The advent of online investment platforms, such as the crypto market, has caused an investment frenzy. Many beginner traders rush to make investments that sometimes lead them to substantial financial losses for avoidable reasons. Well, it could be a simple mistake like the need for an elaborate trading strategy or making too many trades hoping to get huge returns. And perhaps you’ve been scammed, yet you could have avoided this by simply conducting due diligence on particular investments.
This article elaborates on five crypto mistakes to avoid as you strive to earn profit from your cryptocurrency investment portfolio:
- Lack Of Strategy
One of the worst mistakes you can make as a crypto trader is trading without an elaborate plan. You must build one that benefits you from the vast cryptocurrency market. And based on your trading experience, you can choose to be a long-term or a day trader (short-term trader).
Day trading requires a high level of experience and expertise in analyzing charts and predicting the market’s direction. On the other hand, long-term trading doesn’t require a unique understanding of market dynamics. You simply purchase the coin, hold it until its value rises, and sell it.
Remember, an elaborate plan will get you in motion fast and give you an edge over other traders in the market. However, you still need trusted platforms to get reliable news on various coins and where you can trade. This Swyftx review fills you in on the details about one of the top crypto exchanges you may want to try.
- Investing At Once
Some cryptocurrencies, such as bitcoin, are relatively expensive and are subject to semi-regular price swings. And due to this uncertainty, it’s not a good idea to buy many bitcoins at once. Instead, plan to buy them at regular intervals, such as monthly or quarterly. This gradual investment strategy is commonly called dollar cost averaging.
Using dollar cost averaging will help you mitigate the risks related to uncertainty in the cryptocurrency market. For example, if you have USD$20,000 to invest in crypto, buying coins worth USD$2,000 or USD$4,000 (whichever figure you choose) each month is prudent. Spreading your capital will help you balance dips and even out price fluctuations rather than making a lumpsum purchase, where you risk running into huge losses in case of an immediate drop.
- Too Many Trades
As a beginner, you may attempt to swing impulsively from one trade to another. New traders tend to hold one coin, sell it for another cryptocurrency, hoping it gains value, and then sell it for a third one, and the trend continues to a couple of non-profitable trades. And before you realize it, you’ve lost too much that’ll take a long time to recover. This impulsive panic-driven trading is often a result of the fear of missing out (FOMO) on a trade or social media buzz.
It’s never a guarantee that taking many trades will lead to more profits, but it’s a guarantee that such trades will incur huge transactional costs. These transactional costs, combined with the trades closed at a loss, are a fresh recipe for failure.
To avoid such disappointments, it’s essential to identify fundamentally stable coins, stick with them, and avoid skipping from one cryptocurrency to another. Remember, the crypto market is still young, so cryptos modestly rising now may gain value in years to come—provided they’re fundamentally stable.
- Poor Safety Measures
Most cryptos are built on blockchain technology, which provides the required encryption for their safety. However, this doesn’t protect them from hacking or theft. To protect your investments, you must keep your passwords and codes private. Any unauthorized access can lead to significant losses. Use a digital wallet from a trustworthy company to store your coins. Before using it, don’t forget to examine its reputation, performance, credibility, and features.
- Falling Prey To Scams
The Internet is famous for its numerous money-making possibilities, fraud, and hacking. However, many people have experienced the fraudulent side of the Internet more than the money-making side. As a result, since its inception, the crypto market has been labeled a scam.
Beware of scams camouflaging as cryptocurrency investment opportunities. Scammers have upped their game; they’ll flood your email with lucrative offers that seem real, hoping to take advantage of you. A simple click on your email could lead to the loss of critical information regarding your investment portfolio. So, before you proceed to register for that lucrative deal, please conduct some due diligence—ask your friends, get more information about the company, and don’t forget to trust your instincts.
Making profits as a beginner cryptocurrency trader can be challenging, especially if you have no trading background. And since day trading requires experience, the simplest route is to buy a fundamentally stable coin and hold until you’re comfortable with the returns. Moreover, avoiding the mistakes outlined in this article will help you enjoy profits from your crypto investments.