Beginners make mistakes in anything they do – It’s just part of the learning process. Think back to when you first started to learn math. How many times did you miss a problem because you forgot to carry the 1 or you flipped a positive symbol into a negative sign?
The magic in life is learning how to make small mistakes instead of big mistakes.
One way to do this is by learning from other people’s mistakes and adjusting your behavior accordingly. This gives you a roadmap with all of the warning signs along the way. You might still get lost, but you won’t get “middle of nowhere with no gas” lost.
When starting to trade cryptocurrency, there are some serious mistakes you want to avoid right off the bat. Avoiding these mistakes can save you a lot of money and a lot of stress/anxiety. From watching others, my own experiences, and research, I have found there are 5 major mistakes new cryptocurrency traders make.
1 – They don’t set limits.
Sounds stupid, but most people don’t set limits. Investing in cryptocurrency provides the same kind of rush as gambling for some and others think they can scale their trading after one good pick.
If you want to be more than just an average investor, you need to set limits and stick to those limits.
The first limit you need to set is: How much money am I willing to lose? This amount might be $20 or $10,000 depending on the person. And let’s face it, we both hope you don’t lose all your money; however, the reality is that some of those who invest will lose money. If you know how much you are willing to lose (without it impacting your day to day living), you can set that money aside and never dip into your bank account (or credit card) again.
The next limit you will want to set is a limit on the amount of time you are willing to spend watching market places or researching new coins. When you first start, there is so much to learn. As you start learning more, you might start to get sucked into reading every little article about cryptocurrency you can find. While this is great for your knowledge, it can take away from activities and loved ones. I have seen numerous people start to “zone out” and focus on every little shift of a coin.
The final limit you will want to set is your limit to start banking profits. Are you going to let all of your investments ride until the end of time? Are you trying to earn enough money to pay off a car or a house? Are you trying to create a stream of income to help with daily bill? Regardless of your goal or motivation, there has to be a point where you start cashing out your profits. Knowing this limit can help you actually see a return on your investment instead of just the hope that the coins will be worth something down the road.
2 – They don’t build a strategy.
Would you walk out on the field to play a football game without a playbook or game strategy? My guess is no.
Every football team has one goal – Score as many points as possible. The difference is how they approach getting these points.
Without a strategy in place when investing in cryptocurrency, you are hoping to score a bunch of points without a play to get you there.
Some of you will say you want to invest in Bitcoin and run to Coinbase and buy $500 worth. You have no idea at what point you want to sell to bank the profits or if you are buying at a high or low point in the day.
A better approach would be to create a strategy like this:
I am going to invest $500 with the intention of making a 30% profit ($150). Once I hit that mark, I will sell $500 of my coins off to recover my initial investment and then I will invest $50 into 3 different altcoins with the intention of getting a 60% ($30) on all three. Once this occurs, I will sell off $50 worth of each coin and hold $30 of it for a possible breakout in the future (aka – return over 1000%).
With that strategy, you have set it up to know your limits and know when you should cash out and pocket the money.
It’s this time of planning that can help you from being greedy or losing all of your earnings in the blink of an eye.
3 – They freak out when a coin drops in value.
Why are you investing in cryptocurrency? My guess would be because of the massive positive swings you have witnessed on the news or with your primary research into the field of cryptocurrency.
Guess what? With massive gains come massive losses. You can’t have one without the other.
Some people will not have a plan in place (please see #2) and they will freak out when they start seeing a coin plummet in value.
This is a natural reaction.
But if you have done your research, stuck to your plan, and set your limits, you should be able to sleep at night with no worries. It’s just the way the market operates. The increase in volatility is what creates the opportunity for profit.
Better yet, you can use these dips to invest additional funds (within your limits) to further your future earnings.
4 – They get greedy.
One quote that I used to hear all the time when I watched Jim Cramer with my dad is:
Pigs get fat, hogs get slaughtered.
It sounds a little morbid, but it can teach us a very important lesson.
When a coin shoots up by 1,000%, what would you do? Would you sell off all of your coins and bank the profit? Would you sell of a portion of the coin and let the rest ride? Would you hold out until it jumps up another 1,000%?
Although each of these answers could the be the correct one, there is a big difference between an 1,000% gain on paper and an 1,000% gain in cold hard cash.
You actually only make money when you cash out your coins. There is no other way around it. At the drop of a hat, the value of a coin could drop dramatically. It’s great to be motivated by self-interest to make more money, but make sure to cash out and bank some profit along the way.
5 – They don’t do their research.
I would be willing to bet that most of you have no idea what the following coins are:
At the time of me writing this post, each of these coins have shot up over 300% within the last 24 hours.
Some people might see this spike and think: These three coins are going to be the next Bitcoin or Ripple!
My guess is probably not.
If we take the first one (FUZZ) and do a quick Google search, you will find this:
FuzzBalls is a fun driven coin, intended for gifts and parties. the FUZZ blockchain is maintained by Proof of Work miners, who can then use FuzzBalls rewards to gift people in IRC or Chatrooms.
If you dig a little deeper, you will find this in one of the chatrooms:
FuzzBalls is a coin intended for gifting and parties, no monetary value or road maps or pumps/dumps to be expected.
If you look even deeper, you will see that it has only traded $46 worth in the last 24 hours.
But some people will see the 300%+ spike and think there is a gold rush.
Doing your own research can take a stupid investment and shine some light on it before it is made.
If you can take a little knowledge from these 5 big mistakes, you are already a step above everyone else out there who thinks they are a “trading expert.”
Chris Wilkey (CW)