Unfortunately, crypto trades are just as good at spitting new investors out of the fold, and they typically lead to heavy losses when they do. That’s because crypto remains the most volatile trade on the table, never mind its promise of high returns or new horizons.
You’re especially liable to get burned if you jump in and get started without doing your due diligence. Such a mistake could easily lead to the following potentially catastrophic mistakes that are all too easy to make in your early crypto trades.
Mistake # 1 – Rushing in Without Doing Your Research
While it’s great to get excited about cryptocurrency, rushing into a trade without doing any research whatsoever is guaranteed to get you into trouble. This is especially true considering how tricky crypto can be to understand for a total newbie: it’s all too easy to sign up for something you simply can’t even begin to understand.
That’s why experts consistently highlight the need to do ample research long before you consider putting a trade on the table. As well as needing to know what’s what and who’s who in the crypto world, you’ll want to gain an understanding of everything from market research to trade transaction ledgers. You’ll also want to take the time to deep-dive into the community in question, to ensure that the right support, security, and standing are all in your trade corner.
Luckily, all of this information is easily available if you know where to look for it. This is especially true when it comes to trade and transaction history, which are right there for everyone to see on the blockchain, and are easily searchable if you use a block explorer-as-a-service as offered by companies like Blockscout. You should also delve into crypto white papers, social sentiment, and market metrics before making any investment decisions.
Mistake # 2 – Losing Any Sense of Strategy
Leaping into any trade without a strategy is bad for business, but it’s especially problematic for volatile markets like cryptocurrency. In fact, leaping in without a plan drastically increases risks like overtrading, missed opportunities, and, of course, inevitable losses.
To avoid all of that, you need to have a strategy from the get-go. In a lot of ways, this is the map that’s going to uncover your crypto treasure, and it ensures you never act too quickly or spend too much. Luckily, while there are more complex trading strategies to consider later in your journey, there are also great options for beginners, and they tend to hinge on simple concepts like trade analysis, risk management, and just basic self-discipline.
In other words, you need to research, set clear price points, and always keep the bigger investment picture in mind. This is true even if a tempting-looking trade tries to lure you outside of those boundaries. Leave the risks to the wolves of Wall Street; you’re here to ensure returns.
Mistake # 3 – Letting Your Heart Lead
You might not think you would be an emotional trader, but it’s surprisingly easy to fall into this trap. After all, cryptocurrency trading is as exciting as it can be stressful, and it’s all too easy to get swept up in that. This can lead to what’s known as ‘emotional trading’, where you begin making impulsive decisions that entirely throw the rulebook out of the window. And that way is sure to lead to the most notable losses you’ll suffer.
Emotional trading is especially liable during market dips and rises, yet these are pretty much part and parcel of crypto life. If you panic and sell your stocks as soon as a market starts to dip, then you’re sure to settle for a loss, while also facing higher repurchase prices when you reinvest. Equally, buying in a market on the rise has the potential to impact trade profitability if you jump in at the wrong time.
Hence, it’s crucial to lean into strategy and research far more than you should factor for any emotional trade elements. This is the only way to stick within reasonable trade limits, make wise choices, and avoid the inevitable fall that’ll come from letting your heart lead.
Mistake # 4 – Falling into the Fraud Vacuum
The safety of cryptocurrency is one of its most lauded benefits, but that isn’t to say that you don’t still need to consider security elements during a trade of this nature. That’s because crypto scams are alive and well, especially in the trading world. From old hats like Ponzi schemes to trades that simply seem too good to be true, you’re sure to face it all when you get started. And, if that happens, you really will lose everything you put in. Luckily, the transparency possible with this currency means there’s no reason why you need to let that happen.
Securing your crypto assets is key to your success in this market, and it’s easier than you might think. Basic scam avoidance rules apply, including the need to thoroughly research every trade market, especially those that promise high returns. Equally, you’ll want to implement security steps like two-factor authentication and secure passwords on your crypto wallet, which scammers won’t be able to access without that information. It’s also worth simply using the block explorers mentioned, as these can help to highlight suspicious transaction activity, which can serve as an immediate red flag.
Takeaway
Whether you’re a novice trader or you’re simply tempted by the allure of a different kind of investment, cryptocurrency holds an undeniable appeal. Yet, its promise can quickly become painful if you don’t tread carefully. As these mistakes reveal, cryptocurrency’s volatile reputation certainly isn’t unfounded. The best way to avoid losses is to step around these mistakes long before you ever consider making a trade.
This is a contributed post