To succeed in cryptocurrency trading, as in traditional trading, you will need to put in place certain rules to avoid mistakes that will make your capital disappear in no time. Many people think that trading crypto currencies is an easy thing and that anyone can make a lot of money quickly with a low initial investment and no knowledge.
Learning to trade takes time and forces us to make mistakes. In this article, let's review the 5 mistakes you can avoid from the beginning and help you to secure your capital as much as possible.
Discover in the video below the 5 mistakes to avoid when starting crypto-currency trading. This video is in French, do not hesitate to put English subtitles if you need to!
1. Lack of knowledge
This is certainly the most common mistake when trading cryptocurrencies. The best thing to do before you start trading is to get a minimum of training in market analysis and learn the basics. You can read books on the subject, blogs, watch videos, etc.
Indeed, you do not become a trader in a day and the simple fact that you are interested in it does not make you a trader.
In addition, lack of knowledge can lead you to make very serious mistakes that can lead to your ruin. If you buy a cryptocurrency because you have read somewhere that it is about to explode and the opposite happens, you will have lost your money and you will be stuck in a trade, especially if you have not configured a stop loss.
2. The impatience
When trading in the cryptocurrency market, patience can be a valuable ally and waiting for an opportunity can be difficult for some of us. Beginners often make the mistake of taking positions without any real strategy or market analysis. Start by establishing a trading plan and stick to it.
A patient trader, and here we take a direct example of several of our clients - at Crypto Addicts - who have chosen this option, is a trader who, for example, tries to make 1% per day, which would still make 30% at the end of the month. Which savings account guarantees this? If you hope to make a 50% profit per day, you are on the wrong track. "Don't be greedy" as we often see on the Internet. And above all, we must learn not to change strategy when the ego tells us that we can win more, faster.
3. Working without a stop-loss
This is a beginner's mistake that can have dramatic consequences for your capital. Stop loss is a tool available on almost all cryptocurrency trading platforms. As its name suggests, it allows you to cut your losses in the event of a bad analysis and trend reversal. Without a stop loss, you could easily get stuck in a trade with a more or less important part of your capital.
4. Investing too much in a trade
The novice trader often tends to want to earn a lot right away. To satisfy this desire, it is possible that you may deviate from your basic strategy. It is even possible that you have not set a maximum amount per trade. To give you an example, in the capital dedicated to day trading, we will never put more than 10% per trade. In general, depending on the risk of the trade, between 5 and 10% of the capital can be invested in a trade.
5. Use too much leverage
Some platforms, such as Bitmex, offer their customers the opportunity to use leverage. It consists in betting a certain amount of money that you do not have by borrowing it from the platform. Bitmex allows us to trade with 100 x the amount we actually bet. But the platform protects itself against losses and bad trades will be liquidated very quickly, i.e. the platform will take all your bet. For a leverage x100, this means that a change of less than 1% in the opposite direction of your forecast could cause you to lose your entire account. Focus on duration, not quantity.
It is therefore very important to analyse the market carefully before embarking on leveraged trading. You can also follow our advice on the channel dedicated to leveraged trading.
We hope that these few simple rules can help you get started in the world of crypto-currency trading.
What beginner mistakes have you made?