Bitcoin is undoubtedly one of the most traded virtual currencies today. With its prices going up every day, more people are joining the market to invest. While investing in bitcoin uses the same concept of buying and selling, knowing when to buy or sell is key. You can also lose vast amounts of money in a short time if you don’t pay attention to Elon Musk and Jeff Bezos’s tweets. With so much uncertainty and volatility in the market, losing money is more likely than winning. Fortunately, we are here to help you navigate the risky crypto industry. In this post, we will highlight some of the most common mistakes traders make and how you can avoid them.
Not Having a Plan
To invest and make money, you need a plan. If you don’t plan, you will likely lose more money than you make. A plan helps you know when to enter the market, the currencies to target, the risk to reward ratio, and the amount of capital you intend to use. If you don’t have a plan, you end up guessing market direction and trading carelessly with no apparent focus, which leads to losses, stress, and frustration.
Buying High and Selling Low
Every trader will make this mistake at some point in their trades. This is because we cannot guarantee market direction. For this reason, it’s always prudent to check signs of a trend continuation or reversal before entering the market. Crypto is extremely volatile, and most bitcoin exchange platforms often give signals and economic releases to help users make informed decisions when they sell or buy bitcoins. When you buy crypto when the prices are high, you will have to wait for a long time for the market to move higher to make profit, which is not even guaranteed. On the other hand, when you buy when the prices are low, you can start making money immediately and maximize your gains.
Investing More Than You Can Afford
When the market is trending and moving towards your direction, it’s tempting to invest more money to earn more. However, the crypto market is volatile, and things can turn anytime. It’s possible to make $100,000 from $1000 and lose the $100,000 you just made in an instant. A trading plan and strategy help you invest a specific amount of money. Remember, you cannot invest more than you can afford to lose. Consider sticking to a small lot size and use stop losses to avoid losing all your money when a trade goes against your expectations.
Investing in a Single Asset
To be a successful trader, you need to diversify your portfolio. You can trade bitcoins, Dogecoins, and other currencies. You can also trade forex and stocks. Choose what you’re more comfortable with based on your capital, strategy, and trading plan. The idea behind diversification is to decrease your risk of losing significant amounts of money in a short time. If one trade fails, you can recover the money with another one.
Not Prioritizing Security
Cryptocurrency is unregulated. That means someone can steal your bitcoins without leaving any trace, reducing the chances of ever recovering your money. Like any hot market, the crypto industry is packed with scammers and social media influencers who can affect your trade anytime. Beware of cons on Twitter, Telegram, and Youtube that claim to double your coins in a few hours or days.
Bitcoin has no physical banking; you need to protect your coins using keys, passwords, 2-factor authentication, and seed phrases. Never save these critical details on your phone, computer, cloud or send them via email. Instead, write them on paper and duplicate them to keep them in different locations. This ensures that you have no traces of bitcoins on your computer or phone, making you invisible to scammers.
