Trading in Crypto is a profitable business to go into, but it is full of a lot of risks. Here, we will look at certain Cryptocurrency trading mistakes to avoid as a Crypto trader.

Undoubtedly, cryptocurrency trading has captured the financial world’s attention due to its extraordinary profit potential. However, the risks and difficulties inherent in this field must be recognized.

Trading is more of an art than a science, despite what certain chartists and technical analysts might have you believe.

This is especially true for cryptocurrency trading, which occurs in a highly unregulated market where values can suddenly rise or fall due to factors such as lack of liquidity, the actions of wealthy investors known as “whales,” and the influence of social media and herd mentality.

Millions of new investors enter this market every year, and considering how volatile cryptocurrency can be, it’s no surprise that many of them wind up empty-handed.

The fact that most novice traders lack significant trading expertise does not help matters.

Due to ignorance, disinformation, fear, uncertainty, doubt (FUD), impulsivity, and impressionability, many people make fundamental mistakes and fall into perilous traps while making financial decisions.

As we will show, however, it is simpler for novice traders to avoid these pitfalls than they might initially believe.

Even though it’s easy to spot these typical blunders by novice cryptocurrency traders, avoiding them can be challenging, especially given the large risks involved.

However, every cryptocurrency trader should take a step back and consider their investment logically and strategically regarding a realistic, informed expectation of what they think will happen and their exit strategy because the stakes are so high.

Cryptocurrency Trading Mistakes to Avoid

Here are some common Cryptocurrency trading mistakes every Crypto trader should avoid to prevent unnecessary losses. They are;

Lack of basic Crypto knowledge
Fear of missing out (FOMO)
Overtrading
Keeping Crypto Wallets Online
Order errors
Short-term thinking
Use of leverage
Wrong wallet address

Lack of Basic Crypto Knowledge

All the buzz about Bitcoin and other cryptocurrencies may make new crypto buyers want to get in on the action, but to invest in crypto, you need to know what it is and how it works.

Investing in something you don’t understand or trying to trade Crypto without knowing how it works at the most basic level is a sure way to lose money.

If you take the time to learn about the goals of each crypto project and company, you will be a better investor.

Fear of Missing Out (FOMO)

The fear of missing out is a significant mistake, and many inexperienced traders do it. This is hardly surprising given the importance of the Internet and social media to the Crypto market and industry.

Many of us learn about cryptocurrency from (sometimes anonymous) online accounts. As a result, many people may suddenly support a specific cryptocurrency based almost entirely on the actions of their peers on social media.

Putting all your eggs in the social media basket is bad because the most shared content on these platforms tends to represent confirmation bias.

Traders would be better served by seeking out primary sources (such as corporate websites and white papers) and conducting their research and critical analysis based on them.

Otherwise, traders risk succumbing to the temptation to follow the prevailing sentiment on social media platforms like Twitter, Discord, and Telegram.

It goes almost without saying that waiting until a cryptocurrency has gone viral before investing implies you’re getting in at the market’s peak.

Simply said, far too many social media-influenced people buy at the peak of the Crypto market before it inevitably crashes.

Overtrading

Many newbies become engrossed in the crypto market’s enthusiasm and trade excessively and frequently.

Motivated by emotions rather than a well-thought-out plan, Overtrading can result in higher transaction fees and lower net gains.

Keeping Crypto Wallets Online

Cryptocurrency is a form of digital money that can only be stored in a digital wallet.

Using an online wallet is more handy, but it is also much riskier than keeping your cryptocurrency in a physical wallet.

Online wallets are more likely to have bugs, and hackers can use crypto scams or hacks to take money out of your wallet.

An offline hardware wallet, a USB stick with advanced hardware and software encryption to protect your crypto secret keys, is the safest way to store your crypto.

Order Errors

Some cryptocurrency exchanges, like Coinbase, focus on easing the process of buying cryptocurrency for newcomers.

Many other Crypto exchanges feature intricate order forms and trading interfaces that can overwhelm them.

When placing an order, a mere decimal point miscalculation could cost thousands, compounding losses.

An oversight by a vendor who thought he was selling a premium NFT for 75 Ether instead of 0.75 Ether recently cost him approximately $300,000.2

It’s important to review all orders and transfers twice before sending them in to prevent these costly blunders.

Since crypto transactions cannot be undone, it is important to double-check everything before sending it off.

Short-term Thinking

Many new buyers only think about the short term because they want to “get rich quick” in the market.

And while it is possible to make huge profits from a crypto trade, it is also possible to lose all of your money if you make a wrong move.

A long-term investment mindset will help you pick your crypto investments more carefully and focus on high-quality projects that have been around for a long time.

Trying to get rich in 90 days is a quick way to go broke, but if you think of buying in crypto as a process that takes years, you can build a better crypto portfolio.

Use of Leverage

New crypto investors may be tempted by tales of overnight success in cryptocurrency trading and decide to use leverage to increase their returns.

However, you will need to put up collateral before making any leveraged trades, and if things go wrong, you may lose everything.

Remember that leverage can equally magnify your losses as it does your gains.

If you’re just getting started in the crypto market, it’s best not to use leveraged trading strategies.

Wrong Wallet Address

To withdraw cryptocurrency from an exchange or to pay another person, the cryptocurrency must be transferred from one digital wallet to another.

However, a common blunder made by new investors is mistyping the wallet address when attempting to transfer cryptocurrency to their wallet.

When this occurs, the digital currency is transmitted to the wrong wallet address and may be lost forever.

While there are recovery programs that could help, doing so may cost you a lot of money.

Lessons from Experienced Investors

Now that we have discussed some common Cryptocurrency trading mistakes that Crypto traders should avoid, let’s take a look at some lessons from experienced Crypto Investors;

Lesson 1: Consider dollar cost averaging as a long-run strategy

Platforms for cryptocurrencies like Coinhako let you buy Bitcoin or Ethereum directly from your bank account. You can use this to move money often, like $100 every week or month.

This is known as Dollar Cost Averaging (DCA), and most people agree it is the best way to build up your savings.

You don’t have to worry about buying at a “good” or “bad” price because you average your buy prices over time. This lets you make steady gains.

Lesson 2: Do your research. Every crypto sounds amazing in a vacuum

One of the most successful crypto traders previously said, “The first cryptocurrency I bought was Bitcoin.

“Being the first cryptocurrency, it has the most brand awareness; therefore, I figured it was a “safe” investment.

Since it is the only cryptocurrency recognized as legal tender by a sovereign state (El Salvador), it must be true, right?

However, digging deeper, I discovered that Bitcoin was one of many digital currencies.

Bitcoin’s reputation as a store of wealth has attracted competition from other cryptocurrencies, such as Luna, Litecoin, and Nano, all of which offer their unique perspectives on the future of digital currency.

Bitcoin may seem like a great investment, but it’s essential to do your homework and consider the market before making any purchases.

Then, when you’re ready to buy, you’ll be confident in your choice.

Lesson 3: Know your Strategy; Are You a Trader or an Investor

Before you jump into the crypto market, you should have a plan. There are two types of people on the stock market: traders and investors.

Determine which course you enjoy most and stick with that.

As a trader, you’d do well to focus on highly volatile cryptocurrencies, as doing so increases your chances of making quick, little profits (known as “scalping”).

Specific advice for traders

Get familiar with charts and Technical Analysis.
When you start making money, don’t forget to take it out!
Dogecoin and other meme coins are fun playgrounds since their value fluctuates based on market speculation.

Specific Advice for Investors

As an investor, you must have faith in your chosen coins.
Learn the goals and strategy of the coin’s creators.
Don’t be frightened by fluctuations in cost.
Keep using them if the crypto’s fundamental principles don’t shift.

It is less important to know the exact cost of buying cryptocurrency.

Whether you buy a coin for $3.20 or $3.23 is less important if you are confident that its value will increase to $10.

Bottom Line

Investing in cryptocurrency might be intimidating, especially if you are just getting started.

However, avoiding these Cryptocurrency trading mistakes can help you become a more confident investor and save thousands of dollars.

Cryptocurrency Trading Mistakes to Avoid: Lessons from Experienced Investors