Thomas J. Watson used to say “If you want to increase your success rate, double your failure rate”. Crypto traders know that Watson’s words are nothing but the truth. With the recent crypto-trading boom, the idea of trading being “easy” has become increasingly popular. After a few months, people start to realise that the process of becoming a profitable trader is extremely difficult. Only those that accept that failure is the key to success and that each mistake teaches us something, are the ones that have more probability to make it to the end.
Here are the most common mistakes committed by crypto traders during the first learning stages:
Choosing the right exchange: Smaller and riskier exchanges are always trying to get new customers with juicy features or the listing of the “million dollar coin”. When starting in the trading game, investors must carefully evaluate the coins offered, the exchange’s liquidity, customer support, ease of use, trading fees and more importantly, the security features. High security, high liquidity, friendly interface and low fees are the key elements to watch.
Put all the eggs in one basket: as the crypto market is very volatile and no-one can predicts the future, putting all your funds in a single digital coin is a suicide. Expectations of becoming rich overnight by investing in a single coin can play with your head, but it is a costly mistake.
Targeting emotions: a trader must be able to control its demons, as the market does not care how you feel. FOMO and FUD can play with your emotions if you are not mature enough to understand how crypto’s price action acts.
Not understanding the order book: complicated order books are the first thing trades must encounter after deciding where to buy or sell a cryptocurrency. Every investor should take time to understand how each order book works. Many exchanges (at least the most reliable ones) offer online support and guidelines for beginners, make sure you check them!
Overtrading: The habit of not following your initial strategy or simply being brain-washed by FOMO and FUD, can lead you to open more positions that you should. In order to avoid this, evaluate each trade carefully and remember to not press any button until your trading checklist get validated!