There’s quite a lot of rookie mistakes that you can learn to avoid when beginning your Cryptocurrency trading career. The most common traps, and what you should do to prevent yourself from falling into them, are listed below for your education!
- Avoid Pump & Dumps.
This is mostly perpetuated on lesser known coins with low volumes by a few individuals with deep pockets (whales) who are capable of ensuring wide swings on these lesser known cryptos in order to cash in on a windfall when they get the price to rise exponentially. It’s great to see that graph of your crypto moving upwards quickly but beware of large rises in short timescales, as you could be seeing a few individuals deliberately misleading the you and the marketplace. When the whales then dump their purchases, that graph is going to go tumbling down so don’t be seduced by sudden large price rises, particularly in the lesser known coins.
- Avoid Setting the Wrong Price.
It is easy to misread or mistype a decimal point or number of zeros. You could set your sell order ridiculously low because you misread the market, or made a typo, and by the time you realize the mistake another trader sees opportunity and quickly snaps up your trade. For example, you could have placed a sell order at 0.0005 BTC instead of 0.005 BTC and that one extra zero can cost you significant funds whiles another trader smiles all the way to his or her wallet. Try to double check your “sell” and “buy” orders every single time before a trade order is placed.
- Avoid Sending the Wrong Coin to the Wrong Exchange or Wallet Address.
There have been instances when people have mistakenly sent the wrong coins to the wrong wallet address and have lost funds. For instance, it is possible to send Bitcoin to say a Bitcoin Cash or Bitcoin Gold wallet. It can also happen that Ethereum could be unintentionally sent to an Ethereum Classic wallet or some other digital currency with similar names. This mistake could mean that you have lost your coins forever, as if you send coins to the wrong wallet you are highly unlikely to be able to get them returned to you.
- Avoid Markets with Little or Low Liquidity.
It is important to recognise those crypto-coins with relatively high volumes and stick to buying and trading these. For a coin to appreciate in value, there must be a crowd of potential buyers to drive up demand. If you buy lesser known coins, you might get your capital locked up unless you’re prepared to wait years for the coin to gradually increase in recognition and value.
- Play the Long Game.
As a newcomer to crypto-trading, you buy a coin and the next day you realize it has appreciated northwards of 20% in value, meaning you might want to quickly cash out and take profit. But then again, if you hold on a bit, you could see that coin witness higher and more astronomical increase in value over the next couple of months to years. Several coins on the Cryptocurrency markets have seen value growth in the thousands of % over the last couple of years. Crypto trading is the right market for people with patience and the vision to have long term gains. This is not a short term game.
- Control your Emotions.
One sure way to losing money is trading with emotions. You may be angry that you missed out on buying a coin before it went up, or maybe you lost a trade bet on a coin so you intend to pile up the rest of your entire funds into another with the hope of making windfall profit…..this should never be a trading strategy. Emotions in crypto-trading should be avoided as much as possible. Detaching emotions from trade transactions gives a better and more objective perspective which is an important tool to making profit.
- Beware of Overconfidence.
Confidence is good, but being overly confident and throwing caution to the wind is something to avoid. Overconfidence could lead to one ignoring market signals and just placing trades based on hunches. This could work sometimes, but there is a high probability this will likely lead to loss of funds. It is important to perpetually study and read wide since the Cryptocurrency world is a fast moving and changing one which could leave one rusty if continuous education and research are left to chance.
Above all, enjoy yourself! The challenge of navigating the tricky Crypto waters can be an extremely rewarding one, and as it’s going to be taking up increasing amounts of your day you may as well enjoy what you’re doing!
Blog by Bob Pattni