If you find yourself repeatedly unsuccessful in gaining profit from the crypto market, you may do these mistakes without knowing how fatal they are to your trades.

Cryptocurrency often scares new investors away because of its extreme volatility. People are frightened by large red spikes on the charts with multiple digits in price changes, which commonly occur in only a matter of hours or even minutes.

Crypto Trading Mistakes

The market's volatility measures how much prices rise and fall. Most traders agree that the riskier an investment, the higher its volatility. Many factors that cause price volatility in traditional markets also apply to the cryptocurrency market. News and speculations trigger the price movements in cryptocurrencies, mostly in a more significant manner due to the crypto market having less liquidity than other markets.

To manage the risks that naturally come with the potential profit in the cryptocurrency market, beginners need to avoid the following mistakes:

 

1. Starting with Real Money without Practicing with Paper Trading

This phase may be tedious, but it is possibly the most crucial portion of cryptocurrency trading. Many traders who do not mind losing money trade with real money before honing their skills.

Paper trading is a prevalent activity in traditional financial markets that has spread to the cryptocurrency industry. Paper trading refers to the practice of trading on a virtual account and is the most effective way to understand how trading works without risking any money. It is an example of "paper profit" and "paper loss" in basic terms. So, paper trading has nothing to do with actual money and is mainly used as a training tool for newcomers or anyone who wants to practice before spending real money.

Several exchanges and brokers are available to start paper trading are eToro, TradingView, Cryptohopper, BitMEX, Nvstr, Bitmart, and StormGain. Instead of only one coin for every trade, paper trading allows users to invest virtual currency in many coins. Users should experiment with their strategy until they gain enough experience or find something that works best.

 

2. Revenge Trading

As mentioned above, the cryptocurrency market is very volatile. It is indeed a wrong decision if you trade based on emotions because it will keep you away from following your plans.

When you lose money on a trade, your natural tendency is to try to recover it. You are placing bigger deals and ignoring your initial plan. As a result, you would act mindlessly in order to exact "revenge" on the market.

Irrational trading, as you surely already know, almost always ends badly. The greater the loss, the stronger your desire to retaliate against the market for "stealing something from you".

Many traders might deny it, but the truth is that they are victims to revenge trades at some point throughout their trading careers. Most people think that risk management is easy to apply. However, things are rarely going as expected, and emotional reactions cannot be avoided.

The most challenging solution to avoid revenge trading is to walk away. It is, however, the most rational. When your stop-loss is triggered, accept the loss, and move on to other opportunities for the day. Get accustomed to the thought that losses are unavoidable in the market as much as possible. Please make this a part of your trading mindset so you can remain calm when it happens.

 

3. Ignoring Stop Loss

Is it true that some professional traders don't implement stop losses? This opinion might be true, but you must also remember that they have many years of experience under their belt. They have dealt with more stressful circumstances than you can count.

If you're one of those newbies who are still confused over the importance of stop loss, keep in mind that setting a stop loss serves several goals, one of which is to help you to detach all emotions from your trading decisions. It also has the benefit of removing the need to keep an eye on your position. In other words, setting a stop loss will allow you to take a break from the charts and enjoy your life.

If you opt not to use a stop loss, it's strongly advised to test this on a small account or with a small amount of money. You can't just forego this and expect to have the same result as the professionals who don't use stop loss due to your lack of experience.

 

4. Failing to Manage Fees

High trading expenses (brokerage fees) can eat up a large amount of your trading income. It's important to note that each exchange has different amount of fees. They also tend to have various schemes in implementing fees to their clients, not to mention things like Ethereum "gas fees" and multi-chain transaction costs that may be applied if you trade cryptocurrencies other than Bitcoin.

Bitcoin fees can be reduced by carefully ing the wallet in which you store your cash. This wallet is a software program, not a genuine wallet that you carry in your purse or pocket. While many wallets offer transaction fees, some never charge transaction fees, and when used responsibly, these platforms can help you keep more money in your account. As a result, you may be able to complete your transaction with cheaper fees.

Another secret is to submit your transactions at a time when the blockchain is less congested. Because many businesses are closed on weekends, for example, fewer transactions are made, and this is when you can try to open transactions with minimum fees. While this method is risky, it is a viable way to avoid paying high fees.

See also: List of Crypto Exchanges with the Lowest Fees

Some exchanges remove deposit and withdrawal fees so you can move your Bitcoins without paying anything. This offering makes trading more affordable, but keep in mind that there will always be a trade-off behind every advantage. Some companies, for example, only eliminate fees if you pay with a bank wire. It will certainly prove useless if you prefer to pay via other methods like credit cards since they provide chargeback protection.

 

5. Using Money That You Cannot Afford to Lose

Some say, "only buy Bitcoins if you are ready to lose your money". As the popularity of cryptocurrencies grows, so does the fluctuation in their prices. Bitcoin values might plummet because of volatility and its demand on the market. When there is more demand for Bitcoin, the price rises, and when there is less demand, the price falls.

Demand is influenced by various factors, including worldwide events that are unpredictable at times. Furthermore, Bitcoin price is very sensitive to market issues so there's a high chance that one piece of news can trigger spikes in both directions.

Based on the above explanation, it is essential to note that if you are interested in Bitcoin, use only a tiny amount of money that you can afford to lose. Never go all-in with your assets when you decide to invest in Bitcoin because you will never know when the market decides to drive the price significantly.

See also: Bitcoin Price Today

 

6. Buying Shitcoin Without Considering Its Risks

A cryptocurrency with almost little to no value or no recognizable use is referred to as a shitcoin. The term is sometimes a negative term to characterize altcoins or cryptocurrencies that emerged after Bitcoin became successful.

Because shitcoins are not established in good faith, or their price is founded on speculation, shitcoins often lose value due to rapidly declining interest from investors. As a result, these shitcoins are referred to as poor investments.

Shitcoins lack functions, unlike Bitcoin and Ethereum, which were created with specified purposes and innovative goals in mind. This leads to shitcoins not having the same lifespan as other altcoins. Many shitcoins were established to take advantage of unknowing people who jumped on the crypto hype without much thinking.

There are several tips to avoid shitcoins, such as:

  • Steer clear from mysterious developers. A project's sponsors should be trustworthy, not a random assortment of strangers with fanciful names. Nobody wants to invest their money in anonymous groups.
  • The project has many potentials, but the performance is lacking. Anyone may come up with lofty objectives and promises. However, not just anyone can provide the blueprint for how those goals will be met. A project is untrustworthy if it fails to define the functionalities.
  • Some aspects of the project appear to be plagiarized or generic. You should give it a red flag if a project's website is generic or uses a free domain. It indicates that it lacks the genuineness of a well-developed project.
  • Examine the total number of holders. According to experts, each new coin worth investing in should have at least 200 to 300 holders. Any coin that does not match that qualification is unhealthy and unsuitable for investment.

Remember that thousands of different cryptocurrencies serve different purposes. The first and most well-known cryptocurrency, Bitcoin, proves to be better for retaining and increasing value than other available cryptocurrencies, which are far more speculative and unpredictable.

If you plan to invest in cryptocurrencies in the long term, Bitcoin has the best track record to look into. Several financial experts have advised that if a client is interested in cryptocurrency, they should buy Bitcoin and avoid the more volatile, lesser-known altcoins (anything that is not Bitcoin).

On the other hand, if you have done your homework and are enthusiastic about a lesser-known cryptocurrency's unique invention, investing in an altcoin may be as much about personal belief as it is about return on investment.

 

Extra Tips: Don't Get Carried Away by Rumors

As you progress in your crypto trading career, you may notice that some of these errors frequently happen. You may do it consciously or without meaning to, especially if you follow cryptocurrency news on Twitter or Telegram Channel with posts like:

"The Whale comes in, let's go all in today!", or

"So it appears that Bitcoin has come to an end, it's okay to sell!"

Fyi, no one will expose REAL inside news in Telegram. It's better to rely on your own experience and double-check the info you have received. Deviating from it due to mood swings can be catastrophic if you have a well-thought-out plan of action.

Also, you will get into many difficulties and lose money if you do not fully understand the asset you trade, especially if you later choose to just rely on "professionals" on social media who tell everyone when to buy and sell cryptocurrencies. In the end, your goal is to limit your losses and concentrate on earning as much profit as possible. It's better to do it on your own terms so you will know what to fix when it doesn't work the few first times you use it in the market.