at its color. In the same way, before you get involved in crypto-trading you simply need to invest the time necessary to do your due diligence.
The fun part begins when you’ve managed to master the basics, have overcome the first hurdles and have a basic understanding of how the market works. It may be hard to find quality resources and media outlets that give you get a good overview of the markets, but we do list some good recommendations at the end of this article so keep reading.
#2 Don’t buy because of FOMO, don’t panic sell
The terms FOMO and “panic selling” are unfortunately two very common behavioral pitfalls for newbie traders. Humans are emotional creatures and it is extremely hard to keep a cool head when you see the prices rising thinking that there is still an opportunity to ride that surging wave. In the same way, it is extremely important to not panic when the prices suddenly slide and dip even lower than the price you purchased your crypto at.
Keep your head cool – we’ve all been there.
You need to realize that investing in cryptocurrencies is not a sprint but a marathon. Everything has its time. Just be patient and think twice before you buy or sell.
#3 Not understanding basic charting fundamentals
Here is another rookie mistake you should definitely avoid: It is very often the case that beginners start crypto-trading without understanding basic charting fundamentals. Market drivers may be considered too boring or technical but understanding the overall price trends that drive crypto markets can be one of the most rewarding aspects of trading! Once you put some effort into understanding the charting fundamentals, you should be able to make your own correlations and identify trading opportunities, so studying the markets will become second nature and will eventually enable you to better identify the right time to buy and sell.
It is meant to help you!
“Isn’t charting just interpretation?” you might ask. Yes and no. While it’s true that no amount of charting or research will give you a definitive answer on how the crypto markets will move, charting will give you the opportunity to identify patterns in market movements and coin prices, which can in turn help you make more calculated trading decisions.
#4 Not defining your personal stop loss
One day it will happen to you: One of your trades turns out to be a terribly bad decision and your investment appears to be going down the drain. It’s definitely not a good feeling but that can happen from time to time. The worst thing you can do here is to let your emotions take control and hold on to your losses indefinitely.
You can beat your emotional impulse by remembering the personal stop loss you’ve set before opening your trade. There’s no need for emotions here, just stick to your plan! As a trader you will have to learn to accept losses as well as to celebrate profits. So, accept it, learn from it, and move on.
#5 Trading without a strategy
Yes, you may be just starting out in crypto trading but there’s no need to make every beginner’s mistakes if you can avoid them.
While reading up on the subject you can set up your individual trading strategy step by step. You can begin by asking yourself the following questions: How much capital can I safely invest? Which main sources do I want to use to build my knowledge and expertise? How can I constantly stay informed and get all the latest information on the current state of the market? When should I be taking profit on an investment?
The more effort you put into building a well-thought-out strategy, the more refined your trading plan becomes. Your trading strategy needs to correspond to your character and emotional disposition so that it can act as your safety net and give you peace of mind. Once you have a solid trading strategy in place – one which you plan, test, and repeatedly revise – you need to remain diligent and stick to your set of rules.
Why? Because NOT having a strategy can make you susceptible to random advice from just about anyone. Of course, it is also important to keep an open mind but always remember to approach ideas with a critical eye and do your own research to confirm whether they have any merit.
#6 Putting all your funds in one coin
Let’s say you’ve done your research diligently and have come to the conclusion that investing in a particular coin will be highly profitable. Congrats, you’ve overcome some common mistakes and did some great work to get here, but you better be careful because the next rookie mistake can cost you dearly!
Don’t make the mistake of putting all your money in one basket! No matter how promising and safe the investment may appear, never ever throw all your capital on one option. Split your funds on different investments and make sure you are always diversifying. No matter how promising that one coin may seem today, there are no guarantees and when the trends shift you will be happy you could balance out any unexpected losses by maintaining different positions.
#7 Misplacing your private key
Understanding how crypto-trading works is important but knowing how to keep your assets safe should also be your top priority. Imagine you have made some solid trading decisions, managed to turn in a significant profit and then it happened! You’ve lost your private key!
This really is a dire situation you do not want to find yourself in. All your efforts were for nothing, your hard-earned assets are gone. If you forget a key, you will not be able to restore access to your crypto wallet, and your assets will simply vanish. It is therefore crucial to keep your private key safe and secure. Think of different ways of saving your private key – keep a printout in your safe or save it on an offline storage device. Whatever you do, make sure you can always access it and no one else can.
#8 Letting the fear of making mistakes stop you from beginning
Last but not least, dare to try! The biggest mistake you can make is to let all these potential mistakes stop you from trying.
Now that you have read all about the beginner’s pitfalls to avoid when starting out on your crypto-trading journey, it is time to select and explore a solid exchange platform where you can get more information and education on the matter.
There is one place, where you can start safely.
DXone is a research and crypto trading platform built by a group of professional traders and crypto-enthusiasts, who knew exactly what was missing in the market and how to make crypto trading more accessible, intuitive and easier to understand.
Just open a free account and get access to the latest news, research tools, analysis charts, indicators and so much more.
You have nothing to lose.
With cryptocurrencies becoming more widely adopted and recognized, there’s still so much untapped potential in digital assets. Get started in crypto-trading and find all the tools and resources you need to keep up with the markets all on one platform!
It’s now more evident than ever that no one can really afford to ignore the crypto world any longer!