Trading can be like gambling, especially if you are just starting out. While there are many methods to invest in crypto easily, a few profits at the beginning of your trading journey can give you an adrenaline rush which can lead you into investing more than what you are prepared for. Without a well-defined trading strategy, investors end up making trading mistakes and losing their savings within a few minutes! Eventually, you will make losses and quit without ever knowing how crypto trading could have been a golden opportunity for you.
Therefore, today we bring to your attention Six Trading Mistakes That Crypto Beginners Make and What You Can Do To Avoid Them.
Avoid These Crypto Trading Mistakes
1. Starting with real money at the beginning
Trading is a skill, and honing a skill takes countless hours of practice. To learn any new skill, there are a few rules which should be always adhered to. The best way to get acquainted with trading is to have a demo with virtual money before investing in real money. In other words, you should first do a mock of the actual trading, to be risk-free while learning.
For a trial run, you can take the help of backtesting. With Backtesting, you can first have your trading strategies tested on historical market data. This gives you time and scope to make trading mistakes and learn from them. With those learnings, you can make modifications to your trading strategy.
Mudrex is the best platform to create trading systems and backtest their performance. The platform provides an exhaustive set of parameters with charts to help a trader understand performance and make appropriate enhancements, without any code!
2. Not examining the situation yourself
In trading, you invest your hard-earned money. If you do not understand the planning part, and the product’s worth, your money may go down the drain in a few days. Simply relying on a few experts from different mediums who just inform when to buy and sell currency may lead to a huge financial loss. Many such “experts” often take a high fee as well. This might take away a decent amount of your trading profit. Hence, the best way is to make your own strategy, backtest them on the Mudrex platform, and then follow the same plan to trade in cryptocurrencies without paying the high brokerage fee.
3. Inevitable Losses
Trading is something in which losses are certain to happen, and you can’t avoid them. One of the biggest trading mistakes beginners make in crypto trading is that they might not accept the loss. This often leads to anger and frustration, and they start trading to make up for the losses incurred. Often attempting a much more risky trade in order to cut down these losses might lead to more financial losses. This kind of trade is a revenge trade and becomes highly poisonous for your crypto portfolio. Set risk limits for yourself and trade accordingly.
4. Margin Trading
There’s no doubt that crypto trading is rewarding as well as very risky. Margin Trading is an act of borrowing additional money or cryptocurrency by leveraging the cryptocurrencies that you already own to buy additional ones. In such a type of trading, the margin can be rewarding as well as highly risky. Thus it is not recommended to margin trade until and unless you understand the risk completely. Often beginners get into margin trading which can result in huge losses for them, and as beginners, one should always stick to the basics.. If you are just starting with crypto trading, check out our A Beginner’s Guide To Day Trading.
5. Following the herd
In any kind of trading one individual should not follow the herd blindly as this could lead to significant losses. Further, following the herd could make you pay heavier amounts or you might get into FOMO i.e. Fear of Missing Out. To avoid this, before making a start with real money, make a set of rules which need to be followed and have stop losses to limit the loss incurred on your trade.
6. Not Doing Fundamental Analysis
A trading mistake that is made by made beginners is that they just start trading in one of the popular cryptocurrencies. This would enable them to make profits in the short term. However, there could be one fine day when that particular currency faces a huge drop. This would incur a single huge loss-making their portfolio red. Hence analysis before investing is very crucial. Know your fundamental trading indicators.
Be wary of these six mistakes and you would go a long way in the trading world. While you are at it, check out the Ultimate Cryptocurrency Investment Strategy tips by Mudrex. Happy Trading!
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