A lot of people are starting to show an interest in cryptocurrency trading. While this is a positive development, there are some pitfalls novice traders will need to watch out for. These mistakes are rather common and can end up costing new traders a few thousand dollars worth of cryptocurrency if they are not careful. With the following pitfalls in mind, there should be far less risk when it comes to cryptocurrency trading as a whole.
#5 Don’t Use The Wrong Exchange
To put this particular tip into perspective, not every cryptocurrency exchange is designed to be used for various altcoins. There are some clear market leaders who can be trusted when it comes to trading alternate cryptocurrencies, whereas others seem slightly shady. Using the wrong exchange can result in withdrawals not being honored or trading markets becoming inaccessible at the wrong time. Always do your own research before trusting an unknown company with your money, as it can be difficult- if not impossible – to get it out again when things go awry.
#4 Buying Into Scams
The world of alternative cryptocurrencies is filled with many opportunities, although not everything is what it seems. Unfortunately for novice traders, it is rather difficult to distinguish between a worthwhile and useless attacking. At the rate at which coins are being “developed” these days, any new coin should be avoided until it properly establishes itself in the market.
At the same time, investors and speculators want to buy potentially powerful coins as cheap as possible. Getting in at a later stage will decrease the chances of making a big profit along the way. There is a very fine balance to walk between buying coins cheap and investing in a pump-and-dump scam at the wrong time. Most novice traders experience the latter option well before they will make their first major profit.
#3 Panic-based Decisions
One thing every cryptocurrency trader needs to keep in mind is how panic can be one of the worst motivators to make the right trade. Markets are very volatile in the altcoin scene, and it doesn’t take much volume to send things in either direction. There is nothing wrong with trusting a gut feeling, but panic should never determine how and when one trades. To this day, a lot of novice cryptocurrency traders let their actions be guided by panic and fear.
#2 Compulsive Trading
As strange as it may sound for a market where profits and losses can be made in mere seconds, there is such a thing as “compulsive trading”. Trading too often during the day can be a big problem for novice traders, as they will make wrong decisions and let panic guide their actions. Monitoring the markets is an absolute must, but one should necessarily jump on every single opportunity when it presents itself. It is difficult to learn a trading style from day one, though, as errors will need to be made along the way until one finds a rhythm that suits his or her needs.
#1 A Finger In Too Many Pies
Given the vast plethora of different altcoins one can buy and trade across popular exchanges, diversification is a good idea. At the same time, there is a risk of trading too many altcoins at once, which will take a toll on one’s portfolio rather quickly. The best advice is to start with small amounts of one or two coins that seem legit, ate and potentially profitable. As one gains more experience, it is still possible to further diversify the portfolio and trade more currencies.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.