You might be one of the increasing cryptocurrency market newbies who want to gain more knowledge on crypto trading. If you are, this article is just right for you!
Cryptocurrency has been on the rise! Everyone is curious if it is a good investment and whether it will gain more popularity and reach in the future. Crypto enthusiasts have always been keen on saying that crypto is here to stay and will be the future of finance.
Everyone will want to be successful in each investment they take on. That’s why getting to know more about the investment you are planning to take on will surely help. It will ensure that you will not commit mistakes and get you a better chance at investment success.
This article will inform you of some of the most critical mistakes people commit when dealing with their crypto trades. Furthermore, we’ll provide you with solutions to counter these mistakes. If you want to learn more about this concept, read on and find out!
This article will focus on the following crucial mistakes people commit when entering a crypto trade:
- Over diversifying your crypto portfolio.
- Entering the wrong crypto market.
- Trading by emotions.
- Using the wrong trading tools.
- Overthinking the technical analysis.
Table of Contents
Over Diversifying Your Crypto Portfolio
As we know, the crypto market is highly volatile. Thus, the need to lessen risks is crucial. One of the most effective solutions will be diversifying your crypto portfolio. Therefore, there is a considerable emphasis on the need to diversify one’s crypto portfolio. Doing this will help spread the risk your crypto investment shall take.
However, over diversifying one’s portfolio is a huge no! One will know that their crypto portfolio is over-diversified when their profits equal their losses. Meaning you will not have profits.
Your crypto portfolio can be considered well-diversified if you combine a high-risk, mid-risk, and low-risk crypto from the market. This way, the risk is spread out while assuring you of profits, especially if you are still starting your crypto trades. You can keep up on the latest trends and news in the crypto world with CryptoQuadriga. The crypto media is suitable for beginners and offers valuable information.
Entering the Wrong Trade Market
It is always easy to enter a trading position, but it is a real hard work to exit one. Highly liquid markets are the ones traders shall enter. The liquidity of the crypto market plays a considerable role in profits. Even if you think you’ve gained enough profits, but the market is illiquid, it will not be an excellent choice to sell your crypto. It is suggested to hold on to crypto until it gains certain liquidity to achieve profits aimed at a particular crypto market. There is a sure loss on your part when you get locked out of an illiquid position.
Thus, taking in the crypto market’s liquidity is essential before entering a crypto trade position. Take into consideration the current liquidity of the crypto you are trading. Choose crypto which has sufficient liquidity and is currently actively traded so you can get a higher chance at profits.
Trading by Emotions
Emotional trading is also a big no! Crypto trading, while hyped up by a trend or in fear of losing an opportunity, is not suggested. Terms like Fear of missing out (FOMO) and fear, uncertainty, and doubt (FUD) have brought huge losses and possible gains.
Getting swept up by emotions will lead to unsuccessful trades and the worst investment loss. This is where news trends play a huge role. Studying the news and getting up to date with crypto development will significantly help to be objective when trying to enter or exit a trade. Furthermore, focusing on your investment plan and strategy despite all opinions on the crypto market will always keep you on the right track. Thus, it is critical to building a plan backed up by process to attain one’s goals before entering an investment.
Using the Wrong Tools
With the emergence of automated trading bots, it is highly tempting to use one to get a chance at higher profits. One will expect that entering multiple trade positions and letting a crypto bot handle all trade executions will bring encouraging results. However, it is not all sunshine and rainbow, even if you use these automated trading tools, especially if you don’t know how to execute the bot and maximise its use correctly.
Thus it is highly suggested that traders, particularly beginners, must do research. Conduct research on the tools you want to use. A good crypto media platform that could provide you with enough reliable research material will be Dart Europe. After analysis, choose which crypto tools can provide you with the best benefits and best securities and are also well-fitted to your skills and aims.
Overthinking The Technical Analysis
Studying the crypto charts is a good start when analysing if crypto has good potential. However, it does not end with just charts. There are more factors to consider and study. Thus, getting too carried away by the charts can cause wrong trade decisions. Why? Because the crypto market is influenced by various in-chain and off-chain factors. That’s why charts will not predict everything that will happen on the market.
If you get too much stuck on the charts, you can miss out on the news, resulting in extreme fluctuation in the market prices. To avoid this, you just have to be more sensible. Keep an eye on the crypto news and updates. Do not dwell too much on the crypto charts alone.
The crypto market has a lot of risks. Thus, managing these risks by avoiding mistakes as much as possible can hugely impact your success in the crypto market. Furthermore, keeping yourself knowledgeable through research and study and armed with excellent trading skills and planned-out strategies is also a good start in preventing crypto trading mistakes.