You have decided to invest in cryptocurrencies. This is undoubtedly great news because they have become the next big thing and boast a lot of profit potential that can work in your favor. But, before you can get started, you do need to know what you are doing because the crypto space is a volatile one and you can lose it all in one go if you are not careful. The knowledge you require to succeed in crypto trading is actually helpful with other forms of trading as well. You will win some and lose some, but the ratio will depend on your knowledge and skills.
Since the market is a new one, it is a given that you will make mistakes and there is no harm in doing so. But, there are some mistakes that every beginner crypto trader makes and it is best to know what they are to learn to avoid them. Why not learn from others’ experiences and save yourself some money? What are these mistakes? Check them out below:
Not Building a Strong Base
One of the best things about knowledge is that this treasure cannot be stolen or taken out by anyone. It stays with you wherever you go, so the first thing that every crypto investor should do is to build a strong knowledge base when they are thinking about venturing into the market. The problem is that a lot of beginner traders are eager to jump the bandwagon and don’t take out the time to gain a little knowledge. They just rely on word of mouth or follow other traders for investing in assets and don’t understand the importance of knowledge. Eventually, this results in a loss of funds and even the loss of the entire investment within the blink of an eye.
Investing without Proper Research
Even if you gain in-depth information about the market and how it works, it doesn’t mean that your work is done. It is also essential for beginners to take out some time to learn specifically about the particular cryptocurrency they are interested in. Don’t just follow the trend if you intend to be successful in the long run. There are many people who fail to conduct extensive research into the asset they are interested in, its past performance, and any other relevant information. Not doing so also contributes to hefty losses for investors because you can end up choosing the wrong asset that doesn’t offer the required level of return.
Not Coming up with a Proper Strategy
Seasoned traders are able to succeed in the crypto market because they tap into their experience for developing a proper strategy that can be used for investing and trading crypto in different market situations and environments. Having a plan and strategy is of the utmost importance when you decide to step into the crypto markets. You cannot rely on luck alone when making your decisions and you have to have a proper strategy because this also ensures that you put some thought into your decisions rather than doing things impulsively.
Not Opting to Diversify
One of the biggest mistakes that any beginner investor can make, not just in the crypto market, but also in others, is to not diversify. We have been hearing different forms of ‘don’t put all your eggs in one basket’ from the get-go and the concept of diversification has existed for thousands of years for good reason; betting it all in one thing means that you are more likely to lose it all. Even when you think that you have found a certain profitable opportunity, it is still a good idea to diversify because there are no guarantees, especially in a market as volatile as crypto. It is not going to hurt to have some variety. With diversification, you boost your chances of winning and reduce the possibility of losing.
Not Resisting Peer Pressure
Another common beginner mistake that you have to avoid is to not march to the beat of your drum. By the time enough people have learned about something for you to start feeling pressured, it is already too late because it means that the tipping point has already come and gone. You shouldn’t let FOMO (Fear of Missing Out) get you down and make investments because no good will come off it. Sure, it is possible that you may end up riding a high for a couple of days or even weeks, but the bubble will burst eventually and the outcome may hit harder than anticipated.
Not Being Patient
One of the strongest weapons for any investor is patients and it is even more so in the crypto space that moves very quickly. To be able to make any returns, you have to be extremely patient because it is simply not possible to make huge profits overnight. If you become agitated, there is a good chance that you will end up making a decision that is not in your favor and you will end up regretting it. It is crucial for a crypto trader to be fully in control of their emotions if they don’t want to suffer from hefty losses. You may end up panic selling if things don’t go your way, but the trend may reverse and it will leave you with regrets.
Not Avoiding the Sunk cost Fallacy
You have to accept that there will be some losses. Even the most experienced traders and investors cannot win them all. The key is to learn to accept a loss and then move on and this is where things can get complicated. There are some people who fall for the sunk cost fallacy. This means that they are aware that they have suffered from losses, but they stay in the trade purely because of what they have invested and hope there will be a return. But, the only problem is that the cost continues to increase and there doesn’t seem to be any sign of change. Don’t let the sunk cost fallacy bring you down. If something is not going your way, you can simply exit and not wait to lose it all.
Not Controlling Your Jealousy
As mentioned earlier, it is a bad idea to let your emotions get in the way, but in particular, trading because of jealousy is much worse. You have to remember that someone else’s success doesn’t really have anything to do with you. Envy will only end up clouding your judgment, not just how you are investing and trading, but also how you are interacting with others. Moreover, jealousy is also distracting and it will prevent you from seeing the opportunities right in front of you. Someone else’s win can also be a win for you, as long as you are ready to learn from it.
There is no doubt that the crypto market is brimming with opportunities and there are a lot of profits to be made. But, avoiding common mistakes is essential if you hope to make something of your effort and you don’t want to waste your time, money, and effort. Avoid the mistakes mentioned above and you will be on the path to success in the crypto market.