The 3 common mistakes made by the beginning Cryptocurrency-Trader
Cryptocurrency trading is for many people a emotional rollercoaster of fear and greed. The volatility is crazy. The prices of Bitcoin can fluctuate between hundreds of dollars in just one day. The altcoins go even crazier, some of those go up 30% and drop 40% the next day.
For a beginner it’s really hard to trade in such a volatile environment. Speaking out of own experience!
The common mistakes made by beginning cryptocurrency traders;
Fear of missing out short for FOMO. What is FOMO and how do traders fall for it?
the sudden rise of a certain cryptocurrency can cause someone to buy it at a inflated price. Why? Because human psychology kicks in.
When you see coin shooting up like crazy with momentum behind it and this doesn’t seem to end, you will think it will go even higher and higher and you feel your missing out on some juicy gains if you don’t buy it right now!
But you have to calm down. In most cases this is very unrealistic eventually it has to retrace to lower price levels.
Sometimes it pans out especially in a bull market, but most of the times it doesn’t and in the end its you who is holding the heavy bags.
FUD stands for fear, uncertainty and doubt. The financial markets are full of FUD and for a simple investor it’s hard to ignore the FUD. When a projects gets FUD thrown at their projects there is always a certain truth about it.
For example Ripple(XRP) always gets the FUD thrown that XRP Ledger is centralized. There is truth to the matter but it doesn’t mean that this always will be the case.
The XRP ledger is continuously adding new validators(nodes) to the ledger where in turn a Ripple validator(Node) disappears for each two nodes so the XRP ledger will continue to decentralize in the future at a great rate.
Beginning cryptocurrency trades mostly don’t do their due diligence before investing in a coin. They could buy XRP just because someone on YouTube said “ ITS GONNA MOON NEXT WEEK because of ‘insert random youtuber analysis’ “.
When you buy a coin on a recommendation like that you probably FOMO’d (mistake #1). And the moment the coin has some FUD you will sell it instantly because you assume the (mis)information is true. You are fearful and uncertain if the information is true, this causes you to doubt your own investments and give in to sell.
To counter FUD its best to do thoroughly research the coin you invest in and get the fundamentals right and use technical analysis to search for a good entry point and potential exit point.
#3 Not doing any or little research on your investment
Before you invest in a coin you will look for key points for why this coin should go up in the near future. Questions you should ask yourself are; Is the coin disruptive? Has it a working product or at least a test-net planned? Are they hitting their deadlines on the Roadmap? Is the development team behind the coin legitimate? Also check their whitepaper and see if what the projects is trying to do is actually possible in the near future!
Not doing your due diligence before investing in the crypto-space is the worst thing you can do. Always know the fundamentals of the coin you invest in. The more you know the better!
Helpful site for researching coins; www.coincheckup.com
Thank you for reading this post hope you enjoyed it, this was just a short intro to the mistakes beginners can make in the cryptospace. All subjects here will be explained in much more detail in my following blog posts.
Positive/Negative feedback is welcome!
— Bits and Coins