Despite what financial experts tell us, trading is more of an art than a science. This line is especially true when it comes to crypto trading where markets are volatile.
Millions of new users enter the crypto space. Most new crypto traders end up losing money because of the unpredictable nature of the market. Crypto beginners make common trading mistakes, from choosing the wrong crypto exchange to lacking knowledge about crypto trading, which increases the probability of losing money.
This article will cover the top 5 common mistakes new crypto traders make and how to avoid them.
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Lack of Basic Crypto Trading Knowledge
New crypto traders can get attracted to all the hype surrounding crypto, but investing in crypto requires basic knowledge of the new asset class and how it works. Investing in an unknown asset or trading crypto without understanding the basics of crypto can be disastrous. New crypto investors have to gain knowledge to find worthy crypto assets. An attractive crypto asset has a few features. Identifying these characteristics can assist beginners in crypto trading. Features such as:
- The crypto asset has a unique functionality that it brings to this space.
- A diverse community with numerous use cases.
- A competent team of developers.
- A comprehensive whitepaper.
- Roadmap for future development.
Additionally, there are other factors for new crypto traders to consider, such as trade volume, market cap, project backers, and past track record.
2. FOMO
FOMO, or Fear Of Missing Out, is one of the main mistakes made by beginners who lose money. This is not surprising given how much the crypto industry is constituted by social media. Many users receive information about crypto from mostly anonymous accounts on social media.
Additionally, social media has the potential for viral investment trends. These trends usually involve a mass of people rallying behind a crypto coin, almost entirely because other users are doing the same.
New crypto traders fear missing out on a limited-time opportunity. FOMO usually involves new investors buying when prices are high, selling early, or just investing in a suspicious project that is surrounded by hype. New traders can combat FOMO by developing a crypto trading strategy and a plan that includes limits on losses and profits for each crypto investment.
New investors should stick to this plan when the market gets volatile; it can serve you well in the long run. New crypto traders should understand that opportunities appear almost daily and should try to let go of their fear of missing out.
3. Panic Buying and Selling
The flipside of FOMO is panic buying and selling. This mistake is harder for new investors to avoid, as they may genuinely need to sell a crypto coin at a certain time. It can be tricky to trade crypto for beginners, as it is difficult to differentiate between a crypto token that is dying and one that has a sustainable future.
Price swings are a norm in the crypto world. Many new crypto traders tend to panic when prices drop and then panic sell to cut their losses. Sometimes selling can save you a lot of money when the market prices are falling, but learning to handle price fluctuations while remaining committed to your financial goals can serve you well in the long run.
4. Holding Your Crypto in Online Wallets
Crypto requires a digital wallet to store it. Using an online wallet is convenient, but these wallets are prone to online attacks. Storing crypto in these wallets is riskier than storing it offline. Hackers can drain crypto from your online wallet through crypto scams.
One of the most secure ways to store crypto coins is offline hardware wallets. Offline wallets are usually USB sticks with advanced software and hardware encryption to protect crypto private keys.
5. Choosing the Wrong Crypto Exchange
First, new crypto traders need to choose a crypto exchange before they can start investing. Many beginners rush into choosing crypto trading platforms, this can prove costly down the line. There are some things to be considered when new traders choose a crypto exchange:
- User-friendliness of the trading platform
- A wide selection of crypto coins
- Attractive asset prices
- Low fees
- Platform security
- Educational content
- Reliable customer support
- History of the platform and the competencies of the management running these platforms
How do I Avoid Crypto Trading Mistakes?
New crypto traders often know about these mistakes, yet they fall into the same traps. New investors need to be disciplined to avoid these mistakes. They need to evaluate every trade and make an investment plan. A checklist will go a long way, and every point on the checklist should be met before making a trade.
Conclusion
Trading or investing in crypto can feel overwhelming when you are just getting started. Avoiding the above-mentioned mistakes can help you become a more confident crypto trader. Also, sticking to your investment plan can keep you from losing money.
If you are a new crypto investor, looking for a crypto exchange offering low fees, reliable customer support, and an easy interface, check out Zebpay, which provides a safe and easy way to buy cryptos. Zebpay has plenty of educational articles and content for beginners looking for information to make smart and well-informed crypto trades.
