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impatience
Lack of awareness of the risks
Sell low and buy high
Not securing open positions
Stop learning and awareness of the latest developments in the cryptocurrency market
Ignore important events and news
Emotional Interventions with Cryptocurrencies
Blind trust in analytics and seeking recommendations
Not diversifying investments into different cryptocurrencies
Negative psychological impact
Mistake 1: Impatience
This is one of the hardest mistakes to avoid. The cryptocurrency market is very volatile, and it is very difficult to predict the direction the market will take, so you should not give in to your impulses and desire to trade, trading is not a game. If you are not an experienced trader, it will be difficult for you to be patient, however, those who are patient are the ones who will be rewarded in the long run.
Impatience makes you make rash decisions, may break your strategy, but worst of all it can make you fear missing out.
Mistake 2: Not realizing the risks
Since the volatility of cryptocurrencies is much higher than in the stock market, the potential gains and losses are also greater. So you should have good risk management. So when investing in this market, you should always keep in mind that it is possible to lose all your money.
The cryptocurrency market is not yet regulated, and the values are purely speculative. Most reckless investors resort to bank loans of several thousand dollars to get more cryptocurrencies and expand their portfolio, so the risk here is very high, especially if these investors are inexperienced.
What we recommend here is to avoid getting into debt and maintain your normal life style. Cryptocurrencies should not become a risky bet on your financial capabilities.
Mistake 3: Selling at the Lowest Level and Buying at the Highest Prices
Since the crypto market is very volatile, as we mentioned at the beginning of the article, large price fluctuations are common. If you get scared of the slightest drop, you will lose money. If you decide to sell in panic or what is abbreviated as “FUD” (an abbreviation for fear, uncertainty, and doubt) and despite its simplicity, it is a common mistake. In this case, the mistake is to enter the market without doing the necessary research.
Then, in the face of a sudden drop or bad news about the cryptocurrencies you want to invest in, you hastily sell your positions in an attempt to minimize losses.
The problem with this approach is that once you sell, you are making your losses real. While it makes sense to minimize your capital losses in some cases (such as triggering a stop loss), here it would be an unreasonable decision. The crypto market is known to be a long-term bull market so acting and selling at the first dip is a bad move. The same can be said when the same people see a rise, buy back at higher prices, and repeat the cycle.
As for those who buy at the peaks, they feel the fear of missing out, or what is known as the "FOMO" feeling. Once they buy and a short period of time passes, the price begins to fall and fall until it reaches the lowest price. Here, the feelings turn to anxiety and fear, which leads them to sell at the decline, which means a real loss.
Mistake 4: Not securing open positions
Stop loss is very popular in the cryptocurrency trading market and other financial markets in general. Unfortunately, many traders and investors overlook it and do not realize its importance until it is too late.
Stop loss is very important for preserving capital. This possibility, which is provided by many trading platforms, translates into "protection" and automatically applies sell orders. Since you set a limit at which you want to place the sell order if the currency price declines.
Often placed at support levels or at certain bounces, placing a stop loss in particular will allow you to:
Save money.
Prevent a bad situation from getting worse.
Guaranteed profits.
Mistake 5: Stopping learning and awareness of the cryptocurrency market
Everything that directly or indirectly touches blockchain and cryptocurrencies is evolving at an incredible speed. Between ICOs, changing regulations, or important team announcements in such a young and dynamic market. It is therefore essential to stay informed, to improve your basic knowledge about blockchain and cryptocurrencies in general (see our guide to cryptocurrencies) and to know the project you are investing in.
Fundamental analysis and increasing knowledge are as important as technical analysis. It helps to base your trading on proven facts and not just rely on numbers and predictions.
What we would like to say is that it is also necessary to deepen your education in technical analysis in order to take a deeper look. The bottom line is that knowledge is power.
You can always follow the latest developments in the cryptocurrency market.
Mistake 6: Ignoring important events and news
If you have been in the crypto market for some time, you have surely come across a piece of advice and a saying that goes: buy the rumor, sell the news.
To illustrate what this means, we give the following example:
There have been many rumors about Coinbase planning to list the BAT cryptocurrency. The price of the coin rose significantly at the time of the rumors and then collapsed after the news was confirmed. Listing cryptocurrencies on platforms like Coinbase and Binance is very encouraging and motivating news. But often it does not go without obstacles and without pumping and dumping.
Therefore, we recommend the first step, which is to buy the rumor. Usually, there is a rumor spreading on forums and social networks about a possible listing of a cryptocurrency on a major exchange. Nothing has been formalized, but investors and traders are starting to stock up on this cryptocurrency. A certain “hype” is created and the bull run continues for several days or even weeks. And it goes on without any known details.
The second step is to sell the news:
When the listing is officially announced, the exchange sends out a public press release. Sometimes the price rises with the announcement and sometimes it starts to fall as traders start selling what they had previously bought during the rumor period.
Of course, cryptocurrency prices are also affected by the possibility of delisting from a well-known exchange, attacks or hacks of a blockchain, team fraud, or miner hesitation during a hard fork.
Mistake #7: Emotional involvement with cryptocurrencies
Some traders and investors fall victim to their cryptocurrency love affair, and this is not a joke, it is very serious. The trader is attached to his cryptocurrency, and despite achieving a certain profit and the time comes to reap the fruits of the profits, these emotional people cling to the currency and do not give it up easily and see it as an integral part of their portfolio.
But this position is dangerous. The reason is simple: it lacks objectivity.
In fact, it will be much more difficult to exit the trade and sell at a loss. Sometimes you will have to put your emotions aside in order to keep your portfolio in the green.
Mistake 8: Blindly trusting analysis and looking for recommendations
You should always do your own research, or DYOR, which simply means that you should verify the validity of the investment and entry advice, which can be found on any social network. So you should always ask yourself how much you know about the project yourself. It is actually better if your choice of investment is primarily your own initiative. Therefore, we advise you to avoid blindly following speculations published here and there.
Newcomers often rely on the advice of others with more experience, and that's okay. But investing is a personal and important decision.
Here is a list of some things to consider before engaging in any social media trading:
Refer to various forums, public Telegram and Discord groups, Medium, etc., in order to get a general idea of how other traders view the currency.
Read the project white paper.
Does this project meet a need? Is having a cryptocurrency necessary?
How does this project stand out from others? What is its strength compared to its competitors?
What trading platforms offer trading this currency?
Is the team still active on social media? Are they following the roadmap that was laid out in advance? Is the professional history of the project members sufficiently concrete and tangible?
Keep in mind that knowledge is power as we mentioned earlier. So invest your time in your own research first before investing your money in it. In the long run, you will be more experienced and successful.
Mistake 9: Not diversifying investments into different cryptocurrencies
Whether you are an investor or a day trader, you cannot put all your money into one asset. Even the most active and risky cryptocurrencies can suffer a significant decline.
It is important to invest in many different cryptocurrencies to reduce the risks. It is also necessary to explore other ways and new markets to avoid some of the hassles in the crypto market and also go for the stock market, real estate, gold, etc.
Diversification and risk management are key to a strong portfolio, so finding good entry points in multiple cryptocurrencies will increase your chances of making profits.
Mistake 10: Negative psychological impact
Emotion is an unwanted friend in trading. It is easy to let greed, fear, hope or excitement get in the way or get in the way. There are many situations that will give you different emotions and it is up to you to decide how you will handle them.
When you make a bad trade, the negativity surrounding that outcome can carry over into the next trade. There may be times when you don't take a position on a new trade for fear of losing again.
On the contrary, when you make a series of winning trades, you will feel invincible and may enter the market at a disadvantage. So, managing emotions is the main key that can make the difference between a good trader and a bad trader.
Another example is that boredom can easily cloud your judgment and cause you to start a new position when you shouldn’t. So before buying or selling your assets, it’s always helpful to ask yourself why you’re taking the action you’re about to take.
We conclude these mistakes with a piece of advice that you should always strive to achieve, which is to be the best trader by increasing your portfolio profits and making them outweigh your losses.
