7 Frequent Crypto Trading Pitfalls to Avoid
Crypto trading is becoming popular among younger investors. People new to investing have entered the crypto markets to increase wealth and earn quick money. But it is not easy as you think. There is a remarkable difference between speculation and investment. Good investment is based on research and knowledge about financial markets and technical trading.
Not every investor has the time to carry out a detailed technical analysis of the crypto market before they enter. Thankfully, there are some reliable and accurate trading software that can be used in automated mode to conduct trading. Bitcoin Trader is an automated cryptocurrency trading software that makes use of an advanced algorithm with six market-leading live trading signals. This helps the app make an accurate and detailed analysis of market trends.
Any new crypto investor is bound to make some mistakes initially. Let’s look at some common trading pitfalls to be avoided by investors in the cryptocurrency markets.
- Investors/traders start trading with real money rather than paper trading- Investing/trading is a skill learned over time, practice, and persistence. Generally, investors/traders believe it as a game of luck and consider it as a gamble. But that’s not true. Anyone can learn how to trade/invest by practicing and learning technical and fundamental skills with time. Beginners should start investing in paper trading and learn about the concepts of crypto markets. If you enter the market with real money, there are higher chances of losing hard-earned capital.
- Ignoring stop losses- The first learning of an investor should be accepting mistakes and wrong trades. Whenever you trade or invest, the first step is to set up a stop loss. Stop-loss is a very important aspect of trading/investing. To curb losses, traders/investors must follow stop losses. Generally, smart investors/traders are overconfident about their trades. They do not accept their mistakes and ignore stop losses that increase their losses. Setting up stop losses is all about risk management. An investor/trader should try to minimize losses by strictly following stop losses.
- High brokerage fees- Brokerage fees can eat up your profits. When you open a trading account, you must check the brokerage fees that are deducted from the profit earned. The higher the brokerage fees, the lower would be your profits. Before opening an account, choose a reputed broker that offers low brokerage fees to investors/traders on a trustable platform.
- Profit/loss is absolute gain- Another very important mistake of investors/traders is that they treat profit/losses as an absolute gain rather than a percentage. Generally, investors/traders do not understand the meaning of gain %.
- Ignoring fundamental analysis- Standard finance theories assume that an investor is a rational animal. But in reality, it is not so. Investor/traders make mistakes and incur losses because he or she ignores research, fundamental and technical analysis concepts. He or she invests emotionally or becomes a noise trader. Fundamental analysis is an important step before investing. An investor/trader must do proper research about cryptocurrencies, macro-environment, future outlook, global indicators, management team, etc. before investing/trading. If you are not looking into these factors before investing, you are bound to suffer losses.
- Doing trade based on pump/dump calls- Generally, investors look for trading signals on virtual forums and discord groups. Beginners fall into the trap, invest, and lose money. Traders/investors should not trust these signals or calls for investing. Hence, as mentioned above proper knowledge and fundamental analysis is the essence of the rational investment process.
- No trading plan- Herd behavior can lead to losses in investing. Do not just follow the signals to invest. You should have a proper trading plan where you know how much to invest and when to invest. Excessive greed and optimism can lead you to investment errors.