The cryptocurrency market has seen a huge influx of traders and investors over the past years. Since its first inception in 2008 by a person or group of people called Satoshi Nakamoto, the market has experienced numerous adjustments to fit the needs of thousands of traders trying their luck every year. However, like any other trading option, cryptocurrency trading has its distinctive risks that every interested person should know about.
As inescapable as it seems, cryptocurrency trading promises a huge curve of profits that sometimes seem unachievable. This leads to one major question: How safe is it? While it is somehow challenging to tell the safety of the market, the best approach is to learn about all the possible pitfalls and how to avoid them and succeed.
What Is Cryptocurrency Trading?
Before joining the bandwagon of crypto trading, one needs to understand what they are getting into and how to maneuver the market. Cryptocurrency trading is often confused with crypto investing.
Although both approaches lead to the same outcome of profits, the key difference is for how long one holds the coins. Cryptocurrency trading is the buying and selling of cryptocurrencies to make profits.
With trading, the crypto trader holds the position for a few seconds or days before selling them. Cryptocurrency investing, on the other hand, is buying of the assets and holding them for a long time before selling them.
Unlike traders, crypto investors hold their positions for several months or even years and sell them when the assets are of higher value. Cryptocurrency trading and investing are all done on a decentralized digital currency platform like the Immediate Edge Website.
Through the platform, traders can see their balances, predict growth curves, and sell their available assets. They can also automate trading using trading bots or artificial intelligence protocols and see their digital accounts or wallets grow.
Common Cryptocurrency Trading Pitfalls and How to Avoid Them
At first sight, cryptocurrency trading might look like a straightforward process that involves buying digital assets when their prices are low and selling them when their prices increase.
However, when reviewed comprehensively, trading these digital assets requires a keen eye for details and risks that might lead to extreme losses when ignored. That means, before getting started with crypto trading, all traders should learn about these common mistakes.
Fear of Missing Out (FOMO)
As cryptocurrency trading continues to be a global phenomenon, almost everyone is interested in joining the market and trade. That means those yet to start might feel left out of the new trading wave, leading to the Fear of Missing Out (FOMO).
FOMO is a common mistake that has seen many new traders make decisions based on how they see others trade. They are also moved by the reports of potential profits and start trading without researching the market thoroughly.
To avoid FOMO, new traders should start by researching the market, setting trading rules, and making informed independent decisions. They should also stop trading on emotions and know that cryptocurrency trading is not a quick money-making strategy.
Ignoring Risk Management
Many traders risk too much capital on their first trade and overlook the possible losses that might happen. Starting with too much capital can lead to financial ruin when not controlled, resulting in a loss of trading morale.
To avoid such incidents, traders need to understand the acceptable risk levels for each trade and know how much they are ready to lose in case the market drops. As a rule of thumb, no trader should risk more than 2% of their capital on a single trade.
To minimize potential losses, traders should diversify their crypto portfolios, set their stop-loss orders, and maintain proper risk-to-reward ratios. These strategies allow them to mitigate all risks and survive all unfavorable conditions.
Ignoring Fundamental Market Analysis
Most cryptocurrency traders already know about conducting market research before they start trading. They always start with identifying the most profitable assets, studying market trends, reading trading journals, and identifying scam projects.
However, only a few go an extra step to conduct fundamental market analysis. While both might sound like the same thing, fundamental analysis has a lot to do with external factors. Besides researching the crypto market, traders should also look at economic factors, news events, and the latest regulatory developments that may affect their trading.
These fundamentals can help them take cautious steps, even when the market itself seems welcoming. Traders can conduct fundamental market analysis themselves or let the best analysts such as Immediate Edge Website use their machine learning to unveil all market secrets.
Overtrading
Overtrading is also a major pitfall that most inexperienced traders find themselves in. Executing too many trades within a shorter time can lead to increased losses, transaction costs, and missed profitable opportunities.
Other traders also believe that they need to be always involved in trading even when the market drops. This exposes them to more trading risks and poor decisions. It is essential to study the trading curve well before buying or selling the assets.
Traders also need to wait for high-reward and low-risk trading opportunities before executing any transaction. This allows them to develop a highly profitable plan and avoid impulsive trading.
Conclusion
Cryptocurrency trading has, for a long time, been a profitable opportunity for new and seasoned digital traders. However, due to its volatility, crypto trading requires cautious steps to avoid the common pitfalls it presents.
That means traders should always be on the lookout for potential risks and learn to navigate the market before they can realize their goals. Once they are ready, they can create their accounts through the Immediate Edge Website and start trading.
