Today we’re going to talk about Most common mistakes in Crypto Trading Part 1. This is Part 1 stay tuned for part 2
If you remember this mantra, it will help you not only understand these crypto trading mistakes but avoid making blunders like all beginners.
Before we dwell deep into this topic, there is one more thing you should know.
If you make a lot of mistakes in a short span (unaware trading), you might never get back to crypto trading again. Fortune has been made in crypto trading and investing, and fortune has been lost.
Those who see this as a mathematical and mindset game, make a fortune. Those who see it otherwise end up losing their hard earned money.
Some of the richest people in the world are hedge fund managers (traders). They got there by following proper trading strategies and minimizing losses.
The easiest way to minimize your losses is by learning crypto trading as a system and from your trading mistakes.
Remember that learning from your mistakes is smartness but learning from others’ mistakes is wisdom.
This is your chance to become wiser and smarter at the same time.
This guide will help you learn and avoid those crypto trading mistakes that many commit, making them never see the trading terminal again.
Common mistakes in Crypto Trading
1. Starting with Real Money Before Paper Trading
Trading is a skill like any other that takes countless hours of practice and patience to master.
It has some ground rules and one of them is using paper trading before you put in the real money. This part is boring for many but it is the most quintessential aspect of trading crypto. Many trading beginners who don’t mind losing money (gambler mindset) end up making real money trade even before mastering skills.
Even if you prepare yourself for two months (or 100 trade) with paper trading, you will not lose anything. You can prepare yourself better for the big game with crypto paper trading before putting in real money.
2. Not Using Stop Loss (Risk Management)
Stop losses are the holy grail of risk management. Stop loss helps you to minimize the losses when your anticipated trade goes south. It does not matter how confident you are about a trade going right, not using a stop loss is the biggest egoistic mistake you could ever make.
Almost all the best crypto exchanges offer this feature to set a stop loss of which some offer a trailing stop loss feature. If you have never used stop loss before or skipped them in your trades, you must start adding it. Using stop loss with every trade you make helps you avoid the mistake crypto traders make.
3. Paying High Brokerage Fees
Brokerage fees (high trading fees) can eat a significant portion of your trading profits. The key here is to use a broker (exchange) that offers low fees trading and has high volume and liquidity.
This way you will end up making more money from trading.
4. Not Seeing Profit/loss as a Percentage
This is another classic mistake beginner traders make.
They often see their profit and loss as an absolute gain rather than seeing it as % gain or loss. Make a habit of seeing every trade of yours as a percentage improvement to have a clear picture of your profit and losses.
5. Not Doing Fundamental Analysis
A lot of beginners start by picking a popular cryptocurrency and start trading in them. There are chances that you will end up making good money for a prolonged time. However, when one fine day the coin dumps like there is no tomorrow, a single big loss would turn your portfolio red for a long period.
The way to avoid this newbie crypto trading mistake is by carrying out a fundamental analysis of the coin that you wish to trade.
6. Trading Based on Pump/Dump Calls
Especially as a beginner, you are better off avoiding such pump and dump schemes.
Such groups are not practical. When thousands of users are acting on the same trading call, the chances of those “Signals” working is bleak to none.
Moreover, the smart money has already moved in or out and now the beginner trader money is at stake.
It may work when the group is small and the owner is a pro-trader with high ethics. Such groups are paid and are usually very small in size (less than 20). Either way, you need to have the basic trading skills to take advantage of such signals.
Like other indicators of technical analysis, use these calls as only an indicator and not an actual trade. The trade situation may change wherein you would end up losing more than gaining.
7. Not Maintaining a Trading Journal
This is perhaps the biggest mistake many beginner crypto traders commit. Writing down why you are taking a trade and analyzing them at a later stage helps you answer the following:
- Why specific trades are giving excellent results?
- Why you are losing some trades?
- Maintaining a trading journal will help you to improve your trading strategy with time.
You can always use excel or a paper journal. It is something that has proven to graduate a beginner to the next level of mastering crypto trading.
