There is a lot of money to be made in cryptocurrency trading. Due to the massive gains the market has to offer, a large number of investors and traders have moved to this market. This is one of the primary reasons why the crypto market reached the $1 trillion mark. While there has been an influx of traders and investors, not all of them are making a profit. Yes, someone has to lose for someone else to win, but there are people who are consistently making losses. Unfortunately, this is a result of some things that can simply be avoided.
What are the things that need to be avoided in cryptocurrency trading? The top 10 are highlighted below:
1. Sell at the bottom and buy at the top
The cryptocurrency market changes frequently and it is quite easy to manipulate these cryptocurrencies. Therefore, there are regular price swings, but the problem is that investors often get caught up in these movements, which can cause them to lose money. Panic selling is very common, especially amongst new traders because they come into the cryptocurrency market without any prior research and then have to deal with very sharp drops.
Why is this a problem? Put simply, once you have placed a sell order, you will end up losing your money quickly. In some cases, it is wise to sell for cutting your losses, but most cryptocurrencies just spike again in a couple of days, if not hours. When these traders see a spike, they will then buy back the cryptocurrency at a higher price, which means the cycle repeats over and over again. It is best to avoid this practice because you will only lose your funds.
2. Favoring a particular coin
It is simply not possible for just one cryptocurrency to continue rising forever, even if it is Bitcoin. There are going to be some good days and some bad days that can extend to months and then there are also some terrible days. The cryptocurrency market is constantly evolving and new opportunities come up on a regular basis. If you believe in a specific cryptocurrency, there is no harm in holding onto it for long-term profits, but you should bear in mind that if you intend to make quick money via trading, it is best to avoid becoming emotionally attached to a coin.
For instance, if you like Bitcoin and there is a price drop from $20,000 to $10,000, However, there were numerous traders who sold it when it was between the range of $10,000 and $20,000, bought it back at a lower price between $6,500 and $10,000 thereby guaranteeing themselves profits in BTC. Furthermore, experts like Guy Galboiz state that if there is a spike in a coin’s price due to a significant announcement, it can be immensely easy to double or even triple your investment.
3. Going for the cheaper option
Just because a coin’s price is less than $1 doesn’t mean that it is the best time to buy that cryptocurrency. Even though it is true that it wouldn’t take long for a coin to go from $0.05 to $0.20, but it could also drop and this could lead to a major loss. The important thing to remember is not to purchase a cryptocurrency just because it is cheap as this doesn’t guarantee any profits. You need to find out why the coin is cheap and then do some research to see if there are any developments expected that might boost its price.
4. Waiting for the next big cryptocurrency to hit the market
In 2017, Bitcoin experienced a sharp rise in its price, which was undeniably impressive. Similarly, other cryptocurrencies like Ethereum and Litecoin have also undergone massive gains. Nonetheless, this doesn’t mean that every cryptocurrency that will be introduced is going to record such profits. As a result of abundant supply and a number of other factors, some cryptocurrencies are regulated to specific prices such as Ripple. Thus, it is not a good idea for any trader to invest in these cryptocurrencies and then expect to make a 200% gain.
As per Guy Galboiz and other professionals, it is vital to have a deep understanding of every cryptocurrency you are trading. This doesn’t just include its price history, but also refers to future projections. Knowing all this can give you better insight into planning and implementing your trades.
5. Not following current events in the crypto space
If you want to be successful in the cryptocurrency market, you should know that technical analysis is never going to be enough. It is essential for every trader to follow cryptocurrency news and stay updated regarding the latest developments and news. The cryptocurrency market is a volatile and speculative market and can swing to both positive and negative events. For those who want to be successful traders, it is necessary to stay informed. These days, there are a ton of websites where you can find the latest news instantly and make your decisions accordingly.
6. Investing everything you have all at once
This is a very expensive mistake and one that all newbies need to avoid unless they want to lose everything. It is not wise to invest everything you have on just one cryptocurrency. If you have found the best spot for purchasing the cryptocurrency of your choice, you should only use 50 percent of your investment to do so and hold the rest to see if the coin drops or increases after your purchase. If there is a dip, you will be able to buy more with the remaining money. But, if there is a constant increase in price, you can always opt for more buy orders as the market continues to move upwards. In this way, you can secure your trade and prevent yourself from investing everything in a single position and then watching it go in the opposite direction.
7. Not doing research and falling for every crypto endorsement
It is a common practice for every new trader or investor to join a cryptocurrency group and follow influencers such as Guy Galboiz on social media. There is absolutely nothing wrong in doing so and is actually a good thing. But, you should never just follow anyone’s advice or recommendation blindly. You will come across tons of people who are going to promote one cryptocurrency or another as well as market moves for their own personal gain. If you just listen to people and put in your money, there is a good chance that you will lose a lot of money.
This is mostly because of these people are paid promoters who are just focused on creating unnecessary hype to get more and more traders to buy what they are selling. Before you invest in the cryptocurrency market, it is crucial to conduct proper research. Understand a cryptocurrency’s use, price movements and its development stage. It is disastrous to invest in a cryptocurrency only due to its price movements.
8. Putting everything you have on one coin
Even the top cryptocurrencies are known to experience dips whereas others might stay green. As mentioned before, the market is highly volatile and no cryptocurrency is guaranteed to last in the long term, not even Bitcoin. Whether you are a day trader or a long-term investor, it is not a good idea to put all you have in one cryptocurrency. The key to trading successfully is investing in several cryptocurrencies. You will increase your profits when you find good entries in a diverse range of coins.
9. Not knowing when to leave
Once you have bought a cryptocurrency at a reasonable price and made some profit, the question is what to do next. Newbies usually don’t have points at which they can take profits from the market. They continue holding as the market moves due to which they lose all gains they have made. Then, they stay in the market until reaching break-even. This is a good plan when you are a long-term investor, but day traders have to sell at one point in order to make a profit. Even when the price is going upwards, it is best to sell in stages and not all at once. This gives you instant profits and also allows you to benefit from higher prices.
10. Not understanding basic technical analysis
A lot of traders believe that understanding technical analysis is quite difficult. There are certain patterns you can see in crypto prices and market movements and when they are identified, they can boost your chances of making successful trades. Bear in mind that there are no guarantees due to the highly speculative nature of cryptocurrencies and since the market is emotion-driven, charts may not always work. But, anyone who is serious about trading in the crypto space should know how to use them.
According to Guy Galboiz and other skilled crypto investors, if you avoid these steps, you will be able to increase your chances of succeeding in this market.