When it comes to Crypto trading, due to the non-stop, rapidly changing process of trading you might fall in the hole of unwanted mistakes. the solution can be knowing them completely and choose the better road of trading to go further. in order to do so, here are 8 common mistakes that any crypto traders must avoid them.
1. They Oversize Their Positions
One reason why people feel the need to check their cryptocurrency investment so often is because they have put a huge portion of their net worth into the investment. If you only put a small fraction of your net worth in, you won’t feel stressed out by losing the money if the trade doesn’t work out. Sizing appropriately will take a lot of emotion out of your trading.
2. They Use Wrong Tools
Some of cryptocurrency products end up limiting one’s ability to day trade effectively.
Wallets are a good example of this. Many cryptocurrency storage solutions are designed with maximum security in mind; but these aren’t meant to be used with day trading which means that the amount of time it takes to sign and confirm transactions from wallets can delay trades that you’re trying to perfectly time. Instead, Keep the cryptocurrency that you use for day-trading on the exchange where you’re doing the day trading. Look for security tools that are appropriate for day trading.
3. They Have No Risk Management
one of the Common Mistakes of Crypto Traders is having no risk management. All traders should be familiar with the concept of risk management. If you don’t have any risk management strategy, then you’re bound for an extremely high risk and a very low probability of success. You get the idea. No one knows if any given trade will be a winner, so you have to prepare for every trade you take to be a loser, and have a plan. If you don’t prepare for a trade going against you, you risk losing a huge portion of your account in one trading day.
4. They Do Not Have Basic Knowledge of TA
Cryptocurrency trading is almost entirely dictated by technical analysis. Trading cryptocurrencies without understanding where support and resistance on the charts are is like trading blind. Every trader should at least have a very basic knowledge of technical analysis. In this case the Internet is a goldmine of countless resources for TA.
TA is not a recipe for success but certainly helps against potential disasters.
5. traders Overtrade
Another Common Mistakes of Crypto Traders is overtrading. Internet talks + FOMO + no risk management = overtrading. And also fear + greed = overtrading. New traders will jump in and out of their positions, taking losses and losing count of their moves to jump on the next big thing.
You will drain your assets by overtrading so quickly. If you find yourself in such position, just step back and take a break for a while. If you’re trading randomly, you will likely end up overtrading. Remember to have a precise strategy and set goals.
6. They Enter a Position They Can Not Exit
Sometimes, it can be easier to enter a position than exit that position. Certain exchanges are fairly illiquid which means they don’t have enough purchase orders to support easily selling off your cryptocurrency at a good price at any given time. At other times, exchanges that usually have healthy liquidity might have really low trading volume — for instance, if you’re trading on a holiday or weekend. If you’re stuck in an illiquid position, you might end up missing a great opportunity for profit-taking, forcing you to stay in a position for longer than you want. Instead, you could try to avoid times where you know there’ll be relatively less liquidity in crypto by closing out all of your positions every night and over the weekend.
7. traders Follow Others’ Trades
You can’t simply rely on people’s trades in the long run. You don’t know what their trading plan or risk tolerance is when they call out their entry. They might be just scalping it, doing a multi-day hold, or day trading it. You better be using other traders’ alerts as trade ideas, and not an immediate buy signal. See if their trade fits your game plan instead of just immediately skipping in.
8. Crypto Traders Trade On FOMO and FUD
Trading based on your emotions rather than analysis, chances are good that you’ll lose your money sooner than your imagination. And if you’re not careful, news cycles and forums will cloud out everything except your emotions. You can develop your own day trading strategy with indicators and rules that you understand and hold yourself to. Then read the news, but read it with a grain of salt — and try not to make trading decisions based on rumors that might be debunked the very next day. Do not buy just because you see the price rise and fear missing out. Look at your performance and gather data on which rules are making money and which are losing money. It is highly recommended to revise the rules that already led you lose money. Updating your rules in a results-driven way may help keep you disciplined and resistant to FOMO and FUD.
Hope you enjoyed!