Much like stock trading and Forex there are a few and hard rules you should follow when you invest in cryptocurrency.
These mistakes usually happen throughout the course of the investment journey, but you can potentially avoid them and learn from these 5 errors by reading about them now.
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You Don’t Know Anything About Cryptocurrency
It’s a common rookie mistake to dive in eagerly and not know what to expect. You assume that all cryptocurrencies are the same and that they’re just assets that can be bought and sold.
What you should know is that cryptocurrencies are volatile, which means they tend to fluctuate wildly in value on short timetables. Also, some cryptocurrencies are best for long-term holding while others are good for swing or day trading.
So, do your research and find out what cryptocurrencies you like to invest in. Then, have a plan on how you can maximize your capital before you start trading.
You Don’t Have a Trading Method in Mind
If your overall plan is to purchase Bitcoin and not much else, you’ll be in trouble. It may work to hold onto the cryptocurrency for years but then you’ll probably lose money instead of gaining it.
The bigger your capital the more time you should spend learning about the cryptocurrency market. As you go along you’ll have an idea of the flow of a ‘coin and predict its maximum ceiling. From there, all you have to do is wait and then jump at the right time to make money.
You Invest in Only One Cryptocurrency
The maxim of trading is ‘don’t put all your eggs in one basket’, and this applies to the cryptocurrency market as well. Unless you have a really small capital you should be looking to invest in two, three or four cryptocurrencies at the start.
Bitcoin is probably a no-brainer at this point since it’s the most popular cryptocurrency, but what about the others?
To this end you can start looking at new cryptocurrencies and its white papers or go for other popular tokens such as Ethereum, Ripple or even Dogecoin. It makes sense to invest in something you believe in, and each cryptocurrency has its own function and belongs to an industry.
You Don’t Have a Stop Loss
A stop loss is the last line of defense in any asset. It’s an auto-release or sell mechanism that occurs when the price of a cryptocurrency falls to the value you assigned.
For example, you put a stop loss on Bitcoin at $50, which means that if Bitcoin hits that price then you automatically unload your asset and turn it into cash. It’s a sort of insurance where you don’t completely lose all your money.
You Let FOMO Get to You
Lastly, FOMO, or fear of missing out and cryptocurrency should never mix together. It’s a surefire recipe for disaster and can prematurely end your investment quickly.
Always get your news and sources from official channels and reputable platforms. Stop, think and verify before you buy or sell your cryptocurrency.