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Home Trading Mistakes of beginner traders. Tips for trading cryptocurrency

Mistakes of beginner traders. Tips for trading cryptocurrency

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Investing all funds at the first deposit

In the era of the mining frenzy and skyrocketing prices of cryptocurrencies, newcomers, like meteors, are eager to fly into the world of earning money, throwing their last funds on coins like gifts from heaven. At the same time, they feel that important elements of trading can be put aside as unnecessary problems. Money management? Many people do not even know what competent money management is, let alone manage it.

There is always an incredible risk lurking on the stock exchange floor, like a sinister spirit ready to shower losses on all those who do not keep vigilance. For newcomers, this risk, like a shadow, becomes longer and more intimidating.

So, a word of advice: invest in cryptocurrency only the portion of money you are willing to sacrifice on the altar of financial opportunity. Deposit only 10 to 40% of the money you hold in your hands. Let the investment be an adventure, but not a plunge into a bottomless abyss of uncertainty.

Use of such a function as stop-loss

Put orders to sell, anticipating the possible rise in price, so that the order itself automatically triggered when reaching a certain level. In the case of acquiring a certain number of coins and persistently holding them “to fall” even in an uptrend, there is a real threat of missing the moment of sharp decline, which will instantly lead to financial losses.

It is also important to set a stop-loss order to minimize potential losses. Contrary to the temptation to close losing trades instantly, sometimes it makes sense to wait until the currency rate starts to rise again. Only at that moment there is an opportunity to recover losses.

Investing in a small number of coins

Placing the entire available amount in a single asset is an extremely risky step. To achieve diversification in investments, it is necessary to create a cryptocurrency portfolio, spreading your capital between different electronic coins.

This approach will provide the opportunity to compensate for losses on one asset at the expense of profits from others. It is recommended to make a list of the most promising cryptocurrencies and suitable for your portfolio in advance. Depending on your assessment of each coin’s potential, allocate funds in your portfolio.

To maintain balance, regularly reallocate funds in the portfolio, add new assets and get rid of low-performing ones. This systematic strategy will help manage risk and maximize potential returns.

Buying at the top of the rise (growth)

The volatility of some cryptocurrencies can be impressive, and many traders, including sophisticated ones, succumb to rash decisions, giving in to emotions like greed, fear and panic. These feelings are often the main initiators of losses in the world of investing.

When the price of a certain cryptocurrency rises, traders feel like they might miss their chance to profit, which leads to massive buying. This is where, in most cases, a deep market correction occurs, bringing with it significant losses for those who made trades at the top of the upswing.

Follow the news in the world of cryptocurrencies

The rate of cryptocurrencies can be influenced by the news background. Many people forget to follow the news, the different events that are happening in the world, what new technologies and updates are being implemented in blockchains, how many companies are joining projects….

Often traders use only technical analysis of charts, neglecting to search for information on the web. It is necessary to develop the habit of following the latest news, monitoring thematic portals, subscribing to channels and publishers about mining and cryptocurrencies.

Trading strategy

A very large percentage of players on the stock exchanges trade situationally, they do not have a well-thought-out strategy, only various infoprovods and triggers from the appearance of candles on the charts.

It is best to think about and write down your own trading rules in advance.

You should determine exactly with what volume of funds you will enter trading at this or that market situation. And of course, to fix profit with loss, as we mentioned earlier in the article.

Buying unstable or young cryptocurrencies

When creating a cryptocurrency investment portfolio, it should be taken into account that the share of poorly capitalized and unstable coins should not exceed 20% of the total deposit amount.

Although such cryptocurrencies can sometimes provide good returns, working with them carries a high risk. Holding them in the portfolio for long periods of time can lead to significant financial risks and losses. Therefore, it is important to strike a balance and limit the proportion of less stable assets to ensure the sustainability of the investment.

Premature loss recognition

If you opened a trade and the cryptocurrency rate started to decline, do not rush to close the order. Many beginners do not fully understand the price dynamics and tend to hastily close losing orders, which eventually leads to negative loss statistics.

The cryptocurrency exchange rate is constantly subject to fluctuations, and most of the time moves in a sideways trend, within the same range.

You should not rush to close the trade, as it is likely that the cryptocurrency exchange rate is just temporarily fluctuating before the upcoming growth. Wait out the temporary drop and analyze the market situation more closely.

Ambition

One of the most common misconceptions is inflated expectations, especially among beginners, who often assume that they will start earning large sums immediately after they start trading cryptocurrency.

The reality is that few people immediately achieve stable profits in the first few months of trading on the exchange. Success in this field depends primarily on the experience gained, which comes with persistence, perseverance and patience. It is important to accept failure as part of the learning process and constantly evolve to achieve success in trading and accurate forecasting after analyzing the market.

Trading bots for stock exchanges

The web is full of offers to use trading bots on exchanges, and most of them are fraudulent schemes or malware. Risks include the possibility of virus infection, leakage of your data, or even loss of deposit due to fraud.

You should be especially cautious when considering both paid and free trading bot offers. Interfering with such programs without proper understanding and supervision can lead to serious consequences.

If you have programming skills, creating your own trading bot with programmer friends and developing an economic trading model is a safer and more controlled approach. However, even then, it is important to conduct a thorough risk analysis and take precautions.

Safety

First of all, you should always check this or that exchange for its quality. Of course, it is better to trade on trusted exchanges such as Binance or MEXC, especially if you make a cryptocurrency portfolio for the long term.

Be sure to connect two-factor authentication. If possible, check if the resource uses SSL-certificate in its connection.

Protect all your mailboxes so that you have to enter a code from SMS for authorization. Use the standard Defender in Windows, and on other operating systems install popular antivirus programs that scan your device for malware or vulnerabilities in real time.

Don’t share your personal information online without a reason. Think twice before confirming your identity on dubious services.

Storing profits on the stock exchange

When you make a significant profit from trading, it is important to consider withdrawing that amount immediately, leaving only the amount of funds that are actively involved in your current assets.

This approach provides financial security by preventing potential losses in the market. Withdrawing your profits allows you to record the results achieved and reduce the risk of losing part or all of the amount as a result of sudden market fluctuations.

Thus, aim for timely profit withdrawal to ensure the stability of your financial positions and reduce the impact of potential risks.

Keep and withdraw money in safe places:

  • Cryptocurrency wallets on your computers or smartphones
  • Bank cards
  • Payment systems

Regular withdrawal of profit is carried out if it is not planned for use in trading turnover.

Conclusion

In this article, we looked at the most common mistakes when trading cryptocurrency on exchanges. Gave you some tips that will hopefully help you improve your experience and profits.

Try to start building your cryptocurrency portfolio on the best cryptocurrency exchange Binance. It’s also handy for creating different crypto wallets for mining. And the mobile app adds to the ease of use.

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