10 Beginner Mistakes Every Crypto Trader Should Avoid
Not reading, not diversifying, and not panicking are just some of the beginner mistakes every crypto trader should avoid.
You know the pros and cons of investing in cryptocurrencies you should consider, and you've decided to go for it! Before you get started, though, you need to know what you're doing to because the knowledge that it takes to succeed in crypto trading will help you succeed in any type of trading. That's because wisdom is translatable while winning is contingent. There many factors that go into a successful trade; where wisdom comes in is in identifying those factors and knowing what to do when things still don't work out. That's important because a trader needs to know how to win to and lose. That way a loss isn't even a lose; it's just another step on the journey to winning.
Don't anthropomorphize the market.
The market has no human qualities, and yet a common mistake many people make is speaking about the market as if it has agency. The result is that people end up with a fundamental misunderstanding of how the market actually works. The market is the sum of all economic transactions; it's not a monolithic entity that you're in competition with. Personifying the market might make for useful shorthand, but it's unfortunate that so many people use that shorthand as the foundation of their economic philosophy. Truly one of the beginner mistakes every crypto trader should avoid.
There's wisdom to some cliches. Take, for example, every phrase that's a variation of, "Don't bet the farm," or, "Don't put all your eggs in one basket." The idea of diversification has been around for thousands of years for a reason: you're more likely to lose it all if you bet it all. And that's as true in cryptocurrency trading as it is anywhere else.
You should diversify even when you think you've found a sure thing, and not just because there's no such thing as a sure thing. It simply doesn't hurt you to have more variety. You win some, you lose some, and sometimes both happen at once. Diversification makes you more likely to lose some rather than all.
Skill, Not Chance
Trading has more in common with chess than it does with dice. Trading demands that you be well-read, knowledgeable, and up to date with the latest news rather than relying on luck alone. Not only that but being well-read and knowledgeable is how you actually get lucky. What appears to be luck to many people is actually the result of determination and resiliency.
Unfortunately, one of the most common beginner mistakes every crypto trader should avoid is not knowing enough about the technology they're investing in. If you're going to invest in crypto you should be well versed enough in the subject that you can explain it to someone who knows nothing about it. Otherwise, you're as doomed as anyone who invested in the worst IPOs in history.
Avoid peer pressure!
Not marching to the beat of your own drum is one of the beginner mistakes every crypto trader should avoid. By the time enough people know about something for you to feel pressured to get involved it's already too late—the tipping point has already been reached. Sure, you may be able to ride a high for a few days or even a few weeks, but it's a good sign a bubble's about to burst when the people in your life who know nothing about crypto are talking to you about crypto.
There are no oracles.
Everyone thinks they're an expert until experience proves that they're not. And, yet, even being wrong doesn't seem to keep people from listening to self-proclaimed seers. At the end of the day, all the tips and all the seminars don't add up to certainty. So take everything you take in with a grain of salt because what people are selling you are dreams rather than sure things. Your best bet is, again, to take in as much information as possible so that you can be your own oracle. And if you don't have enough information to make an educated guess then you're best off leaving your money alone.
You need to have an iron stomach to trade, especially when it comes to a market with as many price movements as crypto. One of the beginner mistakes every crypto trader should avoid is selling when the going gets rough. Sometimes it makes sense to cut your losses, but they're not loses until you sell. If you just hold onto your investment it might go up again. You just don't want to buy high and sell low; that's literally throwing your money away. It cannot be stressed enough how indispensable it is to invest wisely. There's no greater deterrent to failure than wisdom.
Exit through the gift shop.
So, you've made some money off your investment. One of the beginner mistakes every crypto trader should avoid is not knowing what to do after you've actually made some money. You don't want to hold for so long that you start to lose money, but you also don't want to sell it all at once so that you end up missing on the biggest boom. So, practice staggered selling. That way you make some money while potentially making even more!
Avoid the sunk cost fallacy.
To commit the sunk cost fallacy is to remain involved in something purely because of the number of resources invested in it. Those resources may be time, labor, money, or even emotions. Don't snatch defeat from the jaws of victory by falling in love with a stock.
In general, it's a bad idea to trade emotionally, but, in particular, it's bad to trade because of jealousy. Someone else's success has nothing to do with you. Envy clouds judgment not just when it comes to how you trade but to how you interact with others as well. Jealousy is also an emotionally draining emotion that will keep you from seeing all the opportunities in front of you. Some else's win is actually a win for you too if you learn from it.
Everyone could be trading crypto right now, which makes not trading one of the beginner mistakes every crypto trader should avoid. There's no reason to not invest your spare change in crypto with Coinflash. The app rounds up the amount you spend and uses that figure to purchase whatever cryptocurrency you want. And, yes, spare change is enough! Coins can be cut up into manageable chunks just like anything else you can invest in. And while the market may be volatile, you don't stand to lose a lot if you invest a little. However, if you make a profit, your return might be as high as 50 percent annually. Don't let your trepidation stop you; go for it! As the saying goes, "What you seek is on the other side of fear."