Terrible Bitcoin Trading Mistakes That Could Leave You Broke
Bitcoin came into vogue when its price skyrocketed from $725 US dollars in August 2016 to $20,000 in December 2017. The surge in price over this period attracted many investors to learn about Bitcoin trading to take advantage of the opportunity. That is, buy cryptocurrency on the dips and sell when the price is higher.
As far as Bitcoin traders are concerned, there will always be winners and losers. Bitcoin has managed to create a varied field of millionaires. Examples of successful Bitcoin investors and traders include Barry Silbert, Dan Morehead, and Michael Novogratz.
For those that were trading Bitcoin before its peak, they will know just how much money can be made using a Bitcoin exchange with leverage or margin trading. However, it’s best to pay attention to the fact that there’s no magic bullet involved. Trading cryptocurrency is a serious business and you could end up losing more than your initial capital before the next big opportunity comes.
Traders should be cautioned as the choices you make today will affect you tomorrow. As with any other activity, you must develop the necessary attributes – high competence, analytical mind, and attentiveness. In what follows, we’ll present the shortfalls that every Bitcoin trader will eventually need to deal with and overcome.
Thinking that you won’t make the same mistakes as others
You’re probably saying to yourself that you’re smarter than others. You’re absolutely convinced that you can’t do anything wrong and that you won’t make costly errors. It may come as a shock to you, but everyone slips up when it comes down to speculating on the cryptocurrency markets.
More often than not, this is the result of not thinking carefully enough or perhaps overthinking. Over time, you will gain experience that will reduce the number of errors. Unfortunately, the experience is only gained from making mistakes and bad trading decisions. Don’t fool yourself into thinking that you will be different from other traders that lose money eventually.
It doesn’t matter if you’re a finance graduate or if you were the smartest person in all the classes. Even smart people make errors. The best thing to do is to admit that trading Bitcoin is complex for the average individual. You’re a beginner trader, so work on increasing your knowledge base. Understand the ins and outs of the crypto market, keep up with the latest news economic news, and keep yourself informed about successful traders’ risk management plans.
Bitcoin trading can be a process of trial and error at first. You have to figure out what works and what doesn’t. Eventually, you will develop a profitable strategy and will need to stick to it.
Buying and selling based on tips and rumors
You can’t possibly predict the future, but you can use cryptocurrency data and past experience to your advantage. The trends have a big impact on trading decisions, ending up in increased or decreased profit. Never ever buy or sell Bitcoin based on tips or, worse, rumors such as on social media. You should be forging your own path by taking examples from the successful cryptocurrency traders that provide actual trading statistics from their live accounts.
Perhaps you heard someone close to you talking about the fact that Bitcoin’s price will rise in the near future. Or maybe that person wanted to share their profits with you and gave you some trading tips. Don’t follow their advice because you’ll regret it.
If you act on the advice of friends or investment gurus, you’re taking a risk, just so you know. What you should be doing is buying on the rumor and selling on the news. This is a common tactic used in the financial markets in relation to price developments. It draws attention to the fact that it’s risky to trade based solely on rumors. Abandon your current position only after the crypto market has made a move.
In the meanwhile, you’re better off looking into Bitcoin exchanges. It’s better to do your research than go in blind. There are several online platforms that facilitate buying and selling cryptocurrency in a straightforward manner. Do your research and see what you can find out. Check out this comparison post from hedgewithcrypto to find a suitable Bitcoin exchange that’s right for you.
Trading Bitcoin without a stop loss
Let’s change gears and discuss the correct way of trading Bitcoin. Firstly, you need to protect your capital at all times. Therefore, it’s essential to apply stop losses in cryptocurrency trading. A stop loss is basically an order that you place so as not to buy or sell once the Bitcoin has reached a certain price. You need to set a stop loss simply to minimize losses on each trade and should be no greater than 2% each trade.
Even if you’re not actively trading Bitcoin, you’ll be protected because you’ve set a limit to your losses in case of a sudden drop or increase in price. Not only is this tool used to a large extent but also it takes the emotion out of Bitcoin trading.
Attention needs to be paid to the fact that you can’t place a take profit and stop loss command at the same time on certain crypto exchanges. This means that you need to find an exchange with One-Cancel-Other (OCO) orders so you can set a take profit and stop-loss order at the same time.
As most will know, throughout the years’ Bitcoin has been quite volatile. There’s a strong probability that the price of the digital currency can suddenly drop in price. In these cases, you always want to have a protective stop in place while risking a small portion of your capital. This will help you stay in the game longer.
Getting emotional while trading Bitcoin
Surprisingly, even traders with years of experience in the cryptocurrency market go through emotions like fear, excitement, overconfidence, and greed. If you don’t learn how to take control of your trading emotions, you could devastate your trading day. You shouldn’t involve your emotions in Bitcoin trading because they will destroy your plan of action. Emotional traders make the highest number of errors.
Fear and greed are without any doubt the worst emotions that you can experience. While fear makes it impossible for you to see your plan through, greed pushes you to trade too many cryptocurrencies. You must treat Bitcoin trading as a business – in other words, become emotionally detached. Don’t sit in front of the computer all day long and stick to a trading plan.
The cryptocurrency market, as well as the altcoin market, doesn’t always ensure optimal trading conditions. So, you have to wait for the right time. Planning ahead will ensure a smooth landing. To make a profitable investment, you must sell the Bitcoin for more than you bought it for.
Featured image: PaxForex