I hope you are all well and having an excellent week, welcome to CryptoGod-1’s blog on all things crypto. Today I will be looking at some of the most common mistakes which crypto traders are known to make, many of which are totally unavoidable and just require some common sense to ensure they don't happen to you.
Misplacing Keys
One of the most common mistakes for anybody in the Crypto space to make is misplacing their secret key. Basically their access code to get into the wallet should they get locked out, many people have been known to write this down and forget about it, or throw it away. Then when time comes to get back into their wallet, they are out of luck. There are many examples of digital locks to store the secret key being a let down as the owner gets locked out, or people having their secret key hacked. Ensure you have it stored away in a safe place, with more than one copy as a piece of paper can easily get destroyed in a fire or flooding.
Ignoring Fees
Many traders do not fully comprehend the impact that trading fees can have on them. They think a fee of less than 1% is minimal and not even worth bothering with, but in fact it can but vital to ensuring you obtain the most from your trades. Wasting money on fees for exchanges can be one of the biggest loses, and therefore it is important to shop around and decide if the 0.25% exchange fee is worth it compared to the 0.1% exchange fee. It should not be the only deciding factor, but it should play an important role.
Sending to Wrong Address
A simple mistake that many can claim to have made. We all know the long addresses for crypto can be annoying and easy to make a mistake with. When sending crypto to another wallet it is always so important to make a test transaction before sending the actual amount, as if you send it to a wrong address the crypto is gone forever. Also users so beware of malware which can get on devices and change out a crypto wallet address when a user copy and pastes it, meaning even though you think you have the correct address, the funds can get sent to a bad actor.
Over Leverage
This can be done in a manner of ways, with a trader either overtrading or over relying on leverage. Overtrading would be placing too many deals in too quick a period of time, therefore trading more of emotion than strategy. This is likely to lead to loses and a higher spread of losses. Quality over quantity is important when placing trades. As for over trading with leverage, this is generally when a traders makes use of too large a leverage. An experience trader can be very useful when using leverage, but for a novice they can see the large sums and quickly get drawn in, and then see their position liquidated very fast.
Relying on Hot Wallets
This is a mistake many crypto users make, basically thinking their online wallet, such as MetaMask, is safe for storing their funds. The age old saying of not your keys, not your crypto is very true, but it is important to make sure that when storing your crypto it is done in a safe manner. Many believe exchanges are not safe, as has been shown with how FTX collapsed late last year, but users should also be careful of using the online hot wallets. They are great for interacting with D'Apps, but that in itself poses its own risks. Many users have been hacked and by having all your crypto in the hot wallet while going from D'App to D'App, well that's just asking for trouble.
Complicated Strategy
This is a very common one amongst traders. They can go one of two ways - overcomplicating things or having no strategy at all. If a trader is making a complicated strategy it is likely they will not even be able to follow it themselves. Whether this be through setting trades in a specific way, profit based on certain conditions, or stop loss on certain conditions, traders should stick to tried and tested methods instead of trying to create their own ingenious trading strategy. At the same time traders need to have a plan before opening any trade. They need to be aware of their entry and exit plan, along with how much they are willing to invest and the maximum loss they are willing to take. Having a trading plan before execution will save you from making novice trader mistakes.
An obvious one, but for a lot of people in the crypto space it is something which can be easily avoided but also easy to fall for. From shitcoins to NFT rug pulls and wallet draining, scammers are developing new and clever ways to constantly prey on those in the space. Users need to be aware that scams can come in all form and therefore it is not just a case of 'not investing in a shitcoin,' but a case of always being vigilant when operating in the Web3 space. One of the best ways to avoid scams are by ensuring you have a specific wallet for holding your coins and tokens, while another wallet is used for interacting with specific D'Apps.
Revenge Trade
Many get caught up in their emotions once a trade goes bad. They think they can cut down on their losses, and therefore make trades based on their fears and frustrations. This is a toxic loop one can get trapped in, as they have not built the strength to accept a loss. Nobody can win 100% of all their trades and therefore understanding a proper risk-reward ration is the key to success. This can mean having set levels for profit and loss, including a stop loss, while accept that as a trader there will be levels of loss along with levels of profits which should be deemed acceptable. It is important to to allow greed take over. With a proper risk-reward ratio, even winning 40% of the time can keep your crypto portfolio positive.
Herd mentality can be the undoing of many traders, especially new traders. It is not a surprise given how the crypto market is very much driven by social media. Once a user sees that latest, hottest coin being shilled it can be easy to fall into the trap of not wanting to miss out. This is especially true of users who want to ensure they do not miss the next big thing. Once a mass of people rally behind a particular crypto then others will be likely to follow. If a trader follows this mentality then it shows how poorly informed they really are, and points out to a clear lack of research. Traders should endeavour to find more objective sources of information before they invest, and do their own research. It is important to realise that a crypto only goes viral when it has already reached its top, or near to it, and that you have already missed the boat at that stage.
So there we have it, a list of some of the most common mistakes traders make in the crypto space. While there are plenty of more mistakes out there, avoiding these ones can help to ensure users don't end up with a loss which shouldn't have happened. Being prepared and smart about your objectives, aims, and goals is what matters most.
Have a great day.
CryptoGod-1.
** I first posted this article on Medium on the 21st of April 2023, which can be found here: https://medium.com/@1r3n9project/common-mistakes-most-crypto-traders-make-3411d0f93999?sk=92b7b60cbfbbb73f985037c6ee380e19
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