Getting started in cryptocurrency trading can be a complicated process and there’s a lot to learn. We can’t teach you everything in one article, but we can at least point out five of the most common newbie mistakes that trade.io’s experts come across. Avoid these and you’re already on your way to success.
Mistake 1: Having no clue what cryptos are. There’s no shortage of stories about people who became overnight millionaires with a Bitcoin investment, and that’s attracted plenty of people who think they can do the same. Some of them can but only if they know what they’re doing. If you don’t have any cryptocurrency trading experience then you’ve come to the right place. Do your research before you get started and you’ll make better decisions.
Mistake 2: Not having a trading or investment plan. You’ve spotted a coin that’s increased its price by 20 per cent in a day, so do you buy? Of course you do, right? Well, probably not. You’ve missed the initial upward move in price and there’s a good chance that the coin has already run out of momentum. Seeing a coin surge in price is not a good enough reason to buy. Instead, make a plan for when to buy or sell, how much to spend and when to stop. Sticking with your plan will eliminate silly mistakes and help you improve your trading skills.
Mistake 3: Investing more than you can afford to lose. There is no guarantee that investments of any kind will increase in value, but cryptocurrencies are especially volatile. You can win big but you can lose big too. It’s easy to lose money and then spend more to make that back, only to lose that too. This is the mistake that gambler’s end up making. The smart way to invest – or, indeed, to gamble – is to decide how much you can afford to lose and not spend any more than that. If the worst happens and your investment is wiped out, then at least you’ll still be able to pay your bills. Of course, being wiped out is easier to avoid if you have a plan (see above).
Mistake 4: Thinking every coin is the next Bitcoin. Everyone knows someone who knows someone who invested in Bitcoin years ago and made a load of cash. Everyone wishes they could have had that foresight, but the ones who really profited are those who thought long-term. The short-termists who bought Bitcoin will have cashed out too early. You need to think longterm too. Don’t expect every new coin to be the next Bitcoin. Instead, do your research, diversify your portfolio, don’t put everything into one coin and then be patient.
Mistake 5: Being distracted by low prices. Some things are cheap for a reason. Some are cheap because people have missed out on the value. Do you know the difference? Probably not – especially if you’re just starting out. Lots of novice investors buy cheap coins expecting them to increase and thinking that owning lots of coins is intrinsically a good thing. Needless to say, it isn’t. If the investment is doomed then there is no benefit to having more coins. The most important thing to look for when evaluating a coin is market cap rather than price. Start from there and do your research.