Crypto trading can be profitable, but can also pose a huge risk to your investment if you are not careful. There are stories of people who lost their entire trading capital in a single trade, and that can happen to anyone.
This is why it takes years of training to become a profitable trader. No trader wins all the time, but the goal is to record more wins than losses overall. To attain this, you will need to take some precautions that ensure you don’t make avoidable mistakes that can seriously hurt your investment.
These mistakes are repeatable, but some traders are not aware they are making them. Here’s a checklist of the five common mistakes investors make that cost them a fortune. Once you note and avoid them, you too can increase your number of wins against losses.
Not using a demo account
It is not debatable that some people are naturally more gifted traders than others. However, no trader is too gifted to learn trading before staking their investment in risky trades. This is where demo trading accounts come in.
Nearly every crypto trading platform has a demo account where you can practice trading using paper money in a process called paper trading. This is a simulated trading environment that gives you the feel for a real trading platform without you risking your real money.
You’ll be given paper money that you can trade with and test your trading strategies until you are winning more than you’re losing. You can then transfer your knowledge and experience into real trades.
Although this does not eliminate the chances of making mistakes and losing some money, it greatly reduces the chances of this happening since you’ve tried your strategies and found them to be reliable. Use demo accounts to practice first.
Not using a stop loss or take profit
Perhaps the most important trading feature is the stop loss. Use this every time to open a trade because it can save your life. There are many traders that believe they don’t need a stop loss in their trades, probably because they’re too experienced.
The truth is, no trader is too skilled to use a stop loss. There are times when trades can go the wrong direction no matter how meticulous you are. At such times, a stop loss in place can end the trade and save your investment. Always use a stop loss to prevent avoidable losses.
Also use take profit to take profit at a certain level. Some traders are greedy, and think they can gain more in a trade, so they allow the trade without a take profit set up. This can result in a loss of gains if the market changes suddenly. Protect your gains as much as you protect your capital.
Investing more than you can bear to lose
The motto for crypto investment in general and particularly for crypto trading is “never invest more than you can afford to lose.” Many traders ignore this advice to their own regrets. Anything can happen to your trade, and you can potentially lose everything.
The loss is not the problem though, the question is can you just shrug your shoulders and move on when it happens? If you can’t then rethink your investment. Never trade with more than what you can comfortably part with.
FOMOing
FOMO means fear of missing out. This is when a trader sees an asset increasing in price and jumps in to gain also. In most cases, this can backfire and you’ll lose your money. Never trade an asset simply because it’s pumping.
Not doing proper research
Before opening a trade, ensure that you have done your research – technical analysis, fundamental analysis etc. Ensure you have good evidence upon which you’re entering a trade. Try as much as possible to get rid of emotions in this.
It does not guarantee you’ll win, but it does reduce your chances of losing when you blindly enter a trade. Avoid these mistakes and you’ll be fine.
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