Trading cryptocurrencies is a nonstop game. As a trader, if you do not do it right, you may lose all your money. On the other hand, if you follow a plan and are equipped with the right tools, you stand a chance to gain high returns.
Effective trading can generate returns as high as 2000%. It takes time, practice and continuous learning to become an effective crypto- trader. Here are some of the mistakes people make when getting into crypto trading:
Looking at the Price of a Cryptocurrency instead of its market Capitalization
One common mistake traders make is to look at the current market price of a cryptocurrency rather than its market capitalization. The market capitalization of a cryptocurrency is calculated by multiplying the total number of coins in circulation by the current price of the coin. Looking at the market capitalization of a currency is a more effective way of determining the value of a particular currency.
Comparing the market prices of two coins is deceptive since one cryptocurrency may have a higher supply than the other. In normal share trading, you cannot determine the value of a company purely on the basis of its share price. Likewise, you cannot rely purely on the market price of an altcoin to determine its value.
Trading in FOMO and FUD
Do not trade with your emotions If you do, chances are high you will lose most of your money. Effective trading involves developing a strategy with rules and indicators, and sticking to this strategy at all times.
Putting all your hope in one Basket
You cannot predict the cryptocurrency market. There are times when investors reap from a bull market. Similarly, there are other times when billions of dollars are wiped from the market within a short time. This calls for a prudent strategy that will diversify your portfolio and shield you from unexpected losses. As much as it is important to have BTC as your base currency, it is also important to be on the lookout for the dollar value of your altcoins.
This may present an opportunity from time to time. Finally, trading cryptocurrencies is only one investment avenue. As a trader, it is important to consider other investment options to diversify your portfolio.
Undertrading
Experiencing a string of losses can affect your trading. It is important that you stick to your strategy. Do not start changing it the moment you experience bad trades.
If you experience more than three consecutive losses,then it is prudent to take a short break. Try to examine the possible reasons why your trades did not work. Then come back and continue.
Seeking Revenge on Failed Trades
When you lose a trade on a specific cryptocurrency, it is natural to feel that it owes you, and you try to reverse the losses. This is a bad idea and often you will find that you are just making the situation worse, and end up losing even more money.
On the other hand, if you make a profit from your trade, do not make it your favorite. Trading on a cryptocurrency even when your strategy does not support it is a recipe for disaster.
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