The crypto market has become hugely popular over the past year or so. There has been a combination of factors behind the phenomenon, including simple mobile trading apps becoming widely available and a more stable crypto market ticking more people’s boxes from a risk appetite perspective.
However, this can create a potentially dangerous combination. Sure, the price of Bitcoin is not demonstrating the huge volatility we saw three or four years ago, but it is still subject to rises and falls that are dramatic in comparison to other investments and assets. Similarly, you might sometimes argue that those trading apps are a little too easy and can be dangerous in inexperienced hands.
Here, we look at some of the most common elephant traps that can leave newcomers to crypto trading nursing financial wounds – and how to avoid them.
Thinking you know it all
Confidence is an admirable quality, but a little knowledge can be a dangerous thing. Those who suffer the biggest falls on the crypto markets are often the ones who thought they knew all there was to know about the indicators and signals that inform experienced traders. For a beginner, it’s just not possible to know everything. The best way to mitigate this risk is with an automated trading app that uses an AI algorithm to analyze the markets. There are plenty to choose from, and Bitcoinsrevolution is a good example of what’s available. Even the seasoned pros use trading bots – do the same and put yourself onto level footing with them.
Failing to diversify
Surely this is Trading and Investment 101 – but you’d be amazed how many crypto traders put all their eggs into one Bitcoin basket. As the leading digital asset, Bitcoin certainly needs to be a primary component, but wise investors spread the risk while generating the same returns by holding perhaps 40 percent Bitcoin, 30 percent Ether, 20 percent other leading altcoins like Litecoin and Dash, and 10 percent small cap coins.
Neglecting security
Blockchain is famed for being practically unhackable. However, your personal portfolio is only as secure as your own smartphone, PC or network. If you are trading crypto, follow the basic rules. Keep your antivirus and firewall protection up to date, always lock your phone and keep it with you, and never click on email links that you’re not sure about.
Over-reaching yourself
This is, perhaps, the most tragic mistake of all. It is, however, one that inexperienced traders can easily fall into. Back in 2017, there were tales of people buying all the Bitcoins they could and extending every available credit line to do so. That was just before the bubble burst, and even now, whatever they bought is worth about half what it cost them. It’s easy to say “only invest what you can afford to lose,” but it’s the best possible advice. However, what this point really illustrates is the importance of having a coherent trading strategy before you start – and then sticking to it through good times and bad.
