The Worst Mistakes You Can Make When Trading Bitcoin
Trading Cryptocurrencies can be challenging, especially when you’re just getting started. The market is volatile and new traders are often tempted to make rash decisions in an attempt to get rich quickly. This can result in traders making mistakes that could have been avoided if they had more experience.
So, how can you minimize the risk of making trading mistakes? First and foremost, never trust your emotions when it comes to trading. This is especially true if you’re someone who gets excited easily. Try to keep your emotions under control at all times, and only trade after you’ve done sufficient research, preferably on several different platforms. If you follow these simple tips, trading will be much less risky for you:
Don’t Be Afraid to Hedge
Perhaps the most important trading tip you can follow is to hedge. This is especially true for beginners, as a healthy dose of risk-taking and risk management are essential when you’re just getting started. However, hedge your risks by using a strategy called “hedging,” as this will help you mitigate any significant losses and increase your gains when you’re trading.
A hedge can be as simple as buying a small percentage of Bitcoin and selling a slightly higher amount of Litecoin. By offsetting your risk, you’re able to increase your profits, and this can help you avoid the massive losses associated with a single bad trade.
Be wary of New Coins
When you’re starting, it can be tempting to invest in new Cryptocurrencies or ICOs (initial coin offerings). The problem with this, however, is that there are hundreds of new Cryptocurrencies entering the market every month. A new trader can’t keep up with all of these new additions, so they could miss out on some potentially lucrative opportunities. The best thing to do is to focus on trading established coins such as Bitcoins on BitLQ. Then, you can add new coins on the side later if you have the time to learn the basics of trading.
Always double-check your Data
When you’re just getting started, you may find it useful to “backtest” your trading strategies. This can help you find out which trading strategies tend to work best. However, it’s important that you also “stress test” these strategies. This is where you run your simulation under real-life market conditions. This way, you’ll be able to identify any potential problems with your strategy, such as how your data affects your results. If you’re trading Bitcoin, for example, ensure that your data is for the whole year.
Always remember who you’re trading with
Similarly, who you’re trading with can make a significant difference to your results. If you trade Bitcoin with a friend, for example, you may find that you both have very similar trading strategies. This could mean that neither of you is getting much out of the relationship, so it may be better for you to find a different trading partner.
Another thing to consider is that although you’re trading Cryptocurrencies, you’re not trading against humans. This means that volatility is considerably lower compared to trading stocks or forex. Therefore, you may be trading against bots, and whether that’s a good or bad thing depends on who you ask.
Avoid Trading During Downtimes
When you’re just starting, you may find that you’re more likely to trade during the day. This is because you may be in a rush to make a profit as soon as possible, and it’s easier to trade during the day when the market is open. However, it’s important to avoid this trap while you’re still a beginner. Downtimes can be especially dangerous, as they tend to lead to a lot of irrational trading.
During downtime, traders tend to become more emotional and make more risky trading decisions. It’s best to avoid trading during downtime, and instead save your trading strategies for the times when the market is open. If you have to make a trade during a downtime, do your best to hold on to the coin or trade strategy until the market opens again.
Final Words
The cryptocurrency market is extremely volatile, and that makes it a risky place to trade. However, you’re not going to become a successful trader overnight, so investing some time and effort into learning the basics can help you avoid making some of the more common mistakes made by new traders. It’s important that you follow these tips, and make sure you focus on mitigating risk as much as possible. However, be warned that it can take a while for you to realize significant gains as a trader. When you’re just starting, it’s important to remember that the best strategies come from years of careful research and study.
