Trading cryptocurrencies is easier said than done. That is because the crypto market does not behave in the same way that the traditional market behaves. It stays open 24×7 and traders have to be prepared to incur huge losses at any point of time. Almost 95% traders will fail at the beginning; they will either lose everything at one go or they make much bigger losses than if they would have stuck to any traditional form of investment like stocks and bonds. Why does this happen? It is because most beginners dive into crypto trading without understanding exactly what is at stake and how the market operates.
What Beginners Should Know About Crypto Trading?
- Since the crypto market is open throughout the day and night, traders feel that they will miss out on good trading opportunities if they are not trading all the time. But trading 24×7 is not only humanly impossible but also not desirable. Spending hours on end in front of computer screens will only add to your fatigue and affect your decision making capabilities. As a newcomer, you need to set schedules for trading and take time out for other chores and spending time with friends and family.
- The crypto market will not conform to traditional financial system workings. When buying stocks traders can review the sales reports, quarterly earnings and other useful parameters to assess how successful the stock has been till date. But, when investing in crypto coins, there is no such standard theory because prices are volatile and the market is unpredictable. Experienced traders can still benefit from technical analysis but the beginner is usually not equipped to handle this.
- Experienced traders know the benefit of implementing take-profit and stop-loss measures. But beginners often make the mistake of over trading. Cryptocurrency exchanges will not show you how to manage risks, particularly in a market that does not sleep. So, it is necessary to have stop-loss and take-profit orders in place so that you can get something back from your investment instead of losing it all when a trade starts to go south. While beginners opt for leverage as tool for trading, this is something that only legacy traders should ideally use because without experience, it can backfire.
- Beginners should understand that trading cryptocurrency is not some get-rich-quick scheme. Those who have turned millionaires overnight on starting out are very few in number and even if they did rake in a lot of moolah at the beginning; they soon lost everything they gained through subsequent trades. So, crypto assets are not safe investment options. If you are ill-informed and inexperienced, the chances of going broke are quite high.
- When you are new to the crypto world, you should try to stay updated with the latest happenings in the crypto space. It may be a good idea to get some tips and advice from experts, but you have to remember that research done independently is only the way to make successful trades.
- Many traders make the mistake of averaging down which means buying more of an asset when prices drop. This may be beneficial when you are investing in an asset but not when you trade.
- Managing risks is the only way to stay afloat in the crypto market. It is more important to understand how much you can afford to risk on a specific trade and ways in which to balance your portfolio than to figure out when to enter or exit trades.