The crypto market is getting hot, and you know what that means: mistakes, lots of Mistakes. There’s a reason why buying the top and selling the dip is a meme. When the gains are significant enough, even the most hardcore holder starts to feel the heat. 50, 100, 10,000, in a day, when do you buy, when do you sell, is it a pump and dump, or a one-way ticket to financial freedom?
Figuring this stuff out is hard. Still, there is a solution, and it starts with recognizing what you’re doing wrong. So today, we’re going to tell you about some of the most common mistakes cryptocurrency traders make. But before we get into that, go URL to know more about crypto and get a detailed introduction to it.
1. Lack Of A Well-defined Plan
The number one mistake cryptocurrency traders make going in without a well-defined plan. Before you’ve deposited even a single sat into a cryptocurrency exchange, you have to ask yourself if you’re playing the long game or the short game. The long term means months or years, and the short term means days or weeks.
If you’re in it for the long haul, you should know that buying and holding will be about as profitable as day trading. This is thanks to a popular strategy employed by holders of dollar-cost averaging, where you purchase a cryptocurrency at regular intervals regardless of its current price.
Multiple people have run statistical models comparing dollar-cost averaging to buying the dip. In just about every case, dollar-cost averaging is a more profitable investment strategy in the long term. This is primarily because there is no way of knowing for sure where the bottom of a dip is, and it’s unlikely that you’ll buy the bottom of the drop every time over and over.
2. Lack Of A Sound Exit strategy
Besides the absence of a trading strategy, traders often lack a solid exit strategy. Now the term exit strategy can have a different meaning depending on who you ask for. Exit strategy means the point at which you convert your cryptocurrency gains interfered for crypto maniacs like most.
Exit strategy means reversing your altcoin gains and fiat into bitcoin while it is up to you to decide how you manage your finances, allow me to briefly make a case for bitcoin in a single sentence. Whether you want to buy a house, a car, some stocks, or even precious metals with your crypto gains, the chances are that in five years, those assets will be worth much less than what you would have if those profits had been allocated to BTC instead.
That said, you can’t live inside a bitcoin or drive it around. Both of these things require fiat currency to purchase tesla cars. Of course, notwithstanding, this means you will probably want or need to withdraw cash from your crypto positions at some point. There are two ways you can do this all at once or overtime. The advantage to withdrawing all at once is that it will make taxes a bit easier to manage, and you’ll also hopefully be sitting on a relatively substantial amount of money.
3. Fear Of Missing Out
The disadvantage is that, like buying the dip, there is no way of knowing that you sold at or near the top until much later. This could leave you feeling some serious FOMO if prices continue to rise, and this could do a number on your ability to think critically.
This could cause you to FOMO back in, as we’re sure many of you had done in the past when you cashed out all at once from a cryptocurrency you were holding. If you have a long-term vision, you might be happy enough to take those profits and walk away when the data cash outcomes around.
Alternatively, you could use an exit strategy that works well regardless of the time frame, and that’s to take profits at fixed intervals. This is a similar idea to dollar-cost averaging, but instead of using time as the interval, you’re using earnings in dollars or percentages as the benchmark.
For example, you could have a profit-taking strategy, where you sell 20 of a cryptocurrency you’re holding. Every time it doubles or triples in price, yes, the profits won’t be as large as if you’d sold the top, but they will be much more predictable.
You’ll get a better estimate of how much you’ll have in the end, most importantly, you’ll have enough cash on hand to buy the dip if you’re a day trading or add back to your crypto positions if Your dollar-cost averaging trading volume and circulating supply are also frequently overlooked by crypto-traders.
4. Reference To Trading Terminals
To clarify, we’re not talking about the trading volume you see on trading terminals on cryptocurrency exchanges. Still, the trading volume you see on sites like coin market cap and coin gecko. These give you a bird’ eye view of the trading volume for that cryptocurrency across all exchanges.
It also lets you easily spot any volume abnormalities that could suggest price manipulation. A cryptocurrency should have ample trading volume relative to its market cap, and ideally, that trading volume should be high on more than one exchange.
This is especially true when it comes to and coming erc 20 tokens which often trade exclusively on decentralized exchanges like uni swap as a general rule of thumb; If you see a cryptocurrency that’s trading primarily on a dex, be sure to give it some extra due diligence during your research also, be on the lookout for any ridiculous trading volumes taking place on lesser-known exchanges. To get more updated on trends and changes on the market, join platforms and use codes from ShipTheDeal to save.
This article was written in a way to tell you what not to do instead of directly just starting out with common mistakes that people make in their lifespan as traders. It is very important to be able to trade without making a lot of the mistakes that will continuously drag you down.