The crypto investing market is full of risks. Even when you are 100% correct and are making zero mistakes, there is no guarantee that your crypto investments will end up in a profit. But, yes, making fewer mistakes is a certain way to increase your chances of making a good profit from cryptocurrencies.
So, what kind of mistakes are we talking about?
Well, there are a number of things that can go wrong when dealing with cryptocurrencies. Since the market is always volatile, it is possible to make a lot of decisions based on emotions. But, at the same time, many of these mistakes are avoidable, only if you knew about them in advance.
So, let’s talk about some of the common mistakes people make when trading cryptocurrencies.
#1 Buying a Crypto You Know Nothing About
One of the most common mistakes that people, especially beginners, make in the crypto market is investing based on hype. It is VERY important to research a token before you invest in it. Why? Because the market is still new for us. Moreover, every person has a different risk level, and just because others are investing in a coin doesn’t mean you should too. Do your research and invest in a good coin based on your risk level.
For instance, not everyone can take the volatility of bitcoin. They should rather invest in less-volatile cryptocurrencies such as the Libra coin.
#2 Investing Aimlessly
Most of the crypto investors, almost 80%, have no long-term goals behind investing. They do so only to earn profits. This is NOT a good investment strategy in any market. Having definite, long-term goals will help you avoid making decisions based on emotions. For example, many investors start selling when the market is falling and buy when it’s rising because they make decisions out of fear and not based on goals.
#3 Not Diversifying
Diversification is one of the best ways to limit your investing risk. It means spreading out your investment across multiple tokens that you believe in. This helps reduce risk by ensuring not all your investment is lost even when one or two coins are falling significantly. At the same time, it is crucial to not over-diversify.
#4 Running after the price
Waiting for the right time or to drop the price of a cryptocurrency is another mistake many people make when trading crypto. There is no right time when it comes to investing. If you believe in and want to invest in a coin, the right time is now. However, try to avoid investing when a coin is at an all-time high.
#5 Not tracking their crypto portfolio
Though it is said that one should leave their investments alone for at least a couple of years, this may not be 100% true in the crypto market. Since the industry is very volatile, you may never know when a coin will fall significantly. And it is only by diligently tracking your portfolio, you can identify and correct any mistakes you may have made in selecting a coin.
#6 Not using stop-loss
Stop-loss is a blessing for crypto traders. This helps ensure you do not incur a loss after a certain limit. By using the stop-loss limit option provided by your exchange, you can limit your losses when day trading cryptocurrencies.
#7 Investing more than they can afford to lose
Though this mistake is common in all market segments, investors in the crypto space are particularly seen investing money that they don’t own or cannot afford to lose. Often driven by sentiments, people end up investing loaned money in the crypto market and regret losing it.
Be careful and vigilant to not waste your hard-earned money on cryptocurrencies that you do not understand. Do your due diligence and invest carefully to make profits in this market.
Originally published at www.medium.com