It is understood that when people decide to venture into the world of cryptocurrency trading, they want to make a profit. Since it is the crypto space, this means they want to make very high profits, which is something a market as volatile as this can deliver. Nonetheless, you shouldn’t forget that the losses can be equally high if things don’t go your way. It is important to understand that the toughest thing you have to learn for succeeding in the market is not to maximize your winnings, but rather how to minimize your losses.
Of course, this is easier said than done and most people don’t even know where to begin. If you want to make the most of your cryptocurrency trading, listed below are some of the things you shouldn’t do:
Investing more than you can afford to lose
When you start crypto trading, only use the capital that you don’t need for necessary things in your life. Your trading capital should be the money you can actually afford to lose, not your rent money, or something equally vital. Using the latter puts you under pressure even before you begin and this can affect your focus. It is best to begin with a small investment and only add more if you have money left. You should never invest your entire savings in a trading account, particularly cryptocurrencies that are highly volatile.
Putting all your eggs in one basket
Most people are drawn towards cryptocurrencies because of Bitcoin and its price movements, but believing in one crypto is not how you can profit from the market as a whole. You need to diversify your portfolio, no matter how much it is. For instance, you can invest 80% in the coin that has drawn your interest and 20% in other options, after evaluating them carefully. Moreover, you shouldn’t just invest in different cryptocurrencies, but also diversify on the basis of their underlying technology. For instance, if you are investing in Bitcoin, look for a cryptocurrency that doesn’t use Proof-of-Work.
Trying to make profits in every trade
You should definitely not try to do so and learn to take losses. The important thing to remember is that you can be wrong in 75% of the trades you make and just have to be correct in 25% of them. It is still a win for you at the end of the day.
Being too greedy
This one is also very difficult for crypto traders to accomplish. When you take a large risk, it is a given that you would want to make a profit. But, an important thing to bear in mind is that it doesn’t have to be a large profit. You can take small profits as well, which can be accomplished by selling portions of your trade. Rather than selling off 100% of your investment, you can just sell 20% and wait for a couple of days to sell the rest.
Having FOMO (Fear of Missing Out)
Most cryptocurrency traders experience FOMO at some point because this usually happens when the prices of digital currencies are moving very quickly. This makes them feel as if they are missing out on something and they decide to rush in without thinking about why it is happening and if it will continue. Just because a cryptocurrency has surged in price by 30% in a few hours, it doesn’t mean it will do the same in the next few hours as well. Most people who make decisions based on FOMO end up investing right on the peak and sell when they are afraid to lose their investment.
Along with these things, you should also remember to not let your emotions get in the way of your trading. This will only lead to disasters and those you want to avoid. As long as you don’t make these mistakes, you can achieve the success you are looking for.