With multiple stories of people finding success in the crypto trading market, it is easy to see why many traders—both new and experienced—are becoming more interested in cryptocurrency. However, many newcomers eventually realize that trading in crypto is a lot more difficult than expected. It mixes all the complicated aspects of finance along with the equally complex nature of computers. To get to the top, it is critical to, at the very least, have a good understanding of what crypto is and how to trade in it.
As of now, the crypto market is exceedingly volatile. Prices go up and down all the time, with exchange platforms emitting a flurry of green and red lights from one moment to another. It is not a welcoming place for rookies. Fortunately, newbie investors can learn from the mistakes of older traders and mitigate the risks associated with the Wild West of crypto.
To elaborate further, here are some of the trading traps that you—whether experienced or not—should watch out for.
Lack of Proper Security
Some traders are so focused on trading that they forget about security. In the realm of crypto, where everything is found online, this is a dangerous mistake. Cyberattacks could result in account hacking, stolen assets, or even hostage accounts if people are not careful.
Hence, you must always keep your passwords, private keys, and seed phrases safe. Keep these tips in mind to ensure account security:
- Do not store the passwords to your XMR wallet or other crypto wallets online. Write it down on a piece of paper and store it somewhere safe.
- Be careful in choosing a crypto-exchange platform. Make sure they offer two-factor authentication for extra protection.
- Beware of fake profiles, scammers, and other shady deals. If it sounds too good to be true, it most likely is.
Moreover, make sure to keep your mobile devices safe. After all, they are your access to your trading account, so guard them properly.
Not Having a Plan Nor Long-term Goal
Like any other venture, it is vital to have a plan before entering the crypto space. The chaotic trading landscape will be difficult to traverse without a clear goal to aim for. Thus, make sure to have a detailed, actionable list of goals first before even setting your sights on a particular coin. Look at the stories and plans of other more experienced traders for guidance. In this way, you will not be easily swayed by trends and other market sentiments and have a more practical approach in reaching your financial objectives.
Investing in Any Crypto
There are thousands of cryptocurrencies in the market, and hundreds more are being developed each day. Inevitably, not all of them make it, so you have to be smart when choosing which coins to buy. Heed the following tips during the selection process:
- Choose crypto that offers something unique or improves upon an already existing technology. Monero, for example, offers complete anonymity to users, allowing greater online privacy.
- Check the market cap, trade volume, coin background, and project backing.
- Be careful of low bargains. A cheap coin is cheap for a reason.
You can also consult with other traders and listen to experts, but take everything with a grain of salt. Do not be afraid to turn down opportunities because, in the end, not all of them are worth purchasing.
In the ever-changing market of cryptocurrency, emotions can run high. It is easy to buy into the hype of a new coin or get intimidated into selling when the coin price dips. Bear in mind that, in the crypto market, volatility is the norm, and price swings are expected. Understanding this fact will help you keep your cool and take a step back from all the debates, discussions, and hype. As such, you can consider matters more carefully and take the step which fits your needs best.
Investing in Only One or Too Many Cryptocurrencies
Diversification is crucial to any trading portfolio. It ensures that even if one asset tanks, you have other investments to rely on. Putting all of your eggs in one basket puts your portfolio in a lot of risk, so you need to look into other potential assets to invest in as well.
On the other hand, spreading yourself too thin will make it difficult to keep track of them properly. You could overlook windows of opportunity and even lose money when juggling too many assets. Simply put, do not take on more than you can handle.
Investing More Than You are Willing To Lose
With all things said, the golden rule is this: do not invest more than what you are willing to lose. Many rookie traders take the gamble of putting too much money in a cryptocurrency, thinking they would strike gold and lose everything in the end instead. Experts suggest investing no more than five percent of your overall portfolio to crypto, which ensures that you have a stable fallback plan.
Overall, there is no single way to become successful in crypto trading, but there are common mistakes that you can avoid to increase your chances of success. Make sure to keep an eye out for these traps as you venture into the crazy and exciting world of cryptocurrency.
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