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18 Feb 2020
2 min read

Most Popular Mistakes When Trading Crypto

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Written by OspreyFX News Team

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.

 

High levels of volatility surround the Cryptocurrency sphere every day. However, new aspiring traders join the Crypto community hoping that it will be the answer to their financial concerns. It’s logical to think that an industry that allows traders to make money with just a decent internet connection and low capital, would be getting the attention of young investors. But does it really take just a decent internet connection and some money to start earning profits?

Here are some of the most popular mistakes novice traders make when beginning their Crypto trading journey:

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1) Not practicing their trades before moving on to the real thing.

One very important detail to avoid when starting to trade Cryptocurrencies, is placing a trade before being ready. Every trader that wants to become an expert, should first develop the knowledge and experience required to engage the market. OspreyFX offers all traders the option to first trade with a demo account before trading with real money. A very effective tool for those who want to learn before risking their capital.

2) Trading with emotions instead of reason.

The human mind can be quite an obstacle sometimes. For traders, keeping emotions controlled comes as one of their main responsibilities. It is normal for everyone to see the value of a coin rising abruptly, and then wanting to place a trade just for the fear of missing out (FOMO). But every trader must always keep in mind that prices can go up in a matter of minutes but also suffer a massive drop in the same timeframe. Therefore, it is important to keep emotions balanced, every position opened needs to have reason and a proper analysis behind it. To get a deeper understanding of how emotions can affect trades, click here.

The role emotions play when trading cryptocurrencies are not limited to FOMO only. Every new trader must know that it is normal to experience more losses than profits, which means they shouldn’t get too emotional when suffering a loss. And that takes us to the next common mistake.

3) Averaging down and adding to losing trades.

No trader should add additional value to losing positions. Every trader has beliefs about the price some coins may reach in the future basing their thoughts on events happening around the industry. But every trader, and especially new ones, should always base their decisions on evidence and analysis rather than intuition. This will help them protect their capital.

4) Not setting up a stop-loss order.

One of the main issues, when traders trade emotionally, is denying losses. Every new trader must make peace with the idea of accepting losses and move on to the next trade. A stop-loss order helps traders control their open positions when they’re not online, as many big movements in the market happen during late-night hours. When traders set a stop-loss order they reduce the chances of ruining their account.

There are certainly many mistakes new traders can make when starting to trade cryptocurrencies. The important part is for them to be able to identify where they acted wrong and avoid making the same mistake in the future. With these simple mistakes taken into consideration, every trader can make the beginning of their journey a less turbulent one.

Every mistake to avoid when trading recent events.

The world still suffers from the Coronavirus or Covid-19 outbreak that started in China in 2019. Which caused the global stock markets to plunge thus affecting cryptocurrency exchanges as well.

We already highlighted some of the common mistakes new traders make when beginning their crypto journey. Given the high levels of volatility the market is experiencing due to Covid-19, the focus of this part will go to some of the mistakes many traders make when volatility strikes.

1) Not following news or recent events that affect the market.

The cryptocurrency market is highly speculative and swings to both positive and negative directions. Having knowledge in technical analysis is not enough to become a good trader. It is important to follow the news that surround the industry and events that may suggest a move is coming by staying updated with recent developments.

Every experienced trader first does a research about a coin before investing on it. Furthermore, if there are news or events affecting the Stock Market and fiat currencies, it’s highly probable that cryptos will make a big move.

Which takes us to the next point.

2) Not doing proper research.

A common mistake new traders make is choosing the direction of their investments based on what they read online. Many Social Media influencers promote coins and explain why those will increase in value based only on what they post. This results in new traders seeing their decisions influenced by someone who’s trying to profit from their investment.

Doing proper research becomes vital for every trader’s wallet. As it can detail the development stage of the coin, its price movements and its use cases. Giving the data required to do a proper investment, instead of buying a coin as a result of price movement.

3) Investing everything on a coin.

Even though Bitcoin is considered the “father of all crypto”, it still suffered some dips in price like any other coin. Raising awareness towards the fact that no coin is 100% guaranteed to survive in the long term.

Cryptocurrencies are unpredictable and traders shouldn’t invest all their funds in a single coin. Investing in multiple cryptocurrencies and finding the right entries can help increase profits, but every trader should keep at least some back up funds to be safe regardless of the outcome.

4) Panic selling.

Usually happens after a trader invested in a coin without doing proper research and after facing a huge drop in price.

Some traders forget the levels of volatility the market can face in just minutes, which makes them lose interest in a coin as they think the price will continue falling. Resulting in losing money after placing a sell order.

It is true that cutting losses early minimize risks but selling orders should be placed based on a previous analysis and research, that suggested the price wouldn’t bounce back. The most common crypto mistakes happen when a trader doesn’t plan ahead.

 

*OspreyFX would like to state that traders should research extensively before following any information given hereby. Please read our Risk Disclosure for more information.