The crypto market is volatile, unpredictable and requires a lot of patience from investors and traders. But there are common mistakes that even experienced traders make more often that cost them a fortune: placing their bets against the trend, not reducing their risk and trading in periods of consolidation.
It is important to consider the volatility of coins, especially those with a low market capitalization because they are quite risky to invest in. Some investors and traders, even though aware of the fundamentals behind wild price swings, continue to put their money in altcoins. One thing to note is that bitcoin’s price affects the crypto market at large. Therefore, when the price of bitcoin drops, the value to altcoins will also take a hit especially because BTC is paired with major coins such as XRP and ether.
Traders need to assess the fundamentals affecting the market and more importantly base their decision to trade on the performance of the big daddy-bitcoin. To reduce the risk of being caught on the other side of the fence, it is always best to wait and see how the trend plays out after a
consolidation period. Check out crypto trading for more information on trading.
Here are common mistakes made by crypto traders and investors;
1. Allowing your emotions to control you: The most common mistake investors make when trading crypto is letting their emotions make trading decisions. Without starting with a plan of what goal you're trying to accomplish and how you will be making investment decisions to reach those goals, your susceptible to letting your emotional reactions guide your decisions. In the long run, that will lead to buying high and selling low which will steadily grind away your investment returns.
2. Social Media Hype:
Nowadays all kinds of news travel through the social media grapevine. This includes news and “advice” about crypto trading. The thing with crypto isn’t that the news is necessarily fake but rather biased. Facebook’s algorithm tends to send you information that you “like” or are affiliated too.
The source of information on social media may be valid if you are following a reputable and/or independent source of crypto news. There will always be good information on social media too, it’s just a matter of sifting through it.
Also, bear in mind who is investing in what. If a blog or someone is talking up the value of a new coin, chances are they are invested in it. So be wary about purchasing new coins or advice about the perfect time to “trade” or “dump” because often times sources may be operating based on their own financial interest, not yours.
3. Keep Your Coins Safe:
This may seem pretty obvious, but always make sure to keep the most of your balance on an off-line wallet. You can use hardware or software to accomplish this, and there are many options out there. If you want to be extremely cautious, you can print out or write down your private keys on a
physical piece of paper.
The reason for this is that sometimes coin exchanges might be down and you won’t be able to access your funds until servers are back up. In the worst-case scenario, the coin exchange can get hacked or shut down by governments and you will lose all your earnings.
Not to mention coin exchanges tend to have horrible customer service. So do yourself a favor and store coins offline. This way, when you need to trade, you can quickly upload them to a functional coin exchange.
Also, when you are trading online at any coin exchange make sure to enable 2FA (Two-Factor Authentication). This adds an extra layer of security for your online transactions and is available on most coin exchange websites. You can even take a screenshot of the QR code for reference or print it.
Source: Stefan Ateljevic (bitcoinpay), Edith Muthoni, LouHaverty(Financial Analyst Insider)
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