Crypto trading offers the promise of making you rich fast but it is not as simple as some people want you to think. If you are a beginner, you make your first steps into a world that is quite complex. It can be quite difficult to make great gains when you do not know what to do. And the truth is that most of the trading success people enjoy is based on trial and error.
Before you even consider trading cryptocurrencies, make sure you learn about the following big mistakes. They are made way too often and you should avoid them at all costs.
Not Using Paper Trading Before Using Real Money
It takes a long time to master trading of any kind, including crypto trading. You need to set up a good system and you need to respect it. If you are a beginner, you will lose money because you will make mistakes with your real money. And you can lose a lot before you master crypto trading.
Keep in mind that crypto trading will not disappear. This means you can prepare for a few months and use paper trading options. This helps you to prepare and when you master your strategy, you can move up to real money crypto trading.
Paying Very High Brokerage Fees
One thing few traders realize is that brokerage fees will eat quite a big part of crypto trading profits. This is why you always need to be extremely careful with your fees. Make sure to use the broker with the lowest fee trading, together with the highest liquidity and volume. When you do this, you instantly make more. Two examples of great exchanges to consider that offer really low brokerage fees are CEX and Binance.
Lack Of Fundamental Analysis
Many crypto trading beginners simply pick a very popular crypto coin and then start trading. You might do this and end up making some great money. But, eventually, that coin is no longer going to be a valuable investment. Just one large loss has the capability of turning your entire portfolio red.
You can easily avoid this beginner cryptocurrency trading mistake when you learn all you can about the considered coin. Make sure to focus on:
- What the coin actually does.
- The coin management team.
- Future outlook.
- Token economy.
After you analyze these parameters, start a list of the tokens you consider trading. Just remember that the trading experience will be unique for each of them.
Improper Risk Management
One of the most important things you have to learn early in your crypto trading journey is the use of stop losses. These are ways in which you can minimize how much you lose in the unwanted event in which the trade ends up going south. Use stop losses even when you are incredibly confident that the trade is going to be a successful one. Do not let your ego get in the way. Every single great crypto exchange out there allows you to set stop losses. In the event you never used them before, it is time to learn. Do not make another trade without them.