Cryptocurrency is a new ocean of investment in which everyone is diving in. It is not that easy to swim in this ocean. You need a lot of practice and experience. It’s best to learn from other people’s mistakes if you want to improve your trading skills and market knowledge. So here are the Top 10 Crypto Mistakes To Avoid In 2021.
Beginning with real money before paper trading
Trading like any other skill requires practice. To master it you’ll need countless hours of practice and patience. It has ground rules one of which is to practice paper trading before investing real money. This part may be tedious for some but it is probably the most important aspect of cryptocurrency trading. Many traders who have a gambling mentality and don’t mind losing money end up taking real money trades before honing their skills. What you must remember is that the crypto market will not go away and even if you prepare for two months with paper trading you will not lose money. So before you invest real money use crypto paper trading to prepare for the big game. This is the first mistake in the list of Top 10 Crypto Mistakes To Avoid In 2021.
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Not using a Stop Loss
Beginner traders have a proclivity for trading emotionally which manifests itself in their refusal to accept losses quickly. The ability to accept a loss and move on to the next trade is an important skill for a trader. The primary reason merchants lose money is that they fail to do so. Set a stop loss and don’t move it if the trade goes against you otherwise, your account will be blown up. When your expected trade goes bad a stop loss will help you limit your losses.
The greatest egotistic mistake you can make is not using a stop loss. Almost all of the best crypto exchanges allow you to set a stop loss and some even allow you to set a trailing stop loss. Start using stop losses if you’ve never used them before or if you’ve skipped them in some of your trades. Stop-loss orders should be used with every trade to prevent the most common mistake made by crypto traders.
Paying high brokerage fees and not seeing profit/loss as a percentage
Brokerage and trading fees will eat up a large chunk of your trading profits. The key is to use a broker exchange with low trading fees and plenty of volume and liquidity you will end up making more money from trading. This way this is yet another common blunder made by new traders. They often consider their profit and loss to be an absolute gain rather than a percentage gain or loss. Make it a habit to look at each trade you make as a percentage gain and you’ll have a good picture of your profits and losses.
Not doing fundamental analysis
Many newcomers begin by choosing a popular cryptocurrency and start trading in it. There’s a possibility that you’ll end up making a lot of money over time. However, the coin will dump like there’s no tomorrow one fine day and a single large loss will put your portfolio in the red for a long time. To avoid this beginner crypto trading blunder, conduct a fundamental analysis of the coin you want to trade. Technical analysis is a difficult skill for new traders to master because of the context and chart placement. They often spot patterns on a chart that aren’t there or are incorrect.
In the beginning, traders should create a simple trading system and avoid making decisions based on trends or indicators that they’re unfamiliar with. Begin with basic support and resistance levels as well as indicators that are easy to understand such as exponential moving averages, What is the purpose of this coin? the cryptocurrency’s prospects, the leadership group, the economy of tokens, create a list of tokens you’d like to trade based on these parameters. Always keep in mind that every trader is different and you must create your own system.
Trading based on pump/dump calls
Pump and Dump skips should be avoided at all costs especially if you’re a beginner. Such groups are impractical because the chances of those signals working are slim to none when hundreds of users are acting on the same trade call. Furthermore, the smart money has already moved in or out, and now the money of novice traders is on the line. When the group is small the owner is a professional trader with high ethics it could work. These organizations are normally paid and modest in size. To take advantage of such signals you must have basic trading skills in either case. Use these calls as an indicator only, not a trade just like other technical analysis indicators. The trade situation will change and you could lose more money than you win.
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Not maintaining a trading journal
This is perhaps the most common blunder made by new crypto traders. Writing down why you’re taking a trade and reviewing it later can help you figure out why are certain trades performing so well, why are you losing some business? keeping a trading journal will assist you in fine-tuning your trading strategy over time. You can still use Excel or even a paper journal to keep track of your progress.
This is something that has been shown to take a beginner to the next level of crypto trading expertise. Successful merchants have a strategy in place. Holding yourself accountable for your actions is an important part of trading with the strategy. The only way to do this is to keep track of the specifics of a transaction. This is the most effective way to learn and avoid making the same trading mistakes. Keep a journal and refer to it frequently. Keep track of your thought process mental state and training outcomes will be extremely beneficial to you.
No trading plan and revenge trade
Failing to plan is planning to fail. Before you begin any trade you must have a strategy in place that means you’ll need to know your entry and exit strategies as well as the amounts of money you’re willing to risk in the trade. Beginner traders also lack a trading strategy and are content to remain in a losing trade for an extended period. Having a trading strategy in place before entering a trade will help you avoid rookie trading errors.
Losses are unavoidable in trade however few users have developed the ability to accept losses and they end up engaging in revenge trading such trades are based on fear and anger and they’re extremely harmful to your trading career. To reduce your losses you may try to take more risky trades which are referred to as revenge trades. After losing trade you must remember that no one has ever won a 100% of their trades. With the right risk-reward ratio even if you only win 40% of the time your crypto portfolio will still be profitable.
Not calculating risk reward
What is your desired profit margin and how many setbacks are you willing to accept this is in a nutshell what risk-reward is all about. For every fifty dollars, you risk you should strive to win at least a hundred dollars. A risk-reward ratio of one to three or one to five is commonly recommended by advanced traders. In any case, having a clearly defined risk-reward ratio would help you avoid risky traders. Furthermore, even if you lose a string of trades your overall portfolio will not be harmed in the long run.
Using margin trading too soon
Margin trading is when you borrow money from an exchange to get into a trade that you don’t have. The advantage is that if you’re correct you will make a large profit and if you’re wrong you will lose a large amount of money. Do not venture into margin trading until you have mastered spot or paper trading. You must undergo proper practice and you should be confident enough of your trading skill. In that case, you can opt for margin trading.
Trading multiple pairs and not following your style: Avoid the herd mentality
Trading multiple pairs at first will not only confuse you but may also prevent you from perfecting your trading skills. It is a marathon, not a sprint as we previously stated. So you should focus on honing your skills rather than trading like there’s no tomorrow. Another common mistake made by new traders is to blindly follow the herd which can result in them overpaying. Traders with a lot of experience are used to exiting trades when they become too crowded.
New traders on the other hand may remain in a trade long after the smart money has exited it. Everyone’s trading style is different and yours is no exception. You’ll notice this over time and it may perplex you at first how everyone trades differently. It’s not unusual for a novice to think like a herd and believe that everyone trades the same way. This is not the case and you should begin developing your personal style. You should appreciate the beauty of your trading style’s individuality. This is the last mistake in the list of Top 10 Crypto Mistakes To Avoid In 2021.
Also Read – 5 Best Ways to Grow Money in 2021 For Beginners
It is always very difficult to predict the market. But you can avoid some common mistakes and can reduce the percentage of loss. So I hope this article – Top 10 Crypto Mistakes To Avoid In 2021. gave you some idea about the common mistakes of the crypto market.