The Biggest Mistakes of New Crypto Traders
Cryptocurrency is a hype.
More and more people are engaged in it, inspired by the idea of making extraordinary money out of thin air. The other powerful driver here is a fear of missing out: no one wants to stay poor while their peers are buying Lambos — just because they grasped the opportunity.
Though many of Lambo stories are true, we should not focus on them if we want to succeed in this market. Instead, it’s better to think of the estimated 95% traders who lost their money and ended up quitting.
What ‘makes losers lose’? After analyzing many stories of failure, you will understand that unfortunate investors keep committing the same mistakes.
The first and the biggest of them is to see crypto trading as a game of chance, rather than a skill. This huge misconception is the mother of all the errors, typical for beginners.
Let’s see what they are, and suggest some solutions.
Mistake #1: You are ruled by emotions
People are naturally greedy, and tend to believe in miracles. Cryptocurrency scammers thrive on these traits — to encourage us to invest money in their projects they promise huge and instant gains.
Though it’s hard to resist the excitement you feel when someone paints a rosy picture of your carefree future, your investment decisions should be based on facts, and not on intuition. Greed and fear are the basic ingredients in the classic recipe of loss.
Instead, make your own research. Go to the company’s web site, explore their Road Map, read about the development team.
Do they play on strong emotions, or is there a solid foundation under the project? Do they offer charts and figures, or prefer bright pictures and calls to actions? What advantages their coin has, and in what ways it is different from other cryptocurrencies? It may be faster transactions, lower fees, higher level of security or some special feature like smart contracts.
Don’t have blind trust in what the startup itself says — seek expert opinion and use third-party resources to check their claims.
Mistake #2: You invest too much in hope for a big fast win
Many people, ruined by crypto, made the mistake of investing the amount they could not afford to lose, in hope for quick returns. Don’t follow their example — never invest all your hard-earned savings, never sell or mortgage your house, never borrow the money you won’t be able to pay back if the coin fails (or takes longer to succeed).
In general, don’t rely on instant gains at all — today the crypto market is not like it used to be. Avoid pump-and-dump schemes and any offers/smart tricks that look too good to be true.
Instead, try to see the big picture behind the coin you have opted for. Focus on its long-term perspectives and have realistic expectations.
Mistake #3: You have no investment strategy or trading plan
You won’t believe how many people become traders just because they have watched inspiring movies, like The Wolf of Wall Street or Billions. Those people see investing in a cryptocurrency as a game of buying cheap and selling dear, when the price gets high. Yes, simple as that. They are not even aware of many important things like the amount they are ready to risk/lose, the price mark that would trigger them to sell, or their own short- and long-term goals.
It is totally wrong.
Every successful investor/trader should have a plan that will help maximize the gains and minimize the losses. To make a good plan learn more about trading. Read good books on the subject, take some classes, make a research. Follow the news — they might affect the market. The knowledge obtained will help you make smarter trading decisions and avoid common pitfalls and honey traps.
Mistake #4: You chase a major crypto instead of opting for new coins
Instead of Bitcoin or another big cryptocurrency, consider investing in small-cap coins that may have bigger potential for market growth. Such coins haven’t reached their peak yet, therefore you have a better chance to make a big amount of money. If you invest in major cryptos, big gains are less likely, as it requires a really dramatic event to make the price skyrocket.
Since investing in smaller cap coins is riskier by default, make a research — for every rough diamond there is a dozen of scam (or not so great) projects. Your choice made, be quick to buy these new assets before too many people do the same. Again — don’t overextend yourself. Even really good startups may suffer some unexpected problems, or change their plans. A good example is Tezos — a promising blockchain project, whose completion was greatly delayed due to the corporate disputes.
Mistake #5: You opt for an insecure exchange
The traders who opt for small-cap new coins, tend to make a mistake of entering smaller and less secure exchanges just because their coins are available there. Our advice would be to avoid the platforms that are not in the top 10 list. Or at least not trust them with big funds.
As always, you should make your own research before entering any exchange. In short, the basic criteria to consider are trading volume, security and transparency levels, absence of successive hacker attacks and reviews by the exchange users.
As you see, avoiding those 5 common mistakes is not really difficult. Learning, researching and being patient might sound somewhat boring compared to a ‘rags-to-riches’ transformation, but it guarantees a better chance of success.
Arm yourself with a strategy, eliminate both positive and negative emotions from decision-making and keep calm.
Though it does not make you a winner, it helps greatly.
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