5 Common Mistakes New Bitcoin Traders Make
In today’s article, we will be looking into the 5 most common mistakes that a new Bitcoin trader is likely to make on a frequent basis.
If you have made one or two of these mistakes, don’t worry, there are many that have started out as you did, and all investors have had their share of slipups while learning how to properly trade.
Inspecting the Exchange Market too Much
When a Bitcoin trader is inspecting his trading options, he tends to consider the offers on various over-the-counter (OTC) trading platforms. This is one of the most common mistakes he can make. In order to find out the rates, you usually have to talk to the brokers of the platforms. But while you are doing this to find out the most advantageous prices for you, you are actually supplying brokers with information that is useful for them.
When divulging details about your trade to brokers, they can use that information to your detriment. Moreover, they will be able to find counterparties for your trade, enabling said counterparties to place their orders below the demand price, so they can secure a better rate for them. Then, you will notice that the price of your asset is lower on the market. This is why we recommend you do not shop around too much before making a Bitcoin trade.
Trading Against the Trend
A new Bitcoin trader will have a hard time recognizing at first when a trend establishes itself on the market and might easily find himself trading against it. As a result, trading against the trend comes with great risks.
Experienced traders can coordinate their exits and entries in order to reap short term profits from price swings, but new traders should not try their hand at this. Traders should first observe the market and determine if it is going up, down, or sideways and trade based on the movements of the market at that particular moment. Going against the momentum of the market can easily get you liquidated.
Another common mistake is making trading decisions based on emotional impulses. New traders usually have a hard time keeping their emotions in check when they first enter the market.
Greed, fear, panic, and excitement can override your rational thinking and make you stray from your intended strategy. Let’s say you are a Bitcoin trader, and you are making successful trades one after another. This euphoria keeps you trading even when research indicates that you should stop because a trend reversal was predicted (as we mentioned above, not a good idea to trade against the trend). Then, you end up losing what you earn.
Panic is another aspect that any trader must be cautious of, as it can be the worst motivator for successful trades. Crypto markets are susceptible to high volatility, and it doesn’t take much to push a price in both directions. Going with your intuition is one thing, but panic should never be in charge of your decisions.
This is why you first have to make a trading plan and stick to it, so you can avoid having negative emotions when unexpected price movements occur. If your position is causing you doubt or greed, then this is probably an indicator that you are trading what you can’t afford to lose.
You should practice a calm mentality, and keep your mind stable, so that you can avoid making any harsh and impulsive trading moves which might cost you all your Bitcoins.
Changing Indicators too Often or Using too Many of Them
When a Bitcoin trader first gets into charts and decides to implement a trading strategy, he might try to use too many indicators or change his strategy too often.
Many traders are guilty of adjusting their indicators after they have lost multiple consecutive trades, believing that their strategy wasn’t effective anymore. This is a common mistake many traders have made. You should stop evaluating your strategy according to a few bad trades and comprehend the long-term implications of your indicator settings.
You shouldn’t immediately switch to a new system after a few losing trades. You shouldn’t give up so quickly when the going gets tough, as you might actually make some profit if you are patient and stick with it just a little longer. Of course, when you are at the very beginning and discovering your trading style, you should opt for various strategies, but you could use market simulators to see the outcome instead of using your own money.
You have to be aware of the fact that losing and winning are of normal occurrence in the market, and no matter your trading experience, you are bound to lose at some point.
Another issue revolves around using too many trading cryptocurrency market indicators. Many traders believe that setting all indicators can lead to better filtering of bad or misleading trading signals.
This actually does the opposite, as a new Bitcoin trader can feel overwhelmed by how much information he has to interpret. Another mistake is the merging of indicators, which basically offer the same information.
Trading with too Many Pairs
Seeing as there are thousands of different altcoins, you can buy and trade Bitcoin in a variety of pairs across many exchanges. And while diversification is healthy for an investor, there is also the risk of trading too many altcoins at once.
It is recommended you start with small amounts of one or two coins which have profitable prospects and that are considered legitimate in the community. Using Bitcoin to buy small and virtually unknown coins is almost a certain failure.
You have more favorable odds if you do not track 10 or 20 different crypto pairs as well as each of their signals on a daily basis. As you will grow as a trader, you will be able to trade with more cryptos simultaneously and healthily diversify your portfolio.
Everybody makes mistakes, especially at the beginning. As a Bitcoin trader, you should be patient and start small with your trades, closely monitor the market ,and avoid as much as you can making any of the above-listed mistakes.
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