Crypto trading is fairly simple (At least, the concept of trading is). However, it is not suitable for the faint of heart or the ones who are not confident enough to make cold-headed decisions. There is a real risk of losing money just as there is a real opportunity of making a profit.

Since this article will be focused on the best crypto trading tips and how to avoid these common mistakes traders must also understand some of the main differences between stock trading and crypto trading. And also, there is a difference between investing in crypto and trading crypto.

Since it’s practically the same activity, there are numerous similarities. However, the biggest difference that you have to keep in mind at all times is that the crypto market is relatively new and immature. This can be translated into: “Greater profit opportunities at the cost of greater risks”

Tips To Trade Cryptocurrency:

Failing To Plan Is Planning To Fail.

This is a pretty common saying in various areas of the financial world, but that doesn’t make it any less true. When you’re performing an operation you can’t just expect to put a price that the market will happily pay for it and that everything will go the way you expect.

The point of having a plan is to keep your emotions at bay and increase your ability to make better decisions. You can’t just blindly start buying and selling as if this was a casino, and if you follow the best traders you’ll notice that luck is not a major deciding factor. 

Stick to your plan, keep track of your performance and you’ll see how easy trading will become.

Correctly Make Use of Stop-Loss

Accepting losses is not easy and even the most experienced traders can, at one time or another, fall victim of this emotion. Stop-loss orders are one of the greatest tools for this purpose and you should know how to make use of it. It has the ability of protecting you against heavy losses. 

However, the way you set up the stop-loss feature will have a great impact on how well it will work for you. This is especially true in crypto due to its volatility, if you place the stop-loss too close to the initial buying price it can end up being triggered before the price goes back up.

Control Fear of Missing Out

One of the most common mistakes in the trading world. Letting fear take control of your decisions is more detrimental to your operations than almost any other thing and it is a too common mistake for new traders.

It manifests in many ways. Selling too early because you think you’ll be losing on some potential profit, or buying when there is a spike in bullish trends, and the list goes on and on. The best way to avoid this is by sticking to your plan. Don’t make decisions based on fear but based on what you can control.

Beware Of The Herd Mentality

This is a very common mistake that is mostly made by new and inexperienced traders, but even some seasoned traders have fallen victim to this. The easiest way to manage this is to avoid letting anyone and certain types of media influence you (crypto trading related, of course).

Just imagine how many traders sold all their assets when everyone thought that Bitcoin was going to die, just to later discover that the price went up to $20,000… Or how many people have bought a useless coin because the whole world was going crazy about it.

Take time to analyze the facts before making decisions based on over-amplified emotions.

Stop Obsessing 

A mistake that everyone makes in at least one aspect of their lives. Some people upload a new picture on social media and look at the screen for hours waiting for interactions, others spend 24/7 reading the news and watching Bitcoin charts.

If you’re making this mistake be aware that stress won’t make you any richer. Take some time to get some air, spend time with other people and relax. As Warren Buffet says “The stock market is a device for transferring money from the impatient to the patient.” Same is true for the crypto market.

Don’t Get Greedy

Beginners tend to make this mistake way too often, but a lot has changed since 2010 and doubling your portfolio capital is not as easy as it used to be. This greedy mentality can get you in trouble and push you to make bad decisions.

Stick to your plan, set realistic goals and make sure that you operate with a proper risk-to-reward ratio.

Leverage With Caution

If you research enough you’ll notice that leverage is a very controversial topic. Some traders swear by it while others will openly say that this is the worst mistake you can do. So, who’s actually right? 

Leverage is indeed a double-edged sword, as such, it means that you have to learn how to use it if you don’t want to get hurt. Understand that although the potential profit will increase, also the risk of losing your money. 

So, whether leverage is the right tool for you or not greatly depends on your ability to manage risk.

Don’t Trade What You’re Not Willing To Lose

Another widely used phrase that is as real as the air we breathe. Clearly no one enters a trade thinking that they want to lose money, but if it happens, it’s better to lose what you’re already prepared to lose.

This does not only have a direct impact on your financial health but also on your mental health. Putting at risk that which you can’t afford to lose will have you dealing with overwhelming emotions and fear, the number one reason for making irrational decisions.

Here is where your trading plan and your financial knowledge will come into play.

Being Undercapitalized

As opposed to trading money you can’t afford to lose, being undercapitalized means that you’re not trading enough money for it to work. In order to actually make a decent profit, you need a good amount of money to start with.

Unless you have enough trading capital the profit will not be worth all the time you invest on your operations. Many new traders fall into this category. They’re afraid of losing money so they spend hours and hours trading for a few cents before realizing that it’s not working. As the saying goes, you need money to make money. 

Various cryptocurrencies and a smartphone with a graph
Various cryptocurrencies and a smartphone with a graph

In Conclusion, If You Plan Correctly And Manage Your Emotions You Can Avoid These Common Crypto-Trading Mistakes

Knowing the market, knowing the strategies and understanding the tools available to you as a trader is just as important as understanding the trading risk management techniques. Because trading and risk go hand in hand, but so does planning and profit.

Learn how to handle the risk and ultimately be open about learning from your mistakes. Once you do that, you’ll be on your way to becoming a successful trader.