Whether you are an expert in cryptocurrencies or you have just started investing, there are many things you need to be aware of while trading in the world of cryptocurrencies. Unlike traditional markets, cryptocurrency trading is full of volatility, unpredictable investors and irrational price movements.
In this article, I will draw your attention to some of the most common mistakes in cryptocurrency trading and how you can avoid them.
FIRST mistake: FOMO (fear of leaking):
Probably the most common (and easiest) mistake in cryptocurrency trading is to buy a currency after the price has already risen significantly. Investors who bought Ripple (XRP) and Tron (TRX) at their peak in late 2017, definitely felt pain just a few weeks later in 2018. Maybe instinct tells you to spend some money when you see that some cryptocurrency has risen 30-40%. Don't! An extreme price increase is almost always accompanied by some type of withdrawal. By the time you hear about such a token and its growth, it is usually too late. Unless you have done your research, believe in the basics of that coin and want to keep it for a long time (more than a year), wait until the price recedes.
Pump and dump
Pump and dump (PnD) are a special type of trading that guarantees to burn you. If you see an unknown token rising sharply, be careful. It is most likely part of a PnD scheme. In essence, these are coordinated efforts to artificially raise the price of the coin (pump), after which it is sold to people who have joined because of the FOMO (dump).
When you come across a coin like this, the first thing to check is the trading volume. Any 24-hour traffic volume below $ 1 million should raise a red flag.
SECOND mistake: Ignorance of your investment
Don't just blindly follow the advice of a Twitter or YouTube "guru" for investments. Often these high profile people are paid to promote certain cryptocurrencies. Even John McAfee, one of the most famous personalities in the crypto space, admitted that he charges for the promotion of projects.
The minimum is to spend at least half an hour researching any project you plan to invest in. See what kind of problem he is trying to solve, and what kind of team is gathered around the project. Is the project related to anyone significant? Are there any known names who are advisors? These are all things you need to know.
Even a quick Google search could reveal some information that turns what may look like gold - into garbage. Ideally, you should read the whitepaper of each project you invest in.
Three Mistake: Selling at Inadequate Times
In contrast to sales at the peak of the pump, sales based on emotions are also common. It's hard, but you have to stay cool when trading - keep your emotions out of trading. Cryptocurrencies fell 50-60% countless times before reaching 200-300% gains.
When the cryptocurrency you own starts to fall in value - before you sell it - re-evaluate your position. If you have invested because you believe in the basics of tokens, there are a few questions you can ask:
• Has any of the fundamentals changed?
• Were there any announcements that would affect the price?
• Have you stopped believing in a long-term vision of the token?
If your answer to all these questions is "no", then think about it. This strategy becomes much easier when you follow the golden rule of cryptocurrency trading: Don't invest more money than you think you will lose.
On the other hand, seeing some good gains can also lead you to a sale. While making a profit is wise, you may want to avoid selling your entire portfolio. Depending on the situation, the cryptocurrency could grow even more. A popular trading strategy is to extract the initial investment while keeping the earnings invested in the currency after obtaining a certain percentage. This reduces the risk of negative impacts, while still giving you the potential for (additional) profit.
Fourth Mistake: Being uninformed
In a market that is changing as fast as the cryptocurrency market, you need to stay up to date with industry news. Without a weekly news check, or even a daily one, the investment tide could turn around, and you won’t even know what happened to you.
The good news is that there are a lot of social networks that make this easier. Telegram, Twitter and Reddit are great resources you can use to stay informed.
I hope these tips will help you! Good luck! I wish everyone a lot of success in cryptocurrency trading!
Greetings from @MarijaJak !
I want you all to get rich