The world of cryptocurrency trading has gathered considerable momentum over recent years, with adults of all ages and experience levels captivated by the concept of Bitcoin, Ethereum and other emerging alt-coins and eager to dip their toe into the world of online investing. And thanks to the growing availability of trading platforms like Profit Edge, it’s now easier than ever for even completely inexperienced traders to get started.
But whilst there’s no denying that cryptocurrency is one of the most exciting investment opportunities of the current time, it is also one that is steeped in risk, with the market’s complex and volatile nature making for a tricky landscape to navigate.
Here, we take a look at five of the biggest mistakes new crypto traders make, and how to avoid them – so if you’ve been toying with the idea of making a career out of it or are simply looking to diversify your existing portfolio, then take note.
Seeking a quick fix
Whilst it is often said that Bitcoin made many early investors ‘overnight millionaires’ when its value surged rapidly back in 2009, investing in cryptocurrency is rarely a quick fix or an instant way to make considerable amounts of money. Those who see the most success with trading Bitcoin and the like are the traders who are prepared to play the long game, and that means having a long-term strategy that you don’t deviate from, and holding your nerve amidst market crashes and spikes alike. When purchasing cryptocurrency, you can almost certainly expect to see some rather dramatic price fluctuations over short periods of time, but riding them out rather than rushing to sell is imperative if you’re looking to build sustainable long-term wealth.
Failing to prepare
Today, thanks to automated signalling software and an abundance of crypto trading platforms and apps that take just minutes to sign up to, it’s easier than ever to begin your trading journey – but doing so without taking the time to learn and understand how the markets work and the fundamentals of the cryptocurrencies you’re considering investing in could be a recipe for disaster – or at the very least, little success. Diving into the market without conducting thorough research about market trends and trading strategies will put you at a disadvantage when compared with other seasoned traders, no matter how innovative the software you’re using happens to be – so be prepared to spend some time laying the groundwork before you dive in.
Neglecting risk management
Taking steps to mitigate risk in your trading decisions is vital if you want to avoid making devastating losses in crypto trading, but many new traders completely overlook this in their eagerness to get started, and go in all guns blazing. Implementing robust risk management strategies, such as diversifying your portfolio with a variety of different digital assets rather than going all in on just one, determining how much capital you’re prepared to allocate to each asset ahead of time rather than making emotional decisions in the moment, and setting stop-loss orders to limit losses are all essential. If you don’t know how to do these things, then take the time to educate yourself before you begin, as any amateur mistakes could prove costly.
Falling prey to shiny object syndrome
With such a vast array of new and exciting alt-coins coming to market seemingly by the day, it can be difficult to know where to start on your crypto trading journey, and it’s easy to see why many new traders get distracted. But doing so could prove detrimental to your long-term success, so rather than chasing the latest trends, be sure to research them thoroughly and do your due diligence so that you can assess whether they are realistically a worthwhile prospect. Understanding the fundamentals and the long-term viability is key when working with volatile assets like cryptocurrencies, so avoid making spur-of-the-moment or emotional decisions, and take your time to understand new coins and the opportunities they present before you act.
Overlooking the importance of security
One of the great things about cryptocurrencies like Bitcoin and Ethereum is the enhanced level of security offered by the robust blockchain technology that underpins them – but whilst transactions made in these currencies are secure, it’s important to make sure that you are also protecting your holdings themselves by using reputable and secure crypto exchanges, storing your assets in secure wallets and enabling two-factor authentication to prevent intruders from gaining access to them. Digital assets are not entirely immune to phishing, hacking and other security breaches, to ensure you have a strong security set up from the beginning to protect yourself and your assets from criminals.
Disclaimer: Investing money carries risk, do so at your own risk and we advise people to never invest more money than they can afford to lose and to seek professional advice before doing so.
