What are the most typical mistakes of the cryptocurrency trading newbies?
Trading (cryptocurrency trade including bitcoin trade on the cryptocurrency exchanges) – is a trading activity aimed for profit. If a person wants to succeed in any activity, he/she needs to exercise a number of specific professional characteristics including analytical skills and attentiveness to reach a necessary competency. Trading activity is also the case.
A lot of people start trading on the cryptocurrency exchanges with an intention to make a lot of money on the rates fluctuations because it does not need a lot of efforts they think. Nevertheless it is all different when it comes to the real trading. As a result a lot of traders are getting soon disappointed with such an activity. Why is it happening? What mistakes are to be avoided? Find out the answers in the new article from EXMO cryptocurrency experts.
1. Traders start depositing fiat funds that they cannot lose
For example, people start depositing all money they have, or even credit funds. There is hardly a person secured from misfortune, and mistakes, including professional traders experiencing major financial losses. Stories about newcomers, who have managed to make no typical mistake in the beginning of their trading career, can be rather called abnormal, or unlikely when trading “from scratch”. What is interesting is that it is essential to make the mistakes (not intentionally, for sure). People learn more effectively on the mistakes they make rather than on the mistakes made by other people. All in all it is a generally accepted rule of the practical knowledge acquisition. The best thing that you can do before starting trading – is to optimize the consequences of your initial mistakes. The rest will come with practice.
2. Traders start trading on big money
It is all better to start trading with small trading orders without involving the full deposit at once. What is also important is not to deposit all money in a single cryptocurrency. It is hardly possible to stay calm and patient for an inexperienced trader, who has deposited all money in a particular crypto-coin that has started going down, or went already down by 10%. It is easier to stay positive in case when an asset involving only 10% of your total depositing sum dropped by 10% making your loss no higher than 1%.
By the way, if your total deposit calculated in dollars is growing while your bitcoin deposit is dropping (there is an automatic calculation option on EXMO) – it is a bad signal. In fact, it turns out that you profit less than you could gain under passive bitcoin purchase.
3. Traders deposit the greatest part of their money in poorly capitalized, unstable cryptocurrencies
As it follows from the above, the more cryptocurrency, which you have bought, is unstable and unpredictable, the less money can be deposited in it.
Traders, who neglect this rule, will sooner or later understand how wrong they did. It happens when the purchased currency is going down regularly for the long terms, and there is a little possibility that the price for it will increase in the nearest future. In this case a trader can either make a mistake discussed below and fix the losses, or wait for the price growth.
Here you will find the list of the most capitalized cryptocurrencies.
4. Loss fixation
Loss fixation suggests a sale of an asset that did not reach the price as it was expected. If you are sure about purchasing an asset not on its price peak, then you need no sell it when the price starts dropping as it may start rising again. Try to analyze the market situation and make your own conclusions. Besides, if you have deposited little money in the particular asset purchase, as it was described above, then you can wait for more favorable asset prices for some time. It may also happen that the avoided losses will surpass profit that you could have gained from selling an asset at the less favorable price.
It is important to mention that there are poorly perspective coins that do not rise in price. If there are a lot of price drops and “depressions” on the cryptocurrency rate graph, then depositing in this coin is very risky and cannot be recommended at all. Even the professional and experienced traders do not risk trading these coins. They may only trade them with an extreme caution in a short-term perspective.
You can compare the yearly rates of bitcoin, ethereum, or KICK token to BTC. As you may see the bitcoin rate rise to dollar is quite evident. Though there were some surges of interest to the KICK token did not help much those people, who have deposited in KICK at 0.00003BTC, or 0.01 BTC in the first weeks of KICK existence on the platform. If you have been experiencing short-term trading for quite a long period of time, you can profit from risky trading such coins as KICK, for example.
5. Traders are driven by their emotions, ambitions, unverified information when making the decisions
It is important to stay calm and analyze reasonably the situation. It is strongly recommended not to make the hasty, impulsive decisions, which are influenced by the panic, or greed. The traders’ chats-based decisions, and decision based on the idea that “everybody does the same” are also misleading. You need to understand that nobody is going to share the insider information (non-public information on pricing perspectives) via chats. Furthermore even advertised commercial channels usually provide more misleading information than the real one. You should also rely on your experience and verify the new information. If you have a plan, then make sure to follow it to the end never relying on the immediate decisions.
6. Traders use trading robots
If you do not understand how trading robots (bots) work, and what you really expect from them, it is recommended that you do not rely absolutely on the trading algorithms. The free bots can be virus-infected yet on their creation stage. However even the secured bots (usually paid) do not always exercise the ideal trading techniques; they can still be useful when competing with people in some situations.
Sometimes bots can “get mad” trading at a loss due to various bugs and unusual market situations, or knowing traders’ activity. There are known cases when bots brought their holders losses of around hundreds of thousands dollars instantly.
7. The problem is that the inexperienced traders do not usually follow the new and pay little attention to the other important factors affecting the price fluctuations
It is another fatal mistake that won’t let you forecast the rise of any coin before it happens (a newcomer may believe that this may happens suddenly). When you monitoring the internal and external market situation regularly, you can get more opportunities to stock up and gain profit in advance. It is important to follow the rates, volumes, and other markers of trade dynamics presented on the online exchanges.
8. Traders buy cryptocurrency when the price reached its peak
Supposing, you did not manage to foreseen the rapid growth of cryptocurrency, so the market just confronts you with an accomplished fact. What should be done then?
It is possible to stock up with cryptocurrencies under its rapid growth (pump) from time to time. Though it is risky you may stock up with crypto in the very beginning of the pump. If the pump is in progress, then a trader risks to buy it when the price reaches its peak. In this case, a trader may rely neither on the profit nor refund (read #4). The matter is that the price will go down in course of so-called “correction”and you will lose profit. All in all if you managed to stock up in time, gaining the profit after the asset growth, you also need then to sell asset in time not waiting for the price correction and drop. If you have enough training experience, the problem can be solved successfully. It is important to have some technical analysis skills and understanding of the cryptocurrency market situation in the beginning of your trading career.
9. Traders early back down from challenges
As it has been mentioned above everybody makes mistakes. Your ultimate success depends on how effectively you will manage the difficulties, draw conclusions from one’s mistakes, and learn. Additionally, the time spent for trading and your experience are also essential. Not only traders, who find it difficult much to trade, leave the exchanges, but also traders, who backed down from challenges too early despite of their intellectual skills. If you want to succeed, then make sure to keep experiencing trading regardless of rising difficulties and personal disappointments.
10. Traders ignore security issues
One of the greatest mistakes – is to pay too little attention to the security of your profile, email, and your computer in general. It is recommended that you use two-factor authentication (2FA) to secure your profile on the platform, and reliable, virus-protected computer. You will find the information on how to switch on 2FA along with the additional recommendations on profile security here.
You can store profit and reserve funds here:
a) on the platform together with the other employed assets;
b) withdraw to off-exchange storage facilities (local wallets for cryptocurrencies, or Qiwi wallets for fiat money).
If you trust the platform and meet all the security requirements, then the first variant is applicable. If you are not sure about this variant, you may prefer the second one. If you choose the second variant, please notice that you need to have the minimum technical skills to work with the local wallets providing its “cold” storage (use secure offline device).
Visit EXMO Youtube channel to find out useful information on cryptocurrencies and trading on the platform.
Additional materials that may help you:
Cryptocurrency rate changes: reasons and factors
Trade figures – what indicators to choose? Part 2
Bitcoin futures: what’s the matter?
Trade figures – what indicators to choose? Part 1
Reach more profit on EXMO – gain 25% more
Thank you for staying with us!
Your respectfully, EXMO team
Original Link: exmo.com/en/news
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned