Crypto trading is a risky business that can cost you lots of money when you make mistakes. Because of the profit-making opportunity that it offers, many people just jump into it, forgetting the fact that the chances of losing are also high.
It is true that you can make lots of profit trading cryptocurrency, but also true is the high possibility of losing your money. The chances of you losing your money in cryptocurrency will be less if you know and can avoid the common mistakes most traders make. Some of these mistakes are given below.
1. Trading with amount you cannot afford to lose
Risking money you cannot afford to lose is one of the biggest crypto trading mistakes you can make. Always think twice before you commit your money to crypto trading. Don’t commit an amount that may lead you to depression if lost.
Don’t invest all your money or above that which you are comfortable with. Trading more than you are comfortable with may affect how you trade. It may prompt you to make trading decisions you are not supposed to make. If you’ve been trading above the amount you are comfortable with, you need to stop. It’s a bad way of trading.
2. Not having a plan
Not having a clear enough action plan is another mistake most people make when they are starting with trading. These people don’t know why they are entering a particular trade and also when they should exit the trade.
Before you start trading, you should define your reason for entering that trade and also have a plan for exiting the trade. Make sure you set clear profit goals and also stop-losses before you start the trade. Never start without having a clear enough action plan.
3. Leaving money on an exchange
A rule for any crypto trader is this: Don’t leave your money in an exchange you are not currently trading with. When you leave your money in an exchange, you have no control over it. If something happens to the exchange (maybe it goes offline, out of business, or gets hacked), you may end up losing your money.
If you have any money that you don’t need at the moment for trading in an exchange, move it to your bank account or crypto wallet for safekeeping. Avoid making the mistake of leaving your money in an exchange.
4. Giving in to greed or fear
Greed and fear are two basic emotions that influence the actions of many traders. They can cause a trader to take a decision he is not supposed to take. For example, when a trader hears a rumor from a friend, or when he reads an unpleasant news article, or sees a sudden dip in price, he may be forced to close his trade prematurely, as a result of fear.
Greed is also an emotion based on fear, but in this case, it is the fear of missing out. For example, when a trader sees a sharp rise in market prices, or when he hears about the next big thing, he may be forced to delay closing an open trade, or may go into a trade he didn’t intend to go into before. The trader does not want to miss out on any action, so he makes hasty decisions.
As humans, we are ruled by our emotions most of the time. We have the tendency to make decisions out of greed and fear. Be aware of this natural tendency; don’t let greed or fear influence your trading decisions. As much as you can, always stick to the plan you had before starting the trade.
5. Not learning the lesson
There is always a lesson you can learn from your trading activities, whether successful or not. You won’t always make profitable trades; you will lose some money on your way to making money. So, don’t quit just because you lost some money in your previous trade. Learn the lessons from the trade and move on.
Whether or not you make profits from your trading activities, always seek to gain new insights that can help you trade better next time. If you don’t learn or gain new insights from your last trading, you may repeat the same mistake you made and may lose more money in your next trading.